Wednesday, September 06, 2006

Case Study in Skepticism


IF your mother tells you she loves you, check it out ..."

That was the advice given by an old city editor to young staffers many decades ago, back in the days reporters wore hats in the newsroom and kept a fifth of Old Inspiration in their desk drawers.

It was his way of injecting a healthy dose of skepticism into the work of his young charges.

I was reminded of that the other day while watching a "60 Minutes" piece on Barry Minkow, the businessman turned felon turned preacher who got his start right under my nose in the San Fernando Valley in the 1980s.

When our paths first crossed, I was working on the city desk of the Los Angeles Times Valley edition, and Minkow, a high school kid, was running his own carpet cleaning company, Zzzz Best, out of his parents' garage in Reseda.

It was a good story: Energetic young entrepreneur finds gold in the stain game.

Indeed, the story got even better. Minkow's company grew to include 1,400 employees and had begun to specialize in insurance restoration business. He starred in his own TV commercials, extolling the superiority of Zzzz Best. And we followed it each step of the way.

Life was good for young Barry. He received favorable press, portrayed as a role model. Mayor Tom Bradley declared a Barry Minkow Day. He appeared on Oprah. He lectured in business schools and contributed to Narcotics Anonymous.

He had a Ferrari Testarossa adorned with Zzzz Best personalized license plates and lived in a mansion in Woodland Hills. When he took his company public, it was valued at more than $200 million.

It sounded too good to be true.

Dan Akst, the same reporter who earlier had written glowingly of Minkow, began to hear talk about credit card fraud. Using a dose of skepticism that the old editor would have admired and following the paper trail, Akst wrote an article in May of 1987 that carried the headline "Behind `Whiz Kid' Is a Trail of False Credit-Card Billings."

The next day Zzzz Best stock lost 28 percent of its value. By the time the scam was fully revealed, investors had lost more than $100 million. The following year, Minkow was convicted on 57 counts of fraud and sentenced to 25 years in jail.

In between, we learned that Minkow's real talent was not cleaning carpets but raising capital by any means necessary. According to published accounts, he arranged burglaries in order to collect insurance money. He borrowed $2,000 from his grandmother and then stole her pearls. When he needed cash in 1984, he forged $13,000 worth of money orders from a Reseda liquor store.

He opened a merchant's account at a local bank, which allowed him to accept credit card payments. For the next few years, whenever he needed money, he would add bogus charges to his customers' credit card accounts and receive ready cash from the bank. If a customer complained, Minkow blamed the forgeries on crooked employees, paid up and carried on.

Minkow served just under seven-and-a-half years, most of them at Englewood Federal Prison in Jefferson County, Colorado. During his early prison stay in San Pedro, before his trial, Minkow became a Christian. He earned a Bachelor of Arts and Master of Arts degrees in Church Ministries from Liberty University, which was founded by Jerry Falwell. In 1996 he earned a Master of Divinity, also from Liberty.

Since 1997, he has served as the senior pastor of San Diego's Community Bible Church. Minkow also is an executive at the Fraud Discovery Institute in San Diego, which he helped found, where he investigates the same kind of crime he perpetuated and works with law enforcement.

Now he tells "60 Minutes" that he spends his time ministering to his parishioners, uncovering white collar crime and repaying his debts. He's written a book called "Cleaning Up," and his agent is negotiating with several production companies to film his life story.

Minkow says that "there's this great phrase in the Bible: `When the man's ways please the Lord, he makes even his enemies be at peace with him."'

Perhaps. But I remain skeptical. Just like the Barry of old, it all sounds just a little too good to be true.

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