Mary McCue, an SEC spokeswoman, said subpoenas are approved by the commission, rather than staff members, as a safeguard. She said the SEC staff has discussed changing procedures for reporting the dismissal or resignation of an auditing firm but has not presented the commission with its recommendations. Morze’s role, Asperger said, was to breeze in to meet with investment officers, introduce himself as ZZZZ Best’s vice president in charge of insurance restoration, then rush off to catch a plane or answer a phone before too many questions could be asked. During the past month several class-action suits have been filed against Minkow and ZZZZ Best alleging that the company made misleading statements in its stock prospectus last December. This letter is to confirm our understanding regarding our engagement as independent accoun�tants of ZZZZ BEST CO., INC. (the Company) and the nature and limitations of the services we will provide.
Please indicate your acceptance of the above arrangements by signing and returning the enclosed copy. There was a Barry Minkow movie made in 2011 that was eventually released in 2018, titled Con-Man. During the zzzz best financial statements filming, Barry was arrested and pleaded guilty to insider trading charges.
When Did Barry Minkow Get Out of Prison?
- The company’s financial statements showed massive revenues from these projects, and the allure of high returns enticed many investors and financial institutions.
- However, it was later revealed that ZZZZ Best was largely a front for one of the most notorious Ponzi schemes and corporate frauds in modern financial history.
- Mary McCue, an SEC spokeswoman, said subpoenas are approved by the commission, rather than staff members, as a safeguard.
- Minkow’s criminal acts included insurance scams and check kiting, which left a trail of deceit until the fraud was exposed by a vigilant homemaker.
Federalprosecutors estimate that, at a minimum, Minkow cost investors and creditors$100 million. The reported profits of the firm were nonexistent and thehuge restoration contracts, imaginary. As one journalist reported, rather thanbuilding a corporation, Minkow constructed a hologram of a corporation. In July1987, just three months after the company�s stock had reached a market valueof $220 million, an auction of its assets netted only $62,000. ZZZZ Best claimed to have diversified into the highly lucrative business of insurance restoration, claiming contracts worth millions of dollars. These restoration projects included repairing and restoring buildings damaged by floods and fires.
However, it was later revealed that ZZZZ Best was largely a front for one of the most notorious Ponzi schemes and corporate frauds in modern financial history. WASHINGTON — The stunning fall of youthful millionaire Barry Minkow and his ZZZZ Best rug cleaning empire amid charges of massive fraud points to serious flaws in the nation’s financial reporting system, congressmen said Wednesday. Minkow has been involved in a number of lawsuits, including one filed against him by Jack M. Catain Jr., a reputed Los Angeles organized crime figure who died earlier this year. In 1985, according to court papers, when Minkow was short of cash, Catain arranged loans for Minkow–but at interest rates of 2% to 5% per week.
However, ZZZZ Best was actually an elaborate Ponzi scheme, and within two years Minkow was convicted of securities fraud for bilking investors out of $100 million. BecauseZZZZ Best was a public company, the resignation of its independent auditor wasrequired to be reported to the SEC in an 8-K filing. One purpose of thisrequirement is to alert investors and creditors of the circumstances that mayhave led to the change in auditors. At the time, SEC registrants were allowedfif�teen days to file the 8-K auditor change announcement. After waiting themaxi�mum permissible time, ZZZZ Best reported the change in auditors but,despite Ernst & Whinney�s insistence, made no mention in the 8-K of thefraud allegation that had been subsequently recanted. The SEC�s rules thatwere in effect at the time also required a former audit firm to file an exhibitletter to a former client�s 8-K commenting on the 8-K�s accuracy andcompleteness.
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Morze, who pleaded guilty to three counts of stock fraud, bank fraud and income tax evasion, will be eligible for parole after serving 32 months of his sentence. Before the initial disclosure of false credit card charges, ZZZZ Best’s stock had traded as high as $18.375 a share in the over-the-counter market. It closed at $3.50 Thursday, as about 2 million of its 11.6 million shares were traded. I am an individual having certain confidential information regarding the financial condition of ZZZZ Best Co., Inc. I have read the prospectus and your Review Report dated October 3,1986 and recognize you have not done an examination In accordance with generally accepted auditing standards, but that such audit will be forthcoming by you. We toured floor 17 briefly (it is currently occupied by a law firm) then visited floor 12 (which had a considerable amount of unoccupied space) and floor 7.
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Before the deal was closed, the jilted homemaker sparked a campaign against ZZZZ Best that would expose more than the fraud committed against her. Upon his eventual release from prison, Minkow became a pastor and a fraud investigator. However, he would later be convicted of another fraud-related offense in 2011, showing a pattern of fraudulent behavior. These fraudulent activities allowed Minkow to secure loans and investments, which he used to expand ZZZZ Best. By the mid-1980s, the company had grown substantially and caught the attention of investors and the general public. Barry Minkow was released from jail most as of late in 2018 in the wake of spending time in jail for insider trading and embezzlement from his congregation.
Shorting stock
ZZZZ Best was a floor covering cleaning and restoration company founded by Barry Minkow that filled in as a front for a renowned Ponzi scheme. The company opened up to the world in December 1986 and was immediately valued at more than $300 million. Inside just seven months of the initial public offering (IPO), be that as it may, ZZZZ Best was bankrupt and its assets were unloaded for around $64,000. On July 6, it emerged that officials with Community Bible Church had accused Minkow of running the FDI with church funds, applying for credit cards in the names of church members and leading his flock into bad investments.
- Ostensibly,these contracts had been obtained by an- Minkow to clean and do minor remodelingwork on properties damaged by fire, storms, or other catastrophes.
- Eventually, Minkowrecognized that the ultimate scam would be to take his company public, a movethat would allow him to tap the bank accounts of investors nationwide.
- It was found that while shooting and delivering his life story, he at the same time was utilizing his enemy of fraud company to short stocks of companies he was exploring.
- In the process of creating the fraud, Minkow was able to dupe the auditors, Ernst & Whinney (now EY), into thinking the insurance restoration business was real.
- Shortlyafter Greenspan completed his audit of ZZZZ Best�s April 30, 1986, fi�nancialstatements, Minkow dismissed him and retained Ernst & Whinney to per�formthe following year�s audit.
The ZZZZ Best scandal, led by entrepreneur Barry Minkow, showcases a complex fraud orchestrated to misrepresent the company’s financial health. Minkow utilized a series of deceitful practices, including creating fictitious business accounts and manipulating audits, ultimately leading to substantial financial loss and legal ramifications. Following the exposure of the fraud, significant scrutiny was directed at the auditing firms involved and the regulatory standards in place, prompting discussions on improving auditing practices and increasing accountability within financial reporting. On April 28, 2014, Judge Michael Anello sentenced Minkow to five years in prison, the maximum possible sentence under his plea bargain. Earlier, he said that the $26 million restitution for the ZZZZ Best scam alone was large enough that he would be writing restitution checks to the victims for the rest of his life.17 As a result of his latest sentence, Minkow was released on June 6, 2019.
Before that conviction, he carried out a huge prison punishment from 1989 to 1995, being released just six years into his 25-year sentence. As a solution, Minkow wanted to gain KeyServ, Sears’ authorized floor covering cleaner, for $25 million. As indicated by Minkow, the revenues from KeyServ would give sufficient cash flow to end the Ponzi scheme.
Thomas Padgett, president of Interstate Appraisal Services, declined in an interview last month to give any details of the restoration contracts his firm had given ZZZZ Best, citing confidential agreements with his clients. ZZZZ Best, a fast-growing Reseda carpet-cleaning firm, said Friday that an internal probe had turned up “significant additional questions” about the accuracy of its financial statements. Prior to the arrival of Larry Gray and an attorneyrep�resenting ZZZZ Best�s law firm, Minkow�s subordinates visited the siteand placed placards on the walls at conspicuous locations indicating that ZZZZBest was the contractor for the building renovation. No details were overlookedby Minkow�s lieutenants; they even paid the building�s security officer togreet the visitors and demonstrate that he was aware in advance of their tour ofthe site and its purpose. Although the building had not been damaged and insteadwas simply in the process of being completed, the sting operation went off asplanned.
