Barry Minkow, a 1980s teen tycoon from Reseda whose ZZZZ Best carpet-cleaning firm turned out to be a Ponzi scheme, resigned as minister at a San Diego County church and intends to plead guilty to a charge of insider trading, according his attorney.
The charge stems from a federal investigation in Florida involving a business, the Fraud Discovery Institute, that Minkow set up while guiding Community Bible Church in Mira Mesa.
His idea was to reveal corporate fraud while holding short positions in the companies he exposed, allowing him to profit on declines in stock prices.
One of his online attacks, a January 2009 diatribe against Lennar Corp., drove Lennar's stock down 20%. It also led the Miami home builder to sue Minkow for libel and extortion; and a judge ordered Minkow to pay millions of dollars in sanctions.
Minkow bought about $20,000 in Lennar stock options contracts based on "nonpublic information" he had received and took a short position on the shares, said Minkow's lawyer Alvin Entin. He said Minkow didn't make any money on the stock's decline.
Entin said Minkow made the investment without "consciously thinking about the legality of what he was doing."
"Unfortunately, that's not a defense," he said. "We obviously believe [prosecutors] can prove their case or we wouldn't be entering into this agreement."
Entin said that Minkow first became aware that federal prosecutors were investigating him about a month ago. The insider-trading charge carries a maximum penalty of five years in prison.
"Barry has taken the position that he did not deliberately make anything up," Entin said. "Which is not to say that all the allegations against Lennar he made were true. But clearly Barry believed it to be real."
Community Bible Church announced Minkow's resignation Tuesday in a letter to parishioners: "Today Barry resigned as our senior pastor as he is no longer qualified to be a pastor. Pastor Barry no longer considers himself above reproach as he has agreed to plead guilty to a criminal count related to the Lennar lawsuit."
The church did not return calls from The Times. The U.S. attorney's office declined to comment.
In the 1980s, Minkow had taken ZZZZ Best public and wound up on the Oprah Winfrey show before his endeavors were revealed as a scam.
After seven years in prison, he styled himself a fraud-buster and was credited by the FBI with helping to expose several Ponzi schemes, including one in which Orange County money manager James Lewis was sentenced to 30 years in prison for swindling $156 million from 1,600 investors.
"Yeah, he probably shouldn't have done what he did, and it is ironic," Entin said. "Nobody in this world is perfect."