ZZZZ Best was an industrial carpet cleaning company started in 1982 by a 16 year old American high school student named Barry Minkow. The company struggled from the very beginning and Barry tried to keep it afloat with bogus credit card charges, stealing from relatives and staging burglaries in order to collect the insurance money. Minkow convinced bankers and investors that he had won large contracts from insurance companies to restore buildings damaged by fire and water. Before he could IPO, the auditors wanted proof of their work though. So, Minkow had a friend who he’d appointed his head of a firm that supposedly provided his company with referrals, rent a building and make it look like a work site. The auditor was satisfied and ZZZZ Best got a clean report.
Barry was the wunderkind of Wall Street when he took ZZZZ Best public in December of 1986. At age 21, he was the youngest person in US history at the time to take a company public. Shares exploded, and the company’s valuation peaked around $280 million. He was even a guest on the Oprah Winfrey Show.
While their carpet cleaning services were legit, ZZZZ Best didn’t actually have any restoration contracts with insurance companies, which was supposed to account for the vast majority of their revenues. The company was poised to take over its biggest competitor in May of 1987 when the Los Angeles Times broke the news about extensive credit card fraud allegations against Minkow. Banks canceled their credit lines and investment bankers immediately postponed the acquisition. At the same time, it was revealed that a number of the major restoration contracts were completely bogus. The next day, ZZZZ Best lost 28% of its value and by July of 1987 Minkow stepped down as CEO. Shareholders got wiped out by the bankruptcy and by the time the scam had fully unraveled, investor losses amounted to more than $100 million.
Minkow was convicted of 57 counts of credit card fraud, racketeering, securities fraud, money laundering, embezzlement, mail fraud, tax evasion, as well as bank fraud and was sentenced to 25 years in jail. After an early release in 1995, he founded the Fraud Discovery Institute, which aided the FBI and law enforcement agencies in uncovering white collar crimes and their perpetrators. But, in 2011 he again fell foul of securities laws, was convicted of insider trading and sentenced to five years in prison. He found religion while in prison the first time and served as a pastor for many years, before pleading guilty in 2014 to defrauding his own church of more than $3 million in donations. This garnered him another five year prison sentence and he was released in the summer of 2019.
He reportedly owes $612 million in restitution payment to a company whose stock he manipulated and the myriad individual victims of his many scams. The assets of ZZZZ Best, a few trucks and some cleaning equipment, were eventually sold for a poultry total of $64,000. And his Ponzi scheme went on to become one of “zee” best case studies in accounting fraud.
