Barry Minkow has long been all about making money. He's good at it. At 16, he appeared to have started a carpet-cleaning business called ZZZZ Best, worth hundreds of millions of dollars that turned out to be an elaborate Ponzi scheme. He served seven years in prison for that no-no.
His devious ways haven't changed. Yesterday, Minkow, now 44, was sentenced to five years in prison by a Miami federal court for his involvement in what Bloomberg calls “a stock-manipulation scheme,” or insider trading.
Need a local slant to this story? Two years ago, Minkow was business partners with William Lobdell, the interim communications director for the city of Costa Mesa. The charge that is putting Minkow back in prison is linked to the type of work the two did together–sort of.
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The new-media business venture was called iBusiness Reporting, and the partnership was announced in February 2010. The idea was to investigate corrupt public companies and their inflated claims, then buy and short-sell the stock for profit. It seemed the company was walking an ethical tightrope.
Minkow's conviction was based on just that sort of work. Prosecutors in the case said Minkow made false and misleading statements about Miami homebuilding company, Lennar Corp. (which will be the developer of houses on the Great Park), that he was supposedly investigating. The statements helped drive down the company's stock price. After Minkow served seven years for his Ponzi scheme conviction, he was ordained as a minister after his release, founded the Fraud Discovery Institute and helped the FBI fight fraud. Part of his current sentence is linked to his possibly having used some of the non-public information he received from federal law enforcement agents. As part of his sentence, Minkow is also being forced to pay $583 million in restitution.
Lobdell says he was not involved in the Lennar investigation, pointing out that it was “from a year before I got there.” The Costa Mesa PR man claims he lasted only four months with iBusiness Reporting, saying the job “wasn't a good fit for me.” He said he did some work “from time to time” with Minkow afterward, but only those four months as a full-time employee. Interestingly, there is no record of Lobdell's work with the company, since the website and its archives have been blanked.
Having made his name as a religion reporter and investigative journalist, Lobdell took a leap of faith in joining forces with Minkow, even if he did feel the business filled a necessary void in investigative journalism.
Lobdell says he did his research on Minkow the new man, prior to agreeing to go to work together. “He got high marks from the FBI, with the SEC; 60 Minutes had a glowing review; I spoke with his church elders, and they had nothing but the highest praise; even the judge and prosecutor said his was one of the best redemption stories they'd ever seen,” he said. “He had a decade-long track record, so everywhere I turned there was no evidence that he would go back to his old pattern. That just wasn't there. He's just an incredible con man.”
Lobdell called Minkow's recent sentencing “well-deserved.”
After leaving Minkow's company, Lobdell returned to the Los Angeles Times family–where he made his name–writing columns for the Daily Pilot, which he used to edit. In May 2011, Lobdell accepted a 90-day contract with the city of Costa Mesa to serve as its interim communications director. His contract has since been renewed through the end of the year, paying him $3,000 per week.
From working for a known fraudulent businessman to representing a city council choosing investigating an option to outsource one-third of its workforce without providing any financial proof that it's a necessary move. Hmm.
