Lennar Corporation (NYSE:LEN) CEO Stuart Miller was on CNBC on Friday to “respond” to allegations made by Barry Minkow and Fraud Discovery Institute about the company’s propensity for fraud. In the process of trying to diminish the impact of the serious allegations, Miller got caught in a blatant lie.
One of the allegations made in FDI’s original report on Lennar is that the company profits from cheating joint venture partners out of the money due to them. Minkow specifically named the LandSource venture (a project now in bankruptcy) as an instance in which Lennar profited while the other parties came out big losers.
That deal has been vetted both in the press and it’s been looked at pretty carefully. The fact is it’s a premier parcel of land that has gotten caught up in the market downturn that I don’t think anybody predicted would be as severe as it’s been. At the end of the day it’s a venture where all venture partners lost – and, have lost – and we continue to try to find ways to maximize value in a venture that is today in bankruptcy, as you noted.
Lost? Really? All partners? Because that’s not what Miller was saying in 2007 when Lennar was profiting handsomely from the LandSource project.
According to a February 28, 2007 press release from Lennar (emphasis mine):
Lennar Corporation (NYSE: LEN and LEN.B), one of the nation’s largest homebuilders, announced today the addition of a new strategic partner, MW Housing Partners (“MWHP”), into its LandSource joint venture. MWHP adds significant financial resources and unique land positions to a venture already recognized as a premier land and development company. The completion of the financing and transaction resulted in a cash distribution to Lennar of approximately $700 million. The resulting ownership of LandSource is 68% MWHP, 16% Lennar and 16% LNR Property Corporation. Lennar will retain a promote opportunity allowing it to have a disproportionate share of the entity’s future positive net cash flow. In the first quarter of fiscal-year 2007, Lennar will recognize approximately $170 million of earnings and, potentially, $400 million in future years.
Even more interesting is that Miller himself profited handsomely from this deal too. LNR, a sister corporation to Lennar, also received $700 million. Miller owns over 20% of LNR, and if my math is right, that means that his personal share of LNR’s profits on this deal were about $140 million.
The public record is clear. Lennar had a very nice payday from LandSource. And Miller blatantly lied about it on CNBC.