Three new fraud charges were filed Thursday against whiz kid carpet cleaning entrepreneur Barry Minkow, alleging that he launched a phony equipment rental scheme and ran up thousands of dollars in unauthorized credit card charges on ZZZZ Best customer accounts.
The new charges, returned by a federal grand jury in Los Angeles, also allege that Minkow obtained $225,000 from Prudential Bache Finance Ltd., then had employees attempt to launder the money at several Las Vegas casinos.
The new indictment retains most of the charges returned by the grand jury in January but drops a complicated racketeering count that carried a potential 20-year prison sentence.
The indictment still charges Minkow and three remaining co-defendants with setting up an elaborate hoax to obtain millions of dollars through bank loans and stock offerings by pretending that it was doing elaborate jobs for insurance companies repairing buildings damaged by fire or flooding.
The new credit card count alleges that, while ZZZZ Best was in its early stages, Minkow made large unauthorized charges on the accounts of customers who had given the Reseda-based company their credit card numbers for carpet cleaning work. In some cases, customers who had thought they were charging $100 cleaning jobs found several thousand dollars billed to their accounts, according to the indictment and customer interviews.
Assistant U.S. Atty. Gordon Greenberg estimated that more than $80,000 in fraudulent charges were made between October, 1984, and March, 1985, effectively giving ZZZZ Best interest-free loans for the money, although Minkow quickly paid back all the money when a bank began investigating the charges.
One of two additional mail fraud counts alleges that Minkow defrauded a variety of equipment leasing companies of almost $400,000 by inducing them to purchase carpet cleaning equipment that supposedly would then be rented by ZZZZ Best. The companies paid the money to a firm owned by Minkow's former co-defendant, Daniel B. Krowpman, but the equipment never existed, the indictment alleges.
Minkow allegedly split the money with Krowpman and, to disguise that scam, paid some rent to the leasing companies for the phony equipment.
The other new mail fraud count adds a $15,000 loan from Valley State Bank to the list of loans that Minkow is alleged to have obtained through fraud.
The $225,000 advance from Prudential Bache was not filed as a new count in the indictment, but as an expansion of a previous count charging Minkow and others with laundering more than $700,000 in ZZZZ Best funds and bank loans through Las Vegas casinos in the days before the company collapsed in bankruptcy in July, 1987.
According to police reports, Minkow sought the $225,000 credit advance based on a worthless $2-million postdated check he gave to a loan officer at Prudential Bache.
Eight of the original 12 defendants in the case have either pleaded guilty or agreed to plead guilty. The new indictment names Minkow and three others still scheduled for trial on Aug. 23: Mark Roddy, a ZZZZ Best vice president; accountant Norman Rothberg, and Edward M. Krivda, who worked at a company that sold carpeting to ZZZZ Best and allegedly exaggerated the amount supplied.
Attorneys for Minkow, 22, who is being held in lieu of $1.5-million bail in Terminal Island federal prison, says he was forced into illegal acts by organized crime figures.