Barry Minkow, who became a teen-age millionaire after he launched a carpet cleaning company in his parents' garage, was convicted Wednesday of 57 fraud counts for masterminding a sophisticated securities swindle that propelled his firm into a hot Wall Street commodity.
A federal court jury found Minkow, 22, guilty of all charges in an indictment that alleged that the ZZZZ Best carpet cleaning company bilked investors--including some of the most prestigious financial institutions in the country--out of more than $26 million in loans and stock offerings by bolstering its books with phantom earnings.
Prosecutors alleged that the charismatic, fast-talking young salesman engineered a classic sting operation--complete with faked documents, staged phone calls and even rented office space hastily outfitted as job sites--to persuade investors that ZZZZ Best was making $43 million a year restoring buildings that had been damaged by fire or flood.
Most Jobs Didn't Exist
In fact, Minkow himself later admitted, 90% of the restoration jobs never existed. But Minkow said he was forced to go along with the scam by organized crime figures who had infiltrated ZZZZ Best.
The verdicts interrupted a last-minute round of plea negotiations, launched Wednesday morning at Minkow's request over the objections of his attorney. Minkow reportedly had been talking from prison over the last several days with a "spiritual counselor" and had become determined to plead guilty, despite his lawyer's belief that he might prevail, perhaps on appeal.
Minkow, who now faces up to 403 years in prison, sat quietly as the 57 guilty verdicts were read over a period of more than 20 minutes Wednesday afternoon, and apologized to reporters when his attorney would not let him speak afterward.
Throughout the nearly four-month trial, Minkow admitted his role in the ZZZZ Best fraud but claimed that he had no choice because various mobsters beat him and threatened him into cooperating in their criminal ventures once he began borrowing money from them.
"I was just a puppet," he testified at one point, describing how several of the men held his head in a sink full of water and beat him until he vomited blood. "I was a front man for the mob."
Even Minkow's attorney admitted that the defense was a risky attempt to persuade jurors that Minkow had committed numerous crimes in fear of his life or the lives of his family over a period of several years. In order to acquit him, jurors would have had to conclude that he had no opportunity to escape from the men he said were threatening him from the time the fraud began in March, 1985, until ZZZZ Best folded more than two years later.
Ultimate Sales Job
For Minkow, the defense was perhaps the ultimate sales job, an attempt during nearly 10 days of testimony to persuade jurors that after three years of lies and double-dealing at the helm of ZZZZ Best, he was at last telling the truth.
"It's easy to convince people of a lie, but to convince people you're telling the truth is difficult," he testified at one point.
Minkow's past shadowed him throughout the trial, as prosecutors presented constant images--via videotapes, photographs and testimony--of the life style financed by the schemes he claimed were forced on him.
One witness testified about an elaborate, pool-side doghouse with vaulted ceilings he built on Minkow's instructions. Another told of thousands of dollars Minkow spent hiring spectators to cheer on the women's softball team he sponsored. A former New York financial officer related how she lost her job when she approved a loan for Minkow after he flew her to California and took her out to a romantic, seaside dinner.
Prosecutors played a videotape of Minkow's televised anti-drug campaign--"My Act Is Clean. How's Yours?"--then introduced evidence that Minkow had used cocaine himself and supplied money for employees to buy the drug.
The defense also was stung by a series of rulings from U.S. District Judge Dickran Tevrizian, who refused to allow evidence that one of the alleged organized crime figures Minkow claimed had engineered the fraud, Encino financier Maurice Rind, had been convicted of stock fraud in the past.
Tevrizian also barred the defense from presenting any evidence about previous racketeering and extortion convictions of many of those involved at ZZZZ Best, as well as evidence that they had threatened other ZZZZ Best employees. The result, defense lawyer David Kenner said, was that jurors never had a fair chance to evaluate whether Minkow's fear of his associates was reasonable.
"I think the court had to wrestle with some very difficult legal principles, and I think these principles will be reviewed (on appeal)," Kenner said, adding that neither he nor Minkow were surprised by the verdicts.
"I think Barry was realistically aware of the fact that the nature of the duress defense made an acquittal unlikely, given the state of the evidence" permitted by the court, he said.