Wifredo A. Ferrer, United States Attorney for the Southern District of Florida, and John V. Gillies, Special Agent in Charge, Federal Bureau of Investigation (FBI), Miami Field Office, announced that defendant Barry Minkow, 44, of San Diego, California, was sentenced today on one count of conspiracy to commit securities fraud, in violation of Title 18, United States Code, Section 371, for his participation in a scheme to manipulate the stock price of Lennar Corporation (Lennar) through false and misleading statements about Lennar’s business operations and management. At today’s hearing, U.S. District Court Judge Patricia A. Seitz sentenced Minkow to five years in prison, to be followed by three years of supervised release. In addition, the court ordered Minkow to pay $583,573,600 in restitution.
According to documents filed with the court, Minkow operated Fraud Discovery Institute, a for-profit fraud investigation firm based in California. In this way, Minkow developed ties with federal law enforcement agencies as a purported fraud-finder. During his plea hearing, Minkow admitted making false and misleading statements alleging widespread improprieties in Lennar’s financial reporting and business structure, and attacking the personal character of Lennar’s management.
According to court documents, Minkow was hired to put economic pressure on Lennar to pay money demanded by a business partner in a prior land deal. To this end, beginning in January 2009, Minkow used the Internet, press releases, e-mail communications, Youtube.com videos, and the U.S. mail to broadcast false and misleading statements about Lennar, with the intent of artificially depressing Lennar’s stock price. Minkow then used his relationship with federal law enforcement agencies to report false allegations of criminal conduct purportedly committed by Lennar and its management. Once Minkow confirmed that his allegations had successfully induced law enforcement to open a criminal investigation, Minkow used that knowledge and information to trade Lennar securities for his own benefit.
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