In January 2009, Minkow accused Lennar and its employees of multiple acts of malfeasance, from a supposedly hinky home mortgage for one of its executives to mistreatment of its development partners. The report, published on the Fraud Discovery Institute website, drove the company's stock down 20%.
Lennar fired back with a libel and extortion lawsuit. That case, in Miami, has not been going well for Minkow. His medical excuse for missing a hearing looked suspect under cross-examination. And he had to acknowledge that he had made a short-sale of Lennar stock, something he had not disclosed previously and initially denied.
At one point in the pretrial proceedings, Judge Gill Freeman declared: "My main issue is that Mr. Minkow acts as judge and jury and decides what we should and shouldn't know, and he will lie, plain and simple."
When I asked Minkow about that statement this week, he said: "You know, based on what she has seen of me, I don't begrudge that." But he added that he has not yet had a chance to present his case and that he expects to win over the judge and prevail in the case.
I don't pretend to have come anywhere close to the bottom of Minkow's dispute with the various companies, including the homebuilder. But his chance of prevailing looked shakier last month when businessman Nicolas Marsch III, who was Minkow's star witness against Lennar, had his own case against the homebuilder thrown out. The California judge in that case doubted Marsch's credibility.
Minkow said he had to shut down the iBusinessReporting site "because we cannot afford a business model where we have to go up against well-funded, deep-pocketed public companies that will sue you for reporting on them." (They won't be the first, or last, small online startup sorry it can't afford the kind of legal help that traditional news organizations enjoy.)
Minkow said the new controversies should not take away from the cases in which authorities praised his work. As one example, he cited the Securities and Exchange Commission's indictment last year of an alleged Ponzi scheme operator named Dean Gross. Minkow posed as a potential investor and wore a wire to help make that case.
Lobdell e-mailed me that he thought that it remained a "valid, though not ideal, model" for paying for business reporting. He also said that the public should still trust business advice coming from Barry Minkow.
Dropping the short-selling is a start. But investors who are tempted to heed the ex-con's advice should watch for the outcome of the Lennar libel case and do their own homework. This redemption story doesn't yet have an ending.
james.rainey@latimes.com
Twitter: latimesrainey
