Barry Minkow busts another fraudster
As if uncovering more than $1.8 billion in frauds hasn’t been enough, Barry Minkow (famous for his ZZZZ Best Carpet Cleaning fraud for which he did 8 years in prison) has just busted another fraudster who was running a Ponzi scheme.
Minkow has blown the lid on about two dozen Ponzis over the years, including the charges the SEC filed against Gross last week.
It has got to be demoralizing knowing your Ponzi gig is up because an even bigger Ponzi artist just ratted you out.
An attorney for Gross declined comment, saying he was just beginning to review the case.
The SEC also charged Gross’ associate, Gregory W. Laser, 46, of San Diego, Calif. Laser didn’t return a phone call and an email.
The SEC alleges that Gross and Laser, and their Bridon Entertainment, took more than $18 million by promising guaranteed returns as high as 40 percent on the sale of advertising to large corporations, including FedEx Corp., Wal-Mart Stores Inc., Best Buy Co., Costco Wholesale Corp., Albertson’s and Jewel Osco.
“The contracts provided to investors were fake, and Gross did not have relationships with the well-known companies he claimed were his clients,” the SEC said in a press release.
It was allegedly just a pretext to suck up other people’s money like one of Minkow’s old carpet-cleaning machines.
“Gross did not buy or resell advertising, and investors’ purported returns were not generated by the sale of advertising, but instead came from money raised from subsequent investors, in classic Ponzi fashion,” the SEC said.
Minkow said he learned of the alleged scheme from a member of his church who was thinking of investing $50,000. Minkow said that when he reviewed the offering memorandum and a slide show presentation, it smacked of Ponzi on its face.
Gross and Laser claimed they needed investors’ money to buy advertising space that they would then sell to large companies. But anyone doing this could typically get credit from the media outlets selling the ads and wouldn’t need investors.
“The offering memorandum, itself, was probable cause to suspect a financial crime in progress,” Minkow said.
So he called the FBI, put on a wire, and had lunch with Gross.
“The guy drove up from the Valley and I was afraid he was going to recognize me,” Minkow said. “Because in the San Fernando Valley, that’s where I did my crime. .. He said, “You look familiar.” .. I said, “Yeah, just tell me about those returns.” And we just sort of moved on.”
Minkow said he came to the meeting with an assistant posing as his wife. Gross asked how many kids they had.
“I said four and she said three, at the same time,” Minkow said. “Then I made some joke about how she doesn’t like to acknowledge our oldest.”
A man intent on closing a deal doesn’t always notice such inconsistencies. And Minkow had been referred by people Gross trusted–a tactic masters like Bernie Madoff deploy universally.
“We all do the same thing,” Minkow said. “This guy was saying I couldn’t talk to anyone at FedEx or Home Depot, and the reason was because it would jeopardize his relationship. .. This is what I used to say.”
When auditors wanted to check if ZZZZ Best did the work it claimed, Minkow told them they couldn’t go to the job sites. It was a liability, he’d explain. They might slip and fall.
This usually worked, and when it didn’t Minkow took the auditors to empty office buildings that he had staged as work sites.
“What deja vu is this?” Minkow said he thought as he listened to Gross’ pitch. “It’s just a variation on a theme.”
Not to take anything away from this caped crusader, but as alleged Ponzis go, $18 million barely makes a news brief in a local newspaper anymore.
But Minkow said he aims to stop Ponzis while they are young: “Madoff didn’t start off at $50 billion, and $20 million becomes $200 million very quickly.”
This author is a “forensic accountant and fraud examiner”? Tracy, your articles are as phony is this Minkow hack.