THE CON: A charismatic teenager grows a carpet cleaning business into a $300 million company. The only problem? ZZZZ Best (pronounced Zee Best) is a complete sham, built on fake contracts, credit card fraud, mob money and one bank loan after another.
THE DAMAGE: Investors lost $100 million, or about $188 million today.
THE OUTCOME: Minkow spent seven years in federal prison; today, he runs the Fraud Discovery Institute and helps nab major white collar criminals.
The year 1987 started off with a bang for Barry Minkow. ZZZZ Best, his carpet cleaning and insurance restoration business, exploded on the stock market. Suddenly, Minkow was worth $110 million. He was just 21-years-old.
Minkow’s reality – from his opulent mansion to his fleet of sports cars – was nothing like that of any kid he grew up with in New Jersey. But his life had always been different. At 16, he came home after school and headed straight to his parents’ basement, where he ran a busy carpet cleaning business. He expanded from one employee – his mother – to 75, opened three locations and took ZZZZ Best public. Within three years, his one-time basement business was worth $300 million.
To match his big and precocious talent as an entrepreneur, Minkow had a keen marketing sense. He hired a public relations expert to get his name in the news and penned an autobiography, "Making it in America," to promote ZZZZ Best. The 1980s were winding down but the big players on Wall Street were getting richer and richer. Minkow – the boy wonder, the kid sensation – seemed to represent all that was possible in America. When he appeared on "The Oprah Winfrey Show," he summed up his early and wild success with a simple phrase: “Think big – be big. End of story.”
Minkow certainly thought big. His initial sources of capital came from a dozen burglaries that he staged to collect insurance money and a loan shark friend with connections to the mob. But it was his scheme for growing the business that made serious money. He started by expanding his company’s services to include restoration in buildings damaged by fire or flood. Before long, Minkow booked several big jobs, which were arranged and overseen by the phony “Interstate Appraisal Services.” To back up his lies, Minkow fabricated thousands of financial statements and floor plans. On paper, ZZZZ Best had up to $50 million in contracted work. In truth, the company didn’t have a single big insurance job.
Enticed by the prospect of 50 percent returns, hundreds of people invested their savings in ZZZZ Best. Just as he charmed shareholders, Minkow exercised his cool persona to squeeze himself out of more than one close call. In late 1987, it seemed the game was up when auditors demanded a tour of the work site on a $7 million contract. Within a matter of weeks, Minkow had a plan: he rented out an entire floor in a brand new building in Sacramento, where he artfully displayed equipment throughout the space. He scheduled the tour for a Saturday, bribed the security guard to greet him like a familiar face and walked a satisfied auditor through the set of his latest job.
In the end, it was an irate client from Minkow’s early days that started the chain of events by which his fraud was exposed. Incensed by the charges to her credit card that traced back to ZZZZ Best, the woman called Daniel Akst, a reporter at The Los Angeles Times. After an article appeared in the paper chronicling Minkow’s shady business partners and alleging up to $70,000 worth of credit card fraud, ZZZZ Best stock plummeted 28 percent.
With the spotlight shined on ZZZZ Best, the truth was soon revealed. In a last ditch effort to escape trouble, Minkow insisted his mistakes were the product of youthful poor judgement. While confessing his wrongdoing, he portrayed himself as the victim of powerful and dangerous criminals. During his trial, the government estimated that Minkow stole $3 million from ZZZZ Best – not including cash. He was found guilty on 57 counts of fraud and sentenced to 25 years in federal prison for swindling at least $100 million from shareholders, banks, private investors and creditors.
After seven years in prison, Minkow emerged a repentant man. He founded the Fraud Discovery Institute, an online company that investigates white collar crime and offers training in detecting fraud. Putting his know-how to use, Minkow has investigated a dozen major fraud cases; he helped nab James P. Lewis, Jr., a fellow Hall of Infamy inductee. Minkow, a pastor at an evangelical church in San Diego, recently wrote a second autobiography. Its title: "Cleaning Up."
Con Timeline: 1980 - 1987
The name for his company came to 16-year-old Barry Minkow as he drove himself to Cleveland High School in 1982. ZZZZ Best - with four Zs to represent the number of children he hoped to have one day.