ZZZZ Best Co., the Reseda carpet-cleaning firm founded by Barry Minkow, will file for Chapter 11 bankruptcy protection, the company said today, because it has discovered facts that "appear to substantiate allegations of fraud associated with the company's restoration business."
The company said an apparent misappropriation of funds has "substantially depleted the company's liquid assets." ZZZZ Best's board of directors said that information has been turned over to the Securities and Exchange Commission and that it will fully cooperate with federal and state regulatory authorities.
The SEC is believed to be investigating the company in connection with possible securities violations and money laundering.
Trading at 75 Cents
Trading in ZZZZ Best's stock was halted in over-the-counter trading early today but later resumed. As of late morning, ZZZZ Best's stock was trading at 75 cents, down $2.75 on 2.6 million shares traded. Earlier this year, ZZZZ Best's stock traded as high as $18.375.
Minkow, 21, resigned as chief executive of the firm late last week citing "severe medical problems."
The carpet-cleaning firm's stock has been falling since a May report by The Times that ZZZZ Best rang up $72,000 in false credit card charges in 1984 and 1985. The article also reported that a Canoga Park flower shop then owned by Charles B. Arrington III, ZZZZ Best's chief operating officer, also rang up $91,000 in false charges in 1986.