BTTF# 24: Barry Minkow's ZZZZ Best Carpet Cleaning Based in Reseda: The SFV Version of a Ponzi Scheme
Welcome aboard the Delorean!
Marty McFly here to take you on a special journey to explore three different locations of Barry Minkow and his company, ZZZZ Best (pronounced Zee Best). The Delorean has the required plutonium plus some random garbage in the Mr. Fusion reactor ready for this trip. The time circuits are set to the 80's (no actual date provided due to various events happening over a wide range of time) and the flux capacitor is......fluxxing. The engine is running (not stalled this time) so we need to hurry. Hang on, as the ride can be a little bumpy as we travel back in time.
The 80's decade is best characterized as an era of glamour and extravagance which was best exemplified in Oliver Stone's film, Wall Street, with the infamous quote, "greed is good." While New York City is the heart of the world's financial system and the playground for the rich, however, 3,000 miles away in the blue collar working community of Reseda, a 15 year old by the name of Barry Minkow started a carpet cleaning business that would put the SFV on the map as a poster child for 80's Wall Street fraud. (Note: it could also be argued that Michael Milken, a SFV native and current resident, should be on this "poster" but his company was based in Beverly Hills, but at any rate, I will blog about this at a future time since Milken is from the SFV).
So here goes the story, I will try to be brief here as there are many great articles out there that do a good job of telling the story. Minkow was raised in Reseda and while attending Cleveland High School (he also attended Ridgewood Military Academy, 20764 Ventura Blvd Woodland Hills) , started ZZZZ Best in his parents garage (see picture above) with three employees and four phones. His business struggled in the beginning and Minkow resorted to various crimes like running up fraudulent credit card charges to continue financing his young enterprise.
Afterwards, Minkow teamed up with Tom Padgett, an insurance claims adjuster, to go after the insurance restoration business and continued in his fraudulent ways by restoring buildings that actually didnt exist. Minkow graduated from Cleveland in 1984 where he devoted himself full time to ZZZZ Best. By this time, Minkow had already moved to a Reseda industrial building shown below.
In January 1986, ZZZZ Best went public on the Nasdaq by merging with Morningstar Investments, an inactive Utah shell corporation, making Minkow an instant millionaire on paper with a 53% interest in the company. At the time, ZZZZ Best's insurance restoration business accounted for 86% of company revenues although carpet cleaning side legitimate and highly praised. Before the company went public, the accountant assigned to audit ZZZZ Best never visited the restoration sites where he would have found mailboxes located throughout the SFV instead of damaged buildings. By December 1986, ZZZZ Best raised $15 million through an IPO making Minkow the youngest person (age 20) to lead a company through an IPO in American financial history.
By February 1987, ZZZZ Best was trading at $18/share valuing the company at $280 million with 1,030 employees across California, Arizona, and Nevada. Minkow was worth $100 million and SoCal and the rest of the nation, unaware of the scam, touted Minkow as the "Whiz Kid" and became a household name. In 1985, he won a commendation from Los Angeles Mayor Tom Bradley.
Despite the "paper" success, ZZZZ Best was still struggling and needing a cash infusion and looked to purchase KeyServ, which was the authorized carpet cleaner for Sears. If this deal was completed, Minkow believed that enough cash would be collected to officially end the Ponzi scheme earlier than planned. Minkow was even thinking ahead and planning for expansion to England, build a billion dollar company, and even acquire the Seattle Mariners. However, as fast as ZZZZ Best rose, it quickly crashed when the fraud was finally being unraveled from a small legal matter costing a couple hundred dollars.
A credit card fraud from1984 and 1985 that Minkow settled and paid back most of the victims left one homemaker ignored and unpaid despite numerous attempts contacting Minkow to pay back. The homemaker gave a diary of her findings to the LA Times which ran the story on May 22 just days before the KeyServ merger which sent the stock tumbling 28%. Afterwards, all of Minkow's loans were being called back and reports of fraud from various activities at ZZZZ Best was being reported. Minkow resigned on July 2nd and ZZZZ Best stock tumbled to $3.50/share. On July 8, ZZZZ Best filed for bankruptcy and Minkow filed for personal bankruptcy on August 7.
In January 1988, Minkow and 10 other ZZZZ Best insiders were indicted on 54 counts of raceteering, secruities fraud, money laundering, embezzlement, mail fraud, tax evasion, and bank fraud. On December 14, Minkow was found guilty on all charges and on March 27, 1989 was sentenced to 25 years in prison with 5 years probation and ordered to pay $26 million in restitution.
In 1995, Minkow was released early where worked at the Church oat Rocky Peak in Chatsworth as the Director of the Bible Institute and Pastor of Evangelism. In 1997, Minkow became Pastor of the Community Bible Church in San Diego. During his time in San Diego, a church member asked Minkow to investigate a firm suspected of being a Ponzi scheme which it ended up being true.
However, once a criminal always a criminal as this discovery would lead to Minkow investigating various suspecting companies but short selling the stock prior to announcing his findings. On March 30, 2011, Minkow plead guilty to one count of insider training where on July 21, he was sentenced to 5 years in prision. But later on, Minkow was sentenced again to 5 years in prison on April 28, 2014 for mail fraud, wire fraud, bank fraud, and embezzling $3 million from the San Diego Church and its members but was already in custody due to the insider trading conviction.
And now its time to fire up the Delorean and go back to the future to the present setting where the former ZZZZ Best office existed and has been replaced by Valley Liquidators Wireless Warehouse along with other small businesses. You can see current images of Minkow's parents and his home above.
 |
| Minkows family home located at 17815 Lull St Reseda where ZZZZ Best started in the garage which still looks original. The home measures 3 Beds/2 Baths on 1,251 sqft on a total lot size of 6,300 sqft built in 1953. The home was purchased by Minkow's parents possibly in 1971 for an unknown amount and sold on February 27, 1990 for $215,000. The home is currently owned by Lisa Licata. |
 |
| Image courtesy LA Weekly |
 |
| The ZZZZ Best main office was located at 7040 Darby Avenue Reseda which measures 13,167 sqft on a total lot size of 18,375 sqft built in 1964. It is currently owned by Bruce Natanzi and Ramin Ray Goel. |
 |
| Gotta have a massage parlor in a nondescript building in an industrial area. |
 |
| On a related note, found it ironic to see a carpet cleaning business next door. Are there any ties to ZZZZ Best? |
By late 1985, Minkow's flamboyance and charm was evident through a massive TV advertising campaign that was shot in one single take which was an impressive display of poise. Minkow drove a white BMW, a 1985 red Ferrari Testarrosa with custom license plates reading "ZZZZ BST", and purchased a Westchester Estates home in Woodland Hills with a huge black Z emblazoned on the bottom of the pool (see below). Minkow also purchased a black Porsche for his girlfriend, Joyce Lipman, and attractive, 5'8" hazel-eyed blonde whose father, Harold, an associate superintendent of the Simi Valley Unified School District, joined the board of directors in February 1986.
 |
| Minkow's home located at 4717 Westchester Drive Woodland Hills in the gated community of Westchester County Estates which is home to past and present celebrities including Dr. Dre and Scott Baio. The home measures 4 Beds/5 Baths on 4,722 sqft on a total lot size of 0.49 acres built in 1985. Minkow paid $698,000 in November 1985 and sold on July 15, 1988 for $900,000. Currently owned by Simone Marcus. |
 |
| In this image, you can barely see the Z emblazoned at the bottom of the pool. My understanding is that the current owner has removed this. I hope I am wrong. |
 |
| Image courtesy LA Times |
 |
| Image courtesy LA Weekly |
 |
| Image courtesy Tothetick |
In January 1988, Minkow and 10 other ZZZZ Best insiders were indicted on 54 counts of raceteering, secruities fraud, money laundering, embezzlement, mail fraud, tax evasion, and bank fraud. On December 14, Minkow was found guilty on all charges and on March 27, 1989 was sentenced to 25 years in prison with 5 years probation and ordered to pay $26 million in restitution.
In 1995, Minkow was released early where worked at the Church oat Rocky Peak in Chatsworth as the Director of the Bible Institute and Pastor of Evangelism. In 1997, Minkow became Pastor of the Community Bible Church in San Diego. During his time in San Diego, a church member asked Minkow to investigate a firm suspected of being a Ponzi scheme which it ended up being true.
However, once a criminal always a criminal as this discovery would lead to Minkow investigating various suspecting companies but short selling the stock prior to announcing his findings. On March 30, 2011, Minkow plead guilty to one count of insider training where on July 21, he was sentenced to 5 years in prision. But later on, Minkow was sentenced again to 5 years in prison on April 28, 2014 for mail fraud, wire fraud, bank fraud, and embezzling $3 million from the San Diego Church and its members but was already in custody due to the insider trading conviction.
And now its time to fire up the Delorean and go back to the future to the present setting where the former ZZZZ Best office existed and has been replaced by Valley Liquidators Wireless Warehouse along with other small businesses. You can see current images of Minkow's parents and his home above.
You can view more SFV history and BTTF series here.
Also check out the videos and commercials:
Sources:
Wikipedia - Barry Minkow
Behind Whiz Kid Is a Trail of False Credit Card Billings by Daniel Kast on May 22, 1987, LA Times.
Fallen Star: How Whiz-Kid Chief of ZZZZ Best Had, and Lost, It All by Daniel Kast on July 9, 1987, Wall Street Journal.
Minkow Empire: ZZZZ Best: The House of Cards Fall by Barry Stavro and Alan C. Miller on September 6, 1987, LA Times.
Barry Minkow--His Dream Born in a Garage Turns Sour by Alan C. Miller on January 19, 1988, LA Times.
Like the 3 Stooges: ZZZZ Best: How the Big Bubble Burst by Kim Murphy on March 30, 1989, LA Times.
I Was a Teenage Fraduster by Oliver Burkeman on July 10, 2002, The Guardian.
Barry Minkow 2.0 by Beth Barrett on October 14, 2010, LA Weekly.
American Hustle: The CEO, the Ex-Partner, the Pastor, and the $1 Billion Shakedown by Paul Barrett on December 19, 2013, Bloomberg Businessweek.
Kenner & Greenfield Criminal Defense Attorneys Website (check out pic of Minkow with actorJames Caan)
Hall of Fame Con Men: Mark Morze by Wallstreetoasis.com on June 16, 2013.
ZZZZ Best Company, Inc by Contemporary Auditing: Issues & Cases - Michael Knapp at RohanChambers.com
Also check out the videos and commercials:
Sources:
Wikipedia - Barry Minkow
Behind Whiz Kid Is a Trail of False Credit Card Billings by Daniel Kast on May 22, 1987, LA Times.
Fallen Star: How Whiz-Kid Chief of ZZZZ Best Had, and Lost, It All by Daniel Kast on July 9, 1987, Wall Street Journal.
Minkow Empire: ZZZZ Best: The House of Cards Fall by Barry Stavro and Alan C. Miller on September 6, 1987, LA Times.
Barry Minkow--His Dream Born in a Garage Turns Sour by Alan C. Miller on January 19, 1988, LA Times.
Like the 3 Stooges: ZZZZ Best: How the Big Bubble Burst by Kim Murphy on March 30, 1989, LA Times.
I Was a Teenage Fraduster by Oliver Burkeman on July 10, 2002, The Guardian.
Barry Minkow 2.0 by Beth Barrett on October 14, 2010, LA Weekly.
American Hustle: The CEO, the Ex-Partner, the Pastor, and the $1 Billion Shakedown by Paul Barrett on December 19, 2013, Bloomberg Businessweek.
Kenner & Greenfield Criminal Defense Attorneys Website (check out pic of Minkow with actorJames Caan)
Hall of Fame Con Men: Mark Morze by Wallstreetoasis.com on June 16, 2013.
ZZZZ Best Company, Inc by Contemporary Auditing: Issues & Cases - Michael Knapp at RohanChambers.com
Share This:
Marty Mcfly
Anything and everything about the San Fernando Valley. This blog will take you back in time when the valley was covered with dirt and orange groves to a leader in the space race to its current status as America's suburb. Come along and join me on this adventure, I guarantee you have been influenced/impacted by the San Fernando Valley in one form or another even if you have never visited or heard of the SFV.
A great info source i found here. Plz visit us for a similar kind of website given below.
ReplyDeleteSofa cleaning Service | Curtain Cleaning Service
Camelia Brown: how great to know about it. I got many trouble with cleaning my carpet. Thanks a lot!
ReplyDelete