Lennar CEO Stuart Miller: Transparency? Or lies?

On Friday, Stuart Miller, the CEO of Lennar (NYSE:LEN) went on CNBC to respond to fraud allegations made by Barry Minkow and Fraud Discovery Institute. But did he really respond? Do you feel he is being transparent? Or is he creating more lies in response to the damaging report?

You be the judget. Here’s the transcript of the relevant portion of the interview:

Well specifically, Lennar did spin off a joint venture with Calpers in 2007 – LandSource – which is a development in Valencia, California. Now it went into bankruptcy last year. This is one of the things they’re citing in these allegations and Calpers lost about a billion dollars. Minkow is alleging fraud in that deal. How do you respond to that?

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.

But there have been no allegations by Calpers against you, is that correct?

There have been no allegations of fraud from anyone except for Minkow in this instance where he represents an angry litigant.

Now this litigant has filed a couple of lawsuits against you, one of them you told me was dropped, the other one is still in litigation. Why are they after you so much?

Well first, one of them wasn’t dropped. It was actually dismissed. It was thrown out. And we have subsequently filed litigation in Florida against this litigant who has been trying to extort money from the company, and he’s been using the litigation process, and we have alleged in our lawsuit that he is using every means to try to extort money where he’s not being successful in the litigation process.

Given that, though, Mr. Miller, as soon as this news hit this morning many of the analysts out there on Wall Street said, “Well we’ve always been skeptical of Lennar’s joint ventures.” They didn’t want to give any credence to what this report was saying, but they did say, “You know, we always take everything with a grain of salt.” Why are – why is the Street so skeptical citing lack of transparency in your disclosures to the SEC?

Well there’s no question that throughout the past years, because we’ve done so many joint ventures and each one is so unique, it’s difficult to give the Street the kind of transparency that one would like to have if they were able to look at each one individually.

One analyst said he even had to “black box” Lennar, saying that you really couldn’t even tell anything.

Well I’m not really sure what black box means. We’ve had a pretty good relationship with all of the analysts on the Street and we’ve kept an open door with our investors as well. We’ve tried to give as much disclosure as possible. But we had almost 300 joint ventures at our peak. It’s now down over 60%. But the amount of disclosure that would have been required to sate the appetite of the many people that were asking would have just been too extensive and too voluminous.

And do you feel at this point that divesting yourself of these joint ventures, or spinning them off as you would, was that a result specifically of the downturn in the housing market or because of this concern over transparency.

Well I think it’s primarily derived from the downturn in the market. Many of the ventures started out to be optimistic about the land that was involved, and that land has been severely impaired and we’ve taken those impairments. And I might add parenthetically that in no instances have we used equity of one joint venture as collateral for debt of other ventures, as seems to be alleged in this circumstance. So the notion that the ventures are hiding some kind of a scheme to build up a balance sheet is just not true.

Leave a Reply