1 00:00:00,520 --> 00:00:06,000 In this episode of American Greed, Barry Minko starts a business in high school. 2 00:00:06,160 --> 00:00:08,720 If you work hard and you're honest, you'll do fantastic. 3 00:00:09,120 --> 00:00:13,960 And he becomes a sensation on Wall Street. Barry Minko made his first 4 00:00:13,960 --> 00:00:14,980 the time he was 19. 5 00:00:15,980 --> 00:00:19,480 From teenage millionaire, he grows up to become a nationally known fraud 6 00:00:19,480 --> 00:00:24,460 fighter. Even profiled by the likes of 60 Minutes. He searches public records, 7 00:00:24,660 --> 00:00:27,480 employs private detectives, and goes undercover. 8 00:00:27,760 --> 00:00:32,560 But all along, Barry Minko is pocketing millions in his own perfect scam. 9 00:00:32,960 --> 00:00:33,960 We know fraud. 10 00:00:34,480 --> 00:00:35,800 And you're just fraud. 11 00:00:36,080 --> 00:00:41,040 He should know. Because Barry Minko acting as a fraud fighter is like having 12 00:00:41,040 --> 00:00:42,740 thief guard the bank vault. 13 00:00:58,280 --> 00:01:03,700 In the working class town of Reseda, California, just north of Hollywood, a 14 00:01:03,700 --> 00:01:07,960 -year -old boy is about to prove that the American dream is alive and well. 15 00:01:08,620 --> 00:01:10,740 His name is Barry Minko. 16 00:01:11,800 --> 00:01:16,740 Diagnosed as hyperactive, he's skinny and awkward and desperate for 17 00:01:17,440 --> 00:01:23,200 And so in 1982, when Minko is still in high school, he chooses an unlikely 18 00:01:23,200 --> 00:01:24,900 ticket to fame and fortune. 19 00:01:27,870 --> 00:01:28,870 carpet cleaning. 20 00:01:29,630 --> 00:01:31,030 My name's Barry. Can I help you? 21 00:01:31,250 --> 00:01:36,150 He borrows some money to buy a few machines, hire some friends, and working 22 00:01:36,150 --> 00:01:39,790 of his garage, he opens Z -Best Carpet Cleaners. 23 00:01:40,090 --> 00:01:43,950 We are licensed, bonded, and insured, and we guarantee all our work 100 % in 24 00:01:43,950 --> 00:01:47,910 writing. He's savvy enough to know that he needs to do some marketing and 25 00:01:47,910 --> 00:01:52,750 eventually hires Jerry Carr, who has just started her own PR firm. 26 00:01:53,170 --> 00:01:59,860 When I first met Barry in the beginning, When he was this young boy, he wasn't 27 00:01:59,860 --> 00:02:03,740 arrogant. In the very beginning, he was actually not even sure of himself. 28 00:02:04,540 --> 00:02:10,259 Not long after Z -Best opens for business, Minko's story is featured on a 29 00:02:10,259 --> 00:02:14,360 station. Since he got his business license about four months ago, he's 30 00:02:14,360 --> 00:02:17,740 close to $10 ,000. Not bad when you're 16. 31 00:02:18,240 --> 00:02:21,220 If you work hard and you're honest, you'll do fantastic. 32 00:02:21,600 --> 00:02:23,820 But in truth, it's not that easy. 33 00:02:24,730 --> 00:02:28,670 From the moment Barry started his carpet cleaning business, he was always, 34 00:02:28,910 --> 00:02:35,730 always, always in the hole, always having a crisis coming up that he had to 35 00:02:35,730 --> 00:02:41,930 deal with. And he would deal with it, one crisis after another crisis after 36 00:02:41,930 --> 00:02:42,950 another crisis. 37 00:02:43,590 --> 00:02:48,890 And he does that by stealing. He steals and then pawns his grandmother's 38 00:02:48,890 --> 00:02:52,170 jewelry. He steals cashier's checks from a liquor store. 39 00:02:52,960 --> 00:02:57,140 He rips off his insurance company, reporting a burglary that never 40 00:02:57,480 --> 00:03:00,040 And then there is credit card fraud. 41 00:03:00,980 --> 00:03:06,860 Robin Swanson gets a taste of that when she orders a $24 floral arrangement from 42 00:03:06,860 --> 00:03:09,760 a flower shop Minko has just bought with a friend. 43 00:03:10,220 --> 00:03:14,880 I gave them my credit card over the phone, and then a month later I got the 44 00:03:14,880 --> 00:03:19,780 bill, and it said $601 and something, over $600. 45 00:03:20,680 --> 00:03:24,300 And that was on top of the $24 charge for the flowers. 46 00:03:24,600 --> 00:03:29,380 She calls the shop and is told to speak to Barry Minko. I called, and he 47 00:03:29,380 --> 00:03:34,480 answered, and he was charming. You know, and he says, oh, my gosh, I'm so glad 48 00:03:34,480 --> 00:03:38,480 you called because I saw that there was a mistake. I was just getting ready to 49 00:03:38,480 --> 00:03:40,600 call you, and I'll put through a credit right away. 50 00:03:41,240 --> 00:03:42,620 But no credit comes. 51 00:03:43,120 --> 00:03:47,800 And because she trusted Minko, she has delayed reporting the error. Now she is 52 00:03:47,800 --> 00:03:48,800 stuck with the charge. 53 00:03:49,420 --> 00:03:50,420 So I called again. 54 00:03:50,920 --> 00:03:53,380 Well, he was very abrupt this time. He wasn't very nice. 55 00:03:53,880 --> 00:03:55,940 And he said, I can't talk to you right now. 56 00:03:56,260 --> 00:04:01,060 That's because Barry Minko, in a short amount of time, has hit the big time in 57 00:04:01,060 --> 00:04:02,060 many ways. 58 00:04:03,300 --> 00:04:08,460 Pumping steroids and iron, he is no longer a scrawny kid by a lot. 59 00:04:09,740 --> 00:04:14,380 Following the news stories about him, customers and investors come pouring in. 60 00:04:15,260 --> 00:04:17,440 Minko is expanding his business. 61 00:04:18,570 --> 00:04:20,769 The Z -Best vans are everywhere. 62 00:04:22,430 --> 00:04:27,690 When he turns 19, he buys a big house and is driving a $60 ,000 Ferrari. 63 00:04:28,190 --> 00:04:31,910 When I was in 10th grade, my two friends got two brand new trucks. I had a 1972 64 00:04:31,910 --> 00:04:33,410 Buick, which we called the Bomb. 65 00:04:33,670 --> 00:04:36,190 They still got the 83 trucks, and I got an 85 Ferrari. 66 00:04:36,570 --> 00:04:38,550 Well, that's what he tells the public. 67 00:04:38,940 --> 00:04:44,020 The truth is that Minko is in debt up to his ears. He is constantly bringing in 68 00:04:44,020 --> 00:04:48,640 new investors and taking out new loans to make payments on old ones. 69 00:04:48,960 --> 00:04:51,300 And that is called a Ponzi scheme. 70 00:04:52,280 --> 00:04:56,160 It was always a Ponzi scheme for Barry. Even though Barry wouldn't have known 71 00:04:56,160 --> 00:05:00,300 what a Ponzi scheme was if you had asked him at that time. It was a Ponzi 72 00:05:00,300 --> 00:05:04,740 scheme. I'm Barry Minko, president of Z -Best Carbon Cleaning. Minko knows he 73 00:05:04,740 --> 00:05:05,559 needs help. 74 00:05:05,560 --> 00:05:07,660 And so he hires Mark Moores. 75 00:05:08,340 --> 00:05:13,040 Moores is running his own company, matching investors to small businesses. 76 00:05:14,480 --> 00:05:18,560 He wanted as much money as he could get his hands on, and he offered to pay me a 77 00:05:18,560 --> 00:05:21,920 very, very nice commission for raising money for him. 78 00:05:22,660 --> 00:05:27,380 Minko tells Moores that although the public face of Z -Best is the carpet 79 00:05:27,380 --> 00:05:32,960 cleaning business, his real income is from insurance restoration work, fixing 80 00:05:32,960 --> 00:05:35,320 buildings damaged by water or fire. 81 00:05:36,110 --> 00:05:41,390 It has slowly escalated upward from a very modest start to maybe $20 ,000, $30 82 00:05:41,390 --> 00:05:46,630 ,000 jobs, to where now he was having a chance to do million -dollar, multi 83 00:05:46,630 --> 00:05:48,470 -million -dollar jobs. 84 00:05:48,930 --> 00:05:51,630 And he says the profit margins are huge. 85 00:05:52,390 --> 00:05:58,330 Investors can expect to get their money back plus 50%. So an investor can go, 86 00:05:58,330 --> 00:05:59,710 gee, I'm putting up a million and a half. 87 00:06:00,410 --> 00:06:02,810 In four months, I get my million and a half back. 88 00:06:03,560 --> 00:06:06,580 And I get $750 ,000 profit. 89 00:06:06,940 --> 00:06:10,340 And they go, this is amazing. It's such a great deal. 90 00:06:10,840 --> 00:06:16,360 Moore starts working for Minco, making sure new investors get their first 91 00:06:16,360 --> 00:06:18,240 exactly as promised. 92 00:06:18,660 --> 00:06:23,020 I would come back to the investor with a cashier's check for all the money he 93 00:06:23,020 --> 00:06:24,620 invested plus all his profit. 94 00:06:24,860 --> 00:06:27,480 And I go, here's your $2 .2 million. 95 00:06:28,560 --> 00:06:32,240 And before I could walk out of the room, they would say, well, wait a minute, 96 00:06:32,300 --> 00:06:33,279 Mark. 97 00:06:33,280 --> 00:06:36,640 Do you have any other jobs that need to be done? Can I reinvest this? 98 00:06:37,040 --> 00:06:38,800 And they do reinvest. 99 00:06:39,140 --> 00:06:44,620 But still, the company is in serious financial trouble, weighed down by 100 00:06:44,620 --> 00:06:45,760 of dollars of debt. 101 00:06:46,460 --> 00:06:48,820 And then, salvation. 102 00:06:49,160 --> 00:06:54,420 A small Wall Street firm offers to host a public offering of the best stuff. 103 00:06:55,100 --> 00:06:56,720 There is just one problem. 104 00:06:57,430 --> 00:07:01,510 Once a decision had been made to take the company public, Barry called me into 105 00:07:01,510 --> 00:07:04,210 his office and said, I have a confession to make to you. 106 00:07:05,190 --> 00:07:10,210 I said, what is it? He goes, one of the jobs that you've been trying so hard to 107 00:07:10,210 --> 00:07:12,930 raise money for. He goes, one of them was a fake. 108 00:07:13,930 --> 00:07:16,150 And I was, you know, stunned. 109 00:07:16,770 --> 00:07:20,450 Mors later learned that it's not just one fake job. 110 00:07:21,090 --> 00:07:25,090 Minko has been faking contracts for every single restoration job. 111 00:07:26,030 --> 00:07:28,210 There has never been a real job. 112 00:07:29,450 --> 00:07:35,210 Next on American Greed. Last week, I raised $15 million from the public. 113 00:07:35,410 --> 00:07:38,730 How to con Wall Street before turning 21. 114 00:07:51,020 --> 00:07:54,640 Terrific Tommy's here. We're going to clean your carpets. In the mid -1980s in 115 00:07:54,640 --> 00:08:00,060 Los Angeles, a local carpet company, Z -Best, is taking its pitch to 116 00:08:00,440 --> 00:08:01,700 I'm Bane. I'm Switch. 117 00:08:02,060 --> 00:08:04,060 You want to know about our two -for -one offer? 118 00:08:04,660 --> 00:08:08,320 The ads argue that Z -Best is different from others. 119 00:08:08,640 --> 00:08:12,840 It's time you called us. I'm Barry Minko, president of Z -Best Carpet 120 00:08:12,940 --> 00:08:14,360 Because it is honest. 121 00:08:14,740 --> 00:08:19,300 The company is doing so well, Barry Minko is preparing for a public stock 122 00:08:19,300 --> 00:08:22,080 offering. He is the picture of success. 123 00:08:22,900 --> 00:08:27,680 You know, he was driving his Ferrari, I was driving my Porsche Turbo, and we 124 00:08:27,680 --> 00:08:31,940 just looked like a couple of zany, yuppie bachelors. What was really 125 00:08:31,940 --> 00:08:34,280 is we were chewing our fingernails down to our elbows. 126 00:08:35,169 --> 00:08:40,730 praying that the public offering would come in and come in properly, and then 127 00:08:40,730 --> 00:08:42,390 that that would solve all of our problems. 128 00:08:42,870 --> 00:08:45,550 The problems are loans and lies. 129 00:08:46,170 --> 00:08:50,950 For years, Minko has been telling investors and banks that in addition to 130 00:08:50,950 --> 00:08:55,490 carpet cleaning business, he has contracts worth millions of dollars to 131 00:08:55,490 --> 00:08:57,910 buildings damaged by water and fire. 132 00:08:58,350 --> 00:09:00,390 But he does not have real contracts. 133 00:09:00,990 --> 00:09:05,750 He has forged documents that look like lucrative contracts with a phony company 134 00:09:05,750 --> 00:09:06,750 he created. 135 00:09:06,930 --> 00:09:12,370 He uses the fake contracts to attract investors and get loans. And he always 136 00:09:12,370 --> 00:09:14,750 needs new money to pay off old debts. 137 00:09:15,090 --> 00:09:20,730 But now, Minko and Moores tell themselves that will change after the 138 00:09:20,730 --> 00:09:21,730 offering. 139 00:09:21,890 --> 00:09:26,210 There'll be more than enough money between the offering and the... 140 00:09:26,550 --> 00:09:31,290 credit lines that we were assured we would get once the offering was done to 141 00:09:31,290 --> 00:09:36,490 off everybody who was, to use Ponzi scheme words, upside down. We could pay 142 00:09:36,490 --> 00:09:39,090 everybody and then just stick to the straight and narrow. 143 00:09:39,930 --> 00:09:41,550 But it won't be easy. 144 00:09:42,050 --> 00:09:46,250 Minkow first needs to maneuver his fraud through the financial scrutiny of 145 00:09:46,250 --> 00:09:47,670 accountants on Wall Street. 146 00:09:48,570 --> 00:09:49,570 No problem. 147 00:09:49,950 --> 00:09:51,790 Mark Moores has it covered. 148 00:09:52,470 --> 00:09:55,430 And so I started creating documents by the... 149 00:09:57,250 --> 00:10:03,310 dozens, over time it was in the thousands, making those restoration jobs 150 00:10:03,310 --> 00:10:04,390 like a complete portfolio. 151 00:10:05,310 --> 00:10:10,310 Moores knows little about the contracts he needs to create, and he knows now 152 00:10:10,310 --> 00:10:11,710 that his mistakes are obvious. 153 00:10:12,170 --> 00:10:16,450 Here's the paperwork for a job in a 16 -story building in Sacramento. 154 00:10:17,440 --> 00:10:21,020 But my favorite on this whole sheet has to do with this handwriting here. I was 155 00:10:21,020 --> 00:10:25,460 asked by one of the auditors how many square yards of carpet were in this 16 156 00:10:25,460 --> 00:10:26,580 18 -story building. 157 00:10:26,860 --> 00:10:30,880 And I announced that there were 379 ,000 square yards of carpet. 158 00:10:31,100 --> 00:10:35,060 If you do the math, that's about 3 .5 million square feet of carpet. And it 159 00:10:35,060 --> 00:10:38,540 would take a building about 80 or 90 stories high to have all of that. 160 00:10:39,440 --> 00:10:41,400 But no one catches the errors. 161 00:10:41,720 --> 00:10:43,840 The phony paperwork makes it through. 162 00:10:44,410 --> 00:10:46,690 The auditors have just one request. 163 00:10:47,490 --> 00:10:50,770 They want to personally see that job in Sacramento. 164 00:10:51,710 --> 00:10:56,210 On a hope and a prayer, Morris heads to Sacramento in search of a 16 -story 165 00:10:56,210 --> 00:10:59,170 building to match the job on the phony contract. 166 00:10:59,590 --> 00:11:02,870 We did find an 18 -story building that was virtually brand new. 167 00:11:03,250 --> 00:11:07,730 And I thought, look, 16, 18 ago, we're close enough. 168 00:11:08,440 --> 00:11:13,000 He tells the leasing agent he wants to rent a few floors, but he needs his 169 00:11:13,000 --> 00:11:18,180 of directors to check out the space immediately, this Sunday, before he can 170 00:11:18,180 --> 00:11:19,079 the lease. 171 00:11:19,080 --> 00:11:24,240 He then slips the security guard some cash to pretend he recognizes Morris 172 00:11:24,240 --> 00:11:25,240 he returns. 173 00:11:26,040 --> 00:11:30,200 So sure enough, the next day when we came in, and he said, Hi, Mr. Morris, 174 00:11:30,200 --> 00:11:33,020 to see you again, sir. How you doing? Guys did great work. 175 00:11:33,880 --> 00:11:36,600 Just that silly song and dance. 176 00:11:37,500 --> 00:11:41,680 really gave a lot of satisfaction to the people doing the due diligence. 177 00:11:42,000 --> 00:11:43,000 It works. 178 00:11:43,220 --> 00:11:48,600 In December, the public offering of Z -Best sells out, bringing in $15 million 179 00:11:48,600 --> 00:11:49,600 in capital. 180 00:11:49,980 --> 00:11:55,040 As the talk soars, Barry Minko is not only worth $100 million, he is now the 181 00:11:55,040 --> 00:11:59,220 wonder boy of Wall Street. Barry Minko made his first million by the time he 182 00:11:59,220 --> 00:12:03,520 19. Now his company is one of the hottest stocks on Wall Street. 183 00:12:03,840 --> 00:12:08,560 At the time, he is the youngest person in American financial history to take a 184 00:12:08,560 --> 00:12:12,340 company through a public stock offering. I raised $15 million from the public. 185 00:12:12,540 --> 00:12:16,340 The city of Los Angeles declares a Barry Minko Day. 186 00:12:16,760 --> 00:12:23,720 I remember being on that stage presenting Barry, and there was everyone 187 00:12:24,160 --> 00:12:27,740 Everyone from USA Today to CNN, everybody. 188 00:12:28,060 --> 00:12:33,220 He was the story, I think. I think he was the story in those days. 189 00:12:34,100 --> 00:12:39,160 A few months later, Minkow is in negotiations to buy a large national 190 00:12:39,160 --> 00:12:40,160 cleaning business. 191 00:12:40,420 --> 00:12:44,540 And that unsophisticated boy in the garage is long gone. 192 00:12:44,800 --> 00:12:47,380 We're on our way to being the General Motors of the carpet cleaning industry. 193 00:12:48,040 --> 00:12:50,920 But Barry Minkow is about to meet his match. 194 00:12:52,430 --> 00:12:58,070 In all his success, he has forgotten about Robin Swanson, which he has not 195 00:12:58,070 --> 00:12:59,070 forgotten about him. 196 00:12:59,190 --> 00:13:02,590 The wonder boy of Wall Street still owes her $600. 197 00:13:03,490 --> 00:13:08,230 She and her husband, Bill, take their case to small claims court, and then 198 00:13:08,230 --> 00:13:10,470 heads to Minkow's office to serve the papers. 199 00:13:10,970 --> 00:13:15,230 A few guys in the parking lot approach him. He tells them he is looking for 200 00:13:15,230 --> 00:13:16,230 Barry Minkow. 201 00:13:16,290 --> 00:13:18,870 And this one guy says, well, I'm Minkow. 202 00:13:19,750 --> 00:13:21,510 Do you know who I am? And I said, no. 203 00:13:22,480 --> 00:13:26,000 He said, well, I'm Barry Menkau. And I said, well, good. Here's some papers for 204 00:13:26,000 --> 00:13:27,840 you to show up in court. You owe me $600. 205 00:13:28,300 --> 00:13:32,140 And he took the papers and he ripped them up, threw them on the ground, and 206 00:13:32,140 --> 00:13:37,760 said, that's just chump change, punk. And one of the guys pulled me around and 207 00:13:37,760 --> 00:13:44,700 took a swipe at me with his open hand and knocked my brand new sunglasses 208 00:13:44,700 --> 00:13:47,740 off. And Barry Menkau stepped on them and crushed them. 209 00:13:48,680 --> 00:13:53,980 And for Robin Swanson, Minko's rising celebrity status becomes even more 210 00:13:53,980 --> 00:13:56,720 infuriating. It just made me mad. 211 00:13:57,320 --> 00:14:01,440 So I called the L .A. Times and I said, you know, this guy's a crook and I can 212 00:14:01,440 --> 00:14:02,079 prove it. 213 00:14:02,080 --> 00:14:06,740 Days before his big deal is finalized, her story makes newspaper headlines. 214 00:14:07,220 --> 00:14:10,740 Behind the whiz kid is a trail of false credit card billings. 215 00:14:11,420 --> 00:14:13,740 It turns out Robin Swanson is not alone. 216 00:14:14,510 --> 00:14:18,870 Minkow has stolen as much as $72 ,000 in false credit card charges. 217 00:14:19,390 --> 00:14:23,130 An assistant U .S. attorney decides to look into his business. 218 00:14:23,690 --> 00:14:28,230 Eight months later, he and his partners are indicted for conspiracy to commit 219 00:14:28,230 --> 00:14:29,230 fraud. 220 00:14:29,790 --> 00:14:36,170 I remember laying in bed and my son's dad coming up with the newspaper 221 00:14:36,170 --> 00:14:42,790 and saying to me, you always wanted Barry on the front of the L .A. Times. 222 00:14:43,450 --> 00:14:46,510 And the Daily News and the Herald Examiner. 223 00:14:46,790 --> 00:14:51,050 Well, you just got your wish. The only problem is he's in handcuffs. 224 00:14:51,910 --> 00:14:54,650 Mark Morris turned himself in immediately. 225 00:14:55,390 --> 00:15:01,550 The first thing I can say to you is it was a tremendous set of fear what the 226 00:15:01,550 --> 00:15:03,610 future is going to hold. And I'm going to be going to jail. 227 00:15:04,690 --> 00:15:05,690 And relief. 228 00:15:06,270 --> 00:15:08,590 Incredible, incredible relief. 229 00:15:09,130 --> 00:15:12,110 This huge weight off my shoulders. 230 00:15:12,960 --> 00:15:16,020 Moores pleads guilty to securities and bank fraud. 231 00:15:16,260 --> 00:15:19,120 He is sentenced to eight years in federal prison. 232 00:15:19,420 --> 00:15:20,460 And Minko? 233 00:15:20,900 --> 00:15:25,960 He's interviewed on 60 Minutes and denies it all. He says that he was the 234 00:15:25,960 --> 00:15:29,100 who was duped. The charges against him are all false. 235 00:15:29,560 --> 00:15:32,440 No, I thought I knew what was going on, that everything was perfect. 236 00:15:33,000 --> 00:15:35,040 A jury does not believe him. 237 00:15:35,370 --> 00:15:40,290 He is convicted on 57 counts and sentenced to 25 years. 238 00:15:40,730 --> 00:15:47,070 He thought the whole process was a joke and that it was a game for Barry. He was 239 00:15:47,070 --> 00:15:53,750 just an arrogant young man that had no responsibility and a broken set of 240 00:15:53,750 --> 00:15:54,750 values. 241 00:15:54,920 --> 00:15:59,980 Next on American Greed, from prisoner to fraud fighter. Welcome to Fraud Biz, 242 00:16:00,180 --> 00:16:02,680 making the American economy safe again for the American public. 243 00:16:02,960 --> 00:16:06,400 But can Barry Minko sell himself as a changed man? 244 00:16:17,400 --> 00:16:19,080 It is now 1995. 245 00:16:20,240 --> 00:16:24,260 Barry Minkow has been granted an early release from federal prison for good 246 00:16:24,260 --> 00:16:28,360 behavior. He is leaving the halfway house where he served his final months, 247 00:16:28,440 --> 00:16:30,200 declaring his remorse. 248 00:16:30,580 --> 00:16:36,380 Actions have consequences. There's no lasting meaning, contentment, or peace 249 00:16:36,380 --> 00:16:38,520 a life that puts money above people. 250 00:16:38,840 --> 00:16:42,680 Wait. What happened to the Barry Minkow we used to know? 251 00:16:43,220 --> 00:16:47,300 People can change because God changes people. 252 00:16:47,760 --> 00:16:50,240 Oh, he found God in prison. 253 00:16:50,440 --> 00:16:53,780 He earns a degree from Jerry Falwell's Liberty University. 254 00:16:54,760 --> 00:16:59,240 And soon he becomes a pastor at the San Diego Community Bible Church. 255 00:16:59,700 --> 00:17:01,720 Father, I'm a sinner and I need a Savior. 256 00:17:02,160 --> 00:17:03,960 Debbie Roller is a member. 257 00:17:04,319 --> 00:17:08,819 As churchgoers, we believe you go to church for grace. 258 00:17:09,980 --> 00:17:16,760 and Barry was really great about promoting grace in the church. And so he 259 00:17:16,760 --> 00:17:19,440 given grace, and he taught us how to give grace. 260 00:17:20,140 --> 00:17:25,180 Minko is so effective as a minister, the church grows ten times under his 261 00:17:25,180 --> 00:17:28,980 leadership. I pray for the encouragement of grace, just like you showed it to me 262 00:17:28,980 --> 00:17:30,560 when I didn't deserve it. 263 00:17:30,760 --> 00:17:31,820 From the start. 264 00:17:32,280 --> 00:17:35,000 He tells the congregation the details of his past. 265 00:17:35,220 --> 00:17:39,340 We said we were doing these huge restoration contracts that we never did, 266 00:17:39,340 --> 00:17:43,640 created 20 ,000 fraudulent documents with whiteout and copy machines. 267 00:17:44,000 --> 00:17:45,040 And he is forgiven. 268 00:17:45,620 --> 00:17:51,200 That was the old him, you know. So we look at him in a different light because 269 00:17:51,200 --> 00:17:56,420 as churchgoers, that's what we're asked to do is to look at people in God's 270 00:17:56,420 --> 00:18:02,430 eyes. At one point, a member of the church asks Minko to look into an 271 00:18:02,430 --> 00:18:07,970 scheme. When Minko finds evidence of fraud that results in an indictment, he 272 00:18:07,970 --> 00:18:11,270 discovers that a former fraudster can become a fraud fighter. 273 00:18:12,190 --> 00:18:14,050 He starts a radio show. 274 00:18:14,350 --> 00:18:17,490 This is Barry Minko. You're listening to Fraud Biz. 275 00:18:17,710 --> 00:18:19,010 And a series of videos. 276 00:18:19,590 --> 00:18:24,490 And he has a business, the Fraud Discovery Institute, that exposes 277 00:18:24,490 --> 00:18:25,490 -dollar scams. 278 00:18:25,760 --> 00:18:30,260 And he sometimes works as a source for the FBI. It was the Ponzi scheme and the 279 00:18:30,260 --> 00:18:31,820 mutual fund that didn't exist. 280 00:18:32,180 --> 00:18:37,920 As a result of his good deeds, Minkow is released from the requirements of his 281 00:18:37,920 --> 00:18:38,920 restitution. 282 00:18:40,460 --> 00:18:45,460 And once again, the news media is captivated by the story of Barry Minkow. 283 00:18:45,840 --> 00:18:49,580 By 2005, he is back on 60 Minutes. 284 00:18:49,860 --> 00:18:54,400 He searches public records, employs private detectives, and goes undercover. 285 00:18:55,110 --> 00:18:59,530 In his media appearances, Minko says he is doing this work because he cares 286 00:18:59,530 --> 00:19:04,030 deeply about investors losing money and stopping scams. 287 00:19:04,250 --> 00:19:07,470 Every day I don't do something, somebody's pouring money into this deal. 288 00:19:07,750 --> 00:19:13,430 But in time, Minko adds another motive, to make some money for Barry Minko. 289 00:19:14,210 --> 00:19:19,270 By 2007, his Fraud Discovery Institute is taking on publicly traded companies, 290 00:19:19,690 --> 00:19:21,590 like USANA Health Services. 291 00:19:22,380 --> 00:19:27,160 He creates websites and videos to spread his allegations of fraud, even 292 00:19:27,160 --> 00:19:28,240 interviewing victims. 293 00:19:28,940 --> 00:19:33,220 Are you thinking some things to describe your experience with USANA? 294 00:19:33,220 --> 00:19:34,740 Disappointment? Oh, yes. 295 00:19:34,940 --> 00:19:36,160 So much disappointment. 296 00:19:36,760 --> 00:19:40,820 Minko looks concerned, but he is also looking to make a profit. 297 00:19:41,200 --> 00:19:46,320 What most people don't know is that before he releases his report, Minko 298 00:19:46,320 --> 00:19:47,780 stock in USANA. 299 00:19:48,250 --> 00:19:52,450 That means he is betting that the stock price will go down when the news media 300 00:19:52,450 --> 00:19:53,890 reports his allegations. 301 00:19:54,530 --> 00:19:59,290 Because of the persona that he cultivated, he had the ability to impact 302 00:19:59,290 --> 00:20:00,290 views of a company. 303 00:20:00,670 --> 00:20:07,430 So when Barry Minkow issued a public statement, he was often able to 304 00:20:07,430 --> 00:20:12,510 use some very large microphones to get that information out. And those large 305 00:20:12,510 --> 00:20:15,190 microphones allowed him to have a very real market impact. 306 00:20:15,740 --> 00:20:21,480 Following Minko's report, USANA's stock price does go down. And because he has a 307 00:20:21,480 --> 00:20:26,660 short position in USANA stock, the lower the stock falls, the more money he 308 00:20:26,660 --> 00:20:28,680 makes. But he doesn't quit there. 309 00:20:28,920 --> 00:20:33,900 His next move is to meet with the company executives and offer a 310 00:20:33,900 --> 00:20:34,899 a price. 311 00:20:34,900 --> 00:20:40,720 That's particularly telling to me because it identifies how strongly he 312 00:20:40,720 --> 00:20:41,960 those fraud allegations. 313 00:20:43,000 --> 00:20:47,400 truly believe those statements to be true, you would not be inclined to 314 00:20:47,400 --> 00:20:49,280 those statements in exchange for compensation. 315 00:20:49,580 --> 00:20:53,360 They lost money because they were doomed to fail and never knew it up front. 316 00:20:53,640 --> 00:20:59,440 But reportedly, some companies do pay hundreds of thousands of dollars just to 317 00:20:59,440 --> 00:21:01,500 get Barry Minko to stop talking. 318 00:21:02,520 --> 00:21:08,040 Next on American Greed, Minko takes on a Fortune 500 company and levels very 319 00:21:08,040 --> 00:21:09,120 serious allegations. 320 00:21:09,860 --> 00:21:11,020 We know fraud. 321 00:21:11,760 --> 00:21:13,100 And you're just fraud. 322 00:21:36,700 --> 00:21:40,800 They don't know that clear across the country in California, another kind of 323 00:21:40,800 --> 00:21:41,800 trouble is brewing. 324 00:21:41,840 --> 00:21:46,520 It is instigated by this man, real estate developer Nicholas Marsh. 325 00:21:46,880 --> 00:21:51,860 For nine years, he and Lennar develop a luxury home community called The 326 00:21:51,860 --> 00:21:56,660 Bridges. Marsh has paid tens of millions of dollars on the project, but he 327 00:21:56,660 --> 00:22:00,020 claims he is owed more, hundreds of millions of dollars more. 328 00:22:00,940 --> 00:22:05,560 Stuart Miller is the CEO of Lennar, a company founded by his father. 329 00:22:06,510 --> 00:22:12,230 By 2008, we are finding that we're being sued by Nick Marsh. 330 00:22:12,470 --> 00:22:17,810 We can't quite put our finger on where this is coming from, except for the fact 331 00:22:17,810 --> 00:22:23,830 that the economy is spiraling downward and Nick Marsh has run out of money. 332 00:22:24,230 --> 00:22:26,210 His lawsuits are moving slowly. 333 00:22:26,490 --> 00:22:29,930 And so in July, Marsh takes matters into his own hands. 334 00:22:30,250 --> 00:22:34,550 He sends a four -page letter to Lenar's board, charging the company with 335 00:22:34,550 --> 00:22:37,830 malfeasance, what he calls dirty little secrets. 336 00:22:38,290 --> 00:22:44,650 And what is interesting is he says in the letter to our directors that unless, 337 00:22:44,870 --> 00:22:51,370 unless the company resolves these matters to his satisfaction. 338 00:22:52,240 --> 00:22:57,980 Very nebulous standard. To his satisfaction, he's going to reveal these 339 00:22:57,980 --> 00:23:01,520 little secrets to the public and to the authorities. 340 00:23:02,040 --> 00:23:03,940 This is a clear threat. 341 00:23:04,580 --> 00:23:10,260 Lenar responds by suing Marsh for extortion. And that leads Marsh to bring 342 00:23:10,260 --> 00:23:11,860 the biggest gun he can find, 343 00:23:12,600 --> 00:23:13,600 Barry Minko. 344 00:23:14,090 --> 00:23:17,230 In December, Minco and Marsh entered into an agreement. 345 00:23:17,610 --> 00:23:22,970 Minco promises to launch an all -out expose on Lenar that will have a 346 00:23:22,970 --> 00:23:25,090 devastating impact on their stock. 347 00:23:25,450 --> 00:23:31,910 The idea was that they would publish false allegations against Lenar and 348 00:23:31,910 --> 00:23:32,910 Lenar's business. 349 00:23:33,650 --> 00:23:39,730 And the stock would crater and Lenar would submit to Marsh's demands. 350 00:23:40,520 --> 00:23:46,320 In early December, Mark approved the plan, and in just one month's time, 351 00:23:46,320 --> 00:23:50,260 allegedly exhaustive investigation of Lenar is good to go. 352 00:23:50,700 --> 00:23:56,800 He contacts agents he knows at the FBI, and then he contacts reporters who trust 353 00:23:56,800 --> 00:24:00,860 him, and also Wall Street analysts who cover Lenar's stock. 354 00:24:01,980 --> 00:24:08,540 Barry used those relationships to promise a new story that would be coming 355 00:24:08,830 --> 00:24:14,430 by 60 Minutes, an investigative news program, that would reveal that these 356 00:24:14,430 --> 00:24:19,470 allegations were both under investigation and truthful. 357 00:24:20,070 --> 00:24:25,670 Minko launches his attack on January 9th. He has a 30 -page report posted on 358 00:24:25,670 --> 00:24:31,050 website named LenRon .com, equating Lenar to the Enron scandal. 359 00:24:31,390 --> 00:24:33,490 And he posts a video on YouTube. 360 00:24:34,010 --> 00:24:37,370 Hi, I'm Barry Minko, the co -founder of the Fraud Discovery Institute, and I'm 361 00:24:37,370 --> 00:24:41,130 here to introduce our top ten red flags for fraud at Lenar Corporation. 362 00:24:41,610 --> 00:24:44,470 He gets the immediate reaction he is looking for. 363 00:24:44,670 --> 00:24:47,570 We've got to go to Diana Holick right now with breaking news from Washington, 364 00:24:47,630 --> 00:24:51,830 Diana. Well, that's right, Mark. Lenar stock is moving lower today on an 365 00:24:51,830 --> 00:24:56,810 Internet report from Barry Minko and the Fraud Discovery Institute. I remember 366 00:24:56,810 --> 00:24:57,810 it distinctly. 367 00:24:59,130 --> 00:25:05,990 Woke up on January 9th of 2009 and my daily routine, get ready for 368 00:25:05,990 --> 00:25:07,530 work, I'm watching CNBC. 369 00:25:08,090 --> 00:25:14,250 And part of the news is that there is unusual movement in Lenar stock 370 00:25:14,250 --> 00:25:21,050 attributable to a press release by Barry Minkow. This catches 371 00:25:21,050 --> 00:25:22,310 me completely by surprise. 372 00:25:22,590 --> 00:25:25,410 With Lenar Corporation, we are forced. 373 00:25:26,030 --> 00:25:30,310 to do what the victims may not have the money left to do or the will, and that 374 00:25:30,310 --> 00:25:34,930 is stand up to them and say, we know fraud, and you're just fraud. 375 00:25:35,330 --> 00:25:39,950 Almost immediately, Miller learns that Minkow is acting as a spokesperson for 376 00:25:39,950 --> 00:25:43,490 Nicholas Marsh, and he knows that this is not about money anymore. 377 00:25:44,030 --> 00:25:49,410 In terms of reputation, they say it takes a lifetime to build a reputation 378 00:25:49,410 --> 00:25:53,650 minute to lose one, and this was one of those minutes where... 379 00:25:54,190 --> 00:25:58,830 The rug of reputation was pulled out from under us. It was incumbent on us to 380 00:25:58,830 --> 00:26:02,830 act in a way to preserve all that we'd built over all those years. 381 00:26:03,730 --> 00:26:07,750 Homebuilder Lennar taking a big hit today on allegations of fraud. 382 00:26:08,010 --> 00:26:10,170 The allegations were absurd. 383 00:26:10,920 --> 00:26:17,340 That Lennar is a financial crime in progress, that it operates a Ponzi 384 00:26:17,780 --> 00:26:23,520 I mean, Lennar has been in business for over half a century, one of the leading 385 00:26:23,520 --> 00:26:29,400 home builders in the nation, a public company since the 70s. 386 00:26:29,820 --> 00:26:31,500 So it made no sense. 387 00:26:31,840 --> 00:26:36,800 The allegations that were made by Barry Minkow were in many instances flat out 388 00:26:36,800 --> 00:26:38,440 false or misleading. 389 00:26:38,640 --> 00:26:39,640 For instance. 390 00:26:40,040 --> 00:26:43,820 An allegation that the Federal Bureau of Investigation was investigating that 391 00:26:43,820 --> 00:26:47,800 Lennar was a Ponzi scheme may in fact have been true. 392 00:26:48,080 --> 00:26:52,600 However, he omitted to mention the fact that the reason that the FBI was 393 00:26:52,600 --> 00:26:57,080 investigating those allegations was because he himself had made those 394 00:26:57,080 --> 00:27:02,220 allegations. And many of the allegations are a kind of wild conjecture. 395 00:27:02,400 --> 00:27:05,780 Corporate fraud comes from an environment of fraud at the highest 396 00:27:06,490 --> 00:27:11,210 We found a very interesting transaction with Mr. Jaffe, the chief operating 397 00:27:11,210 --> 00:27:12,730 officer of Lenar Corporation. 398 00:27:13,170 --> 00:27:16,850 One of the red flags that Barry put out there was that supposedly I had 399 00:27:16,850 --> 00:27:19,490 improperly obtained a loan for my personal home. 400 00:27:19,750 --> 00:27:24,950 And what we found, and that is contained in our report, is that Mr. Jaffe got a 401 00:27:24,950 --> 00:27:29,850 loan from a Mr. Venere, and Mr. Venere is connected with Lenar and SunCal in 402 00:27:29,850 --> 00:27:30,850 Kern County. 403 00:27:31,130 --> 00:27:34,050 So he made up this story that makes no sense at all. 404 00:27:34,570 --> 00:27:38,950 that somehow money went from A to B and B to C and then back to me through a 405 00:27:38,950 --> 00:27:39,809 back door. 406 00:27:39,810 --> 00:27:44,470 By late in the afternoon, there can be no doubt that Minko's plot is working. 407 00:27:45,350 --> 00:27:49,890 Trading volume in Lennar stock options is more than 30 times what it is on a 408 00:27:49,890 --> 00:27:50,890 normal day. 409 00:27:55,540 --> 00:28:00,500 Finally, Miller tries to grab the microphone away from Barry Minko and 410 00:28:00,500 --> 00:28:01,900 finger at Nicholas Marsh. 411 00:28:02,200 --> 00:28:07,760 We have subsequently filed litigation in Florida against this litigant who has 412 00:28:07,760 --> 00:28:10,360 been trying to extort money from the company. 413 00:28:10,990 --> 00:28:12,790 But he cannot stop the slide. 414 00:28:13,190 --> 00:28:18,090 In that first day, in stock price alone, I believe that what was lost was 415 00:28:18,090 --> 00:28:21,570 approximately $350 million of shareholder value. 416 00:28:21,850 --> 00:28:27,910 These are innocent people who lost money by being invested in Lenar Corporation. 417 00:28:28,880 --> 00:28:30,920 And that was just the first day. 418 00:28:31,200 --> 00:28:33,800 Minko keeps the blast up all week. 419 00:28:34,080 --> 00:28:38,600 If you look at our stock activity through the next days, I think all told, 420 00:28:38,720 --> 00:28:44,080 somewhere around a half a billion dollars of stock value was lost as a 421 00:28:44,080 --> 00:28:46,720 response to the allegations made. 422 00:28:46,940 --> 00:28:48,880 And what's in it for Barry Minko? 423 00:28:49,400 --> 00:28:53,880 According to his agreement with Nicholas Marsh, he stands to take in as much as 424 00:28:53,880 --> 00:28:54,880 $2 million. 425 00:28:55,440 --> 00:29:00,080 And Minko needs that money to fund the biggest act of self -promotion one can 426 00:29:00,080 --> 00:29:03,680 imagine. Up next, Minko goes Hollywood. 427 00:29:04,040 --> 00:29:06,400 Your stock is worth over $100 million. 428 00:29:07,260 --> 00:29:08,480 I'm done with you! 429 00:29:09,900 --> 00:29:11,280 You don't have God. 430 00:29:11,860 --> 00:29:12,860 I'll buy God. 431 00:29:14,200 --> 00:29:20,400 Hear more stories about Z -Best Carpet Cleaners Fraud at cnbcprime .com slash 432 00:29:20,400 --> 00:29:21,460 americangreed. 433 00:29:22,830 --> 00:29:23,830 Feeling greedy? 434 00:29:24,090 --> 00:29:27,850 Want more than your share of behind -the -scenes dirt? Follow us at 435 00:29:27,850 --> 00:29:29,610 AmericanGreedTV on Twitter. 436 00:29:29,850 --> 00:29:30,850 We'll be right back. 437 00:29:38,950 --> 00:29:44,830 In 1987, Barry Minko makes a short video about his success as a carpet cleaner. 438 00:29:45,850 --> 00:29:46,850 Now, 439 00:29:47,690 --> 00:29:52,250 more than 25 years later, he is trying again to produce his own story. 440 00:29:52,670 --> 00:29:55,050 This time, he is hoping for a blockbuster. 441 00:29:55,430 --> 00:30:00,390 You are hereby ordered to serve a term of 25 years in jail. 442 00:30:02,410 --> 00:30:07,450 It's a full -blown Hollywood production starring famous actors like James Caan 443 00:30:07,450 --> 00:30:09,770 and also starring Barry Minko. 444 00:30:10,950 --> 00:30:16,930 It will cost several million dollars, which may be a reason in 2009 Minko 445 00:30:16,930 --> 00:30:21,290 Lenar Corporation to pay him to retract his allegations against the company. 446 00:30:22,250 --> 00:30:23,930 But he is in for a fight. 447 00:30:24,450 --> 00:30:31,390 On January 9th, 2009, when he attacked our reputation, we were never interested 448 00:30:31,390 --> 00:30:34,130 in settling with him for one dollar. 449 00:30:34,350 --> 00:30:36,350 It just wasn't going to happen. 450 00:30:36,810 --> 00:30:39,830 But Minko and his partner, Nicholas Marsh, try. 451 00:30:40,210 --> 00:30:44,990 At one point, Lennar's attorney, Dan Petruccelli, gets a call from Nick 452 00:30:44,990 --> 00:30:47,650 attorney and suggests a meeting with Minko. 453 00:30:48,050 --> 00:30:51,510 You have this perfunctory meeting. 454 00:30:52,110 --> 00:30:57,810 where you talk about the accusations, he realizes the error of his ways, and he 455 00:30:57,810 --> 00:31:00,510 then agrees to issue a retraction. 456 00:31:01,530 --> 00:31:07,290 And when he issues the retraction, the stock will go back up. I said, I see. 457 00:31:07,670 --> 00:31:11,190 And what are we supposed to do in return? 458 00:31:11,410 --> 00:31:15,410 Well, you're supposed to give us money and Lennar stock. 459 00:31:16,330 --> 00:31:17,330 Lennar stock? 460 00:31:17,790 --> 00:31:18,790 Really? 461 00:31:19,389 --> 00:31:25,010 Accepting Lenar stock in exchange for a retraction runs directly contrary to the 462 00:31:25,010 --> 00:31:30,270 idea that Barry believed that Lenar was a Ponzi scheme. No one would accept 463 00:31:30,270 --> 00:31:33,810 stock in a corporation if they truly believed that it was a fraud. 464 00:31:34,730 --> 00:31:39,670 Petrocelli turns down the offer, and Minkow tries to negotiate for himself. 465 00:31:40,570 --> 00:31:45,810 Sometime in April, Barry Minkow reached out to us to... 466 00:31:46,350 --> 00:31:53,130 talk to us and have a discussion about settling in some way or maybe recasting 467 00:31:53,130 --> 00:31:56,610 what he was saying towards something more truthful. 468 00:31:57,910 --> 00:31:59,390 It is Easter weekend. 469 00:31:59,750 --> 00:32:02,750 Pastor Minko is in Las Vegas shooting his movie. 470 00:32:03,030 --> 00:32:07,850 Lennar Chief Operating Officer John Jaffe and Lennar's attorney Dan 471 00:32:07,850 --> 00:32:12,570 meet him in his hotel room on Good Friday to show him box loads of 472 00:32:12,570 --> 00:32:14,710 that prove his allegations wrong. 473 00:32:15,530 --> 00:32:17,990 His response was, oh, wow, I didn't know that. Look at that. 474 00:32:19,130 --> 00:32:23,970 Marsh never told me that. I didn't realize that. After doing that, we sit 475 00:32:23,970 --> 00:32:25,590 with him and he says, well, you know what? 476 00:32:26,090 --> 00:32:28,170 I'm ready to resolve this. I'm ready to make a retraction. 477 00:32:28,490 --> 00:32:29,810 All it's going to take is $1 million. 478 00:32:31,390 --> 00:32:32,590 That's all. Just give me $1 million. 479 00:32:33,670 --> 00:32:36,210 The next day, he gets an email from Minkow. 480 00:32:36,690 --> 00:32:40,890 He says he's sending it to me, not as the Barry Minkow that's attacking us, 481 00:32:40,890 --> 00:32:43,970 as the Barry Minkow who's a pastor. And he apologizes for the personal. 482 00:32:45,020 --> 00:32:50,180 And he's caused my family. The next day, Easter Sunday, Dan Petruccelli gets a 483 00:32:50,180 --> 00:32:52,760 phone call from Barry Minkow's attorney saying, you know what? 484 00:32:53,820 --> 00:32:55,660 You won't give us a million. How about 250? 485 00:32:56,040 --> 00:32:58,000 We refer to that as the Easter discount. 486 00:32:59,560 --> 00:33:00,560 Rejected again. 487 00:33:00,760 --> 00:33:04,960 Minkow and Marsh get a new idea. As headlines across the country announce 488 00:33:04,960 --> 00:33:09,780 expansion of a U .S. government probe into executives accused of dodging taxes 489 00:33:09,780 --> 00:33:12,520 by putting money into offshore accounts. 490 00:33:14,090 --> 00:33:20,210 He launched a release that suggested that myself and John Jaffe, our chief 491 00:33:20,210 --> 00:33:23,050 operating officer, had offshore bank accounts. 492 00:33:24,030 --> 00:33:30,250 He had no factual background, no factual basis for making the allegation. And 493 00:33:30,250 --> 00:33:36,750 John Jaffe and myself never had an offshore bank account of any sort 494 00:33:36,750 --> 00:33:38,190 in our lives. 495 00:33:38,450 --> 00:33:41,830 But guess who does have secret bank accounts? 496 00:33:42,190 --> 00:33:43,190 That's right. 497 00:33:43,610 --> 00:33:44,830 It's Barry Minko. 498 00:33:45,670 --> 00:33:50,330 Right here at his own church, the nationally renowned fraud fighter has 499 00:33:50,330 --> 00:33:51,350 to his old tricks. 500 00:33:52,390 --> 00:33:56,070 Forging documents so that he can embezzle millions of dollars from people 501 00:33:56,070 --> 00:33:57,790 trust him implicitly. 502 00:33:59,310 --> 00:34:04,890 Mr. Minko fraudulently opened bank accounts in the name of the church 503 00:34:04,890 --> 00:34:06,470 anyone at the church knowing about it. 504 00:34:07,340 --> 00:34:12,659 In all, he opens 12 secret accounts, allowing Minko to take any check made 505 00:34:12,659 --> 00:34:15,860 available to the church and use that money for himself. 506 00:34:16,340 --> 00:34:17,920 In some cases, Mr. 507 00:34:18,360 --> 00:34:21,540 Minko would essentially steal the checks right from the offering plate. 508 00:34:22,639 --> 00:34:27,159 And so members of his church think they are supporting the services the church 509 00:34:27,159 --> 00:34:30,760 provides, but really funding Barry Minko's movie. 510 00:34:31,179 --> 00:34:33,639 The money got siphoned off in cash. 511 00:34:34,540 --> 00:34:40,440 To pay for the set, to pay for the actors, to pay for, you know, any number 512 00:34:40,440 --> 00:34:45,020 these various things it takes to fund, by yourself, a Hollywood movie. 513 00:34:45,480 --> 00:34:50,860 In one poignant exchange, Minko convinced his grieving husband to make a 514 00:34:50,860 --> 00:34:56,540 ,000 donation to a charity in Sudan in memory of his late husband. But the 515 00:34:56,540 --> 00:34:57,860 never makes it to Africa. 516 00:34:58,360 --> 00:35:00,300 Barry Minko steals it. 517 00:35:00,560 --> 00:35:02,800 It shows he actually has no compassion for anyone. 518 00:35:03,500 --> 00:35:08,580 It shows that he would steal money absolutely from anyone in any situation 519 00:35:08,580 --> 00:35:14,020 mind. Next on American Read, watch Barry Minko self -destruct. 520 00:35:14,280 --> 00:35:18,180 In any fraud case, you look for the lies and you follow the money. 521 00:35:27,260 --> 00:35:29,460 In the case of Lenar Corporation. 522 00:35:30,360 --> 00:35:35,360 For months, press releases from Barry Minko's Fraud Discovery Institute blast 523 00:35:35,360 --> 00:35:36,460 the Lenar Corporation. 524 00:35:37,060 --> 00:35:41,840 He claims they build with illegal Chinese drywall. They don't pay their 525 00:35:42,260 --> 00:35:47,720 Lenar answers every charge, offering detailed reports on why the allegations 526 00:35:47,720 --> 00:35:54,120 untrue. But Minko presses on. In March 2009, he checks in with the FBI agents 527 00:35:54,120 --> 00:35:55,480 who received his report. 528 00:35:56,010 --> 00:36:00,990 He reached out to those agents to try to confirm that there was, in fact, an 529 00:36:00,990 --> 00:36:04,270 investigation instigated by his report. 530 00:36:04,650 --> 00:36:10,470 The FBI confirms its investigation, and Minkow acknowledges that the information 531 00:36:10,470 --> 00:36:15,010 they give him is non -public and that to trade Lennar's stock with that 532 00:36:15,010 --> 00:36:16,670 information would be illegal. 533 00:36:16,890 --> 00:36:19,310 It would be insider trading. 534 00:36:19,880 --> 00:36:25,260 And then, three days later, Minkow buys 150 contracts for options on Lennar 535 00:36:25,260 --> 00:36:27,920 stock, betting the stock price will fall. 536 00:36:28,280 --> 00:36:34,220 He tried to conceal his trades by using other people to open accounts and to 537 00:36:34,220 --> 00:36:35,220 engage in trades. 538 00:36:35,440 --> 00:36:42,340 But it was, in its end, Barry's... egotism and his desire to control 539 00:36:42,340 --> 00:36:47,760 the scheme that forced him to inject himself into the transactions and expose 540 00:36:47,760 --> 00:36:50,540 his direct participation in those trades. 541 00:36:50,780 --> 00:36:55,600 What Minko fails to remember is that stockbrokers record phone conversations 542 00:36:55,600 --> 00:36:59,340 with their client and his calls on the deals are recorded. 543 00:36:59,620 --> 00:37:04,480 He also didn't count on the tenacity of the FBI agents looking into his story. 544 00:37:05,190 --> 00:37:10,010 In any fraud case, you look for the lies and you follow the money. And it's 545 00:37:10,010 --> 00:37:13,050 following the money that led us to the trading accounts. 546 00:37:13,530 --> 00:37:18,290 There may have been others, but the trade that is found from March 2009 is 547 00:37:18,290 --> 00:37:22,230 enough to charge Minko with conspiracy to commit securities fraud. 548 00:37:22,510 --> 00:37:26,890 In 2011, he was called in for a debriefing session with the Fed. 549 00:37:27,210 --> 00:37:29,030 I believe the turning point. 550 00:37:30,110 --> 00:37:36,930 During that session is one when we revealed that there was a recording of 551 00:37:36,930 --> 00:37:38,930 his having executed trades. 552 00:37:39,210 --> 00:37:44,510 And at that point, they asked for a recess. And it was after that that he 553 00:37:44,510 --> 00:37:45,510 to plead guilty. 554 00:37:46,170 --> 00:37:51,410 Minkow comes clean entirely, saying his allegations against Lennar and its 555 00:37:51,410 --> 00:37:52,790 executives are false. 556 00:37:53,090 --> 00:37:56,810 Nothing more than an attempt to extort money out of the company. 557 00:37:57,580 --> 00:38:03,180 We didn't see it coming. We didn't know it was happening. And moment in time, 558 00:38:03,200 --> 00:38:06,720 the entire circumstance had turned around. 559 00:38:07,400 --> 00:38:12,820 From a years -long effort of listening to accusations, 560 00:38:13,380 --> 00:38:20,320 diligencing them, and then responding, it was now over. It was game over. 561 00:38:21,130 --> 00:38:25,690 Minko is sentenced to five years in prison and ordered to pay Lenar 562 00:38:25,690 --> 00:38:29,170 $580 million in restitution. 563 00:38:30,530 --> 00:38:36,310 Nicholas Marsh is not charged criminally. His tactic against Lenar 564 00:38:36,310 --> 00:38:37,310 bundle. 565 00:38:38,350 --> 00:38:42,530 Remember the original lawsuit he brought, saying Lenar him millions? 566 00:38:42,970 --> 00:38:47,650 Every one of Marsh's accusations was found to be invalid. 567 00:38:47,970 --> 00:38:49,630 And in fact, the... 568 00:38:50,480 --> 00:38:54,900 The court determined that Marsh owed Lenar lots of money. 569 00:38:55,180 --> 00:39:00,740 And when Lenar's extortion case against Marsh and Minkow goes to trial, a jury 570 00:39:00,740 --> 00:39:05,780 awards compensatory and punitive damage against Marsh in the stunning amount of 571 00:39:05,780 --> 00:39:06,780 $1 billion. 572 00:39:07,300 --> 00:39:09,780 Many ask, did the system work? 573 00:39:10,140 --> 00:39:16,680 And I have to give kind of a two -sided answer to that and say, on the one 574 00:39:16,680 --> 00:39:19,400 hand, Barry Minkow's in jail. 575 00:39:19,980 --> 00:39:22,860 Nick Marsh has a billion -dollar judgment against him. 576 00:39:23,500 --> 00:39:26,580 And that would seem like vindication. 577 00:39:26,820 --> 00:39:33,060 But the road to get there is very bumpy and very, very expensive. 578 00:39:33,640 --> 00:39:39,040 In San Diego, at the Community Bible Church, as members learn that Minko was 579 00:39:39,040 --> 00:39:43,360 lying in his stunt against Lenar, they look into the church's coffers. 580 00:39:43,700 --> 00:39:47,040 That's when all the questions and all the stories. 581 00:39:47,630 --> 00:39:52,330 started to come out. You know, I gave $75 ,000 for this. I gave this much 582 00:39:52,390 --> 00:39:55,670 and it's not in my records, and it's not in their records. 583 00:39:56,550 --> 00:40:01,930 For one of Minko's congregants, who prefers not to be identified, the news 584 00:40:01,930 --> 00:40:04,670 Minko's wrongdoing is particularly devastating. 585 00:40:05,290 --> 00:40:07,570 She has loaned him her life savings. 586 00:40:08,170 --> 00:40:10,710 I feel terrible. I feel embarrassed. 587 00:40:11,010 --> 00:40:15,130 It's stupid of me to allow him to do this to me. 588 00:40:15,760 --> 00:40:20,800 Over many months, Minko positions himself well in her life, counseling her 589 00:40:20,800 --> 00:40:22,200 daughters in times of need. 590 00:40:23,060 --> 00:40:27,840 I thought, helping my children, and he was my pastor. 591 00:40:28,700 --> 00:40:33,720 And as I always said, if you can't trust your pastor, who can you trust? 592 00:40:34,120 --> 00:40:37,240 And then he moves in with a need of his own. 593 00:40:37,460 --> 00:40:42,480 He came to me to borrow, I think first it was $150 ,000. 594 00:40:43,710 --> 00:40:48,730 He said he had stocks, but he was not able to get them out at the time, so he 595 00:40:48,730 --> 00:40:49,730 needed cash. 596 00:40:50,310 --> 00:40:55,810 And this $150 ,000 was to go towards finishing the movie. 597 00:40:56,210 --> 00:40:58,190 A month later, he's back. 598 00:40:58,430 --> 00:41:01,970 He wants $100 ,000, another loan. 599 00:41:02,350 --> 00:41:06,330 I really truly believed that I would get my money back. I mean, I'm not a 600 00:41:06,330 --> 00:41:08,910 gambling person. Some people say, well, you were investing. 601 00:41:09,170 --> 00:41:11,110 I said, no, it was a loan. 602 00:41:11,790 --> 00:41:16,990 But now Minko is headed to jail, and he knows she will never see the money he 603 00:41:16,990 --> 00:41:17,990 took from her. 604 00:41:18,170 --> 00:41:23,850 I might lose my house. I was living pretty comfortably before he came along, 605 00:41:23,850 --> 00:41:28,090 he's devastated my financial security. 606 00:41:28,910 --> 00:41:33,810 When the final accounting is done, it's found that Minko embezzled $3 million 607 00:41:33,810 --> 00:41:36,230 from the church over a 10 -year period. 608 00:41:36,490 --> 00:41:39,790 He pleads guilty to bank, wire, and mail fraud. 609 00:41:40,600 --> 00:41:44,740 At Minko's sentencing hearing, victims come forward to make sure the judge 610 00:41:44,740 --> 00:41:46,940 understands the damage he has done. 611 00:41:47,500 --> 00:41:49,320 He caused such a dissension. 612 00:41:49,680 --> 00:41:54,060 Some people walked away from God, from church, family. 613 00:41:54,460 --> 00:41:59,840 Barry Minko is sentenced to five years for the Lenar fraud, along with another 614 00:41:59,840 --> 00:42:01,960 five years for the crime against his church. 615 00:42:02,440 --> 00:42:07,740 In his letter to the court, Minko writes that his greed was not for money, but 616 00:42:07,740 --> 00:42:08,740 for attention. 617 00:42:09,190 --> 00:42:13,330 Perhaps it goes back to those early interviews in the garage in Reseda where 618 00:42:13,330 --> 00:42:16,830 16 -year -old boy discovers the thrill of being in the spotlight. 619 00:42:17,230 --> 00:42:22,370 And for the next 30 years, he was director and star of The Barry Minko 620 00:42:22,370 --> 00:42:24,690 long -running series of dirty deeds. 621 00:42:25,800 --> 00:42:30,460 Next, two -timing temptress horses around with city money. The total loss, 622 00:42:30,460 --> 00:42:31,460 than $53 million. 623 00:42:31,760 --> 00:42:34,260 Taking first place in U .S. fraud history. 624 00:42:34,480 --> 00:42:38,460 American Greed, Scams, Scoundrels, and Suckers. Next, CNBC. 625 00:42:39,740 --> 00:42:42,900 The fastest -growing cable network in primetime. 626 00:42:43,300 --> 00:42:44,300 CNBC.