Barry Minkow, con-man nonpareil, gets five more years

May 6, 2014, 1:00 PM UTC
Barry Minkow

FORTUNE — Last week an epilogue was appended to the amazing yarn that has been the life of Barry Minkow — the fraudster turned fraud-fighter turned serial fraudster — when a San Diego federal judge tacked on another five-year term to the five he was already serving in a federal prison in Lexington, Ky.

Minkow’s latest sentence punishes crimes to which he pled guilty in January. They related to acts he committed from 2001 to 2011 while acting as head pastor and CEO of the San Diego Community Bible Church, and revolve mainly around having bilked his church and his flock of money.

The government’s sentencing memorandum, urging the judge to impose the maximum term, appended a Fortune feature story I wrote about Minkow in January 2012, entitled “All-American Con Man,” as, literally, “Exhibit A.”

That article recounted the life of Minkow (rhymes with gingko), now 48, who is still best known as the business phenom and whiz-kid who, at age 16 in 1982, founded the ZZZZ Best carpet cleaning business (pronounced “Zee Best”). He took it public at age 20 and was briefly worth about $100 million on paper. But the company — a giant Ponzi scheme, it turned out — collapsed in 1987. Minkow was convicted of 57 felonies and sentenced to 25 years.

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That proved to be only Act I. Having converted to evangelical Christianity while awaiting trial, Minkow eventually convinced prison authorities, his sentencing judge, and even his prosecutor, that he had turned over a new leaf. He was paroled in 1995; became the pastor of the San Diego Community Bible Church in 1997; set up a for-profit, fraud-fighting company, called the Fraud Discovery Institute, in 2001; and published a bestselling book, Cleaning Up, about his turnaround in 2005.

In March 2011, he was nearing completion of the production and filming a movie about his own redemption — slated to star Minkow as himself, with Ving Rhames and James Caan in supporting roles — when he pled guilty in Miami federal court to a new conspiracy. He had caused the stock of Miami-based developer Lennar Corp. (LEN) to plunge $583.6 million in value in order to make money in a “short-and-distort” stock-fraud scheme and to help a paying client extort money from the corporation.

Sentenced to five years on that rap, Minkow was sent to a federal prison in Kentucky in September 2011, and that’s roughly where things stood when I wrote about him in January 2012. By then it was already clear that Minkow had been illegally commingling church funds with his own for many years, but Minkow was still insisting that the church came out ahead, and that his Lennar-related crime — a relapse, as he characterized it — had been largely the result of a prescription drug addiction he had developed to Vicodin and Oxycontin.

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This past January the other shoe dropped. Minkow pleaded guilty to conspiring to commit a host of financial crimes while heading the San Diego church, offenses that went back to as early as 2001 — even before his probationary period for the ZZZZ Best crimes was lifted for good behavior in 2002. These new offenses included mail fraud, wire fraud, bank fraud, forgery, and various tax-related frauds, and revolved around stealing from his church and its members. When the music stopped, the government maintains, Minkow had improperly converted $3.1 million in church funds to his own use, and had failed to return at least $1.65 million of those. In addition, he left the church on the hook for another $1.9 million in loans that he had taken out in its name without authorization.

In a sentencing memo on Minkow’s behalf, San Diego attorney Mark Adams asked the court to have any new sentence imposed run concurrently with Minkow’s existing sentence from the Florida conviction. (Minkow will complete his term for the Florida conviction in January 2015, if he completes a drug treatment program, or in January 2016, if he doesn’t.)

Adams stressed Minkow’s exemplary behavior in federal prison in Kentucky since 2011, where he has, among other things, completed a doctorate degree in conflict resolution from a correspondence divinity school, and has assisted a University of Wisconsin accounting professor with classes concerning fraud detection. Adams also appended letters of recommendation from inmates at the Kentucky institution, who attest to the positive, transformative impact Minkow has had on their lives since his arrival, as well as some from former parishioners at Minkow’s San Diego church, who stand by him to this day.

However, others members of the San Diego church supported the government’s request that Minkow should receive the maximum term, and that it run consecutively to his existing sentence — pleas that U.S. District Judge Michael Anello heeded last week.

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Among the parishioner victims the government highlighted in its own sentencing memorandum was a retired grandmother with health issues, who is now raising a teenage granddaughter alone, from whom Minkow wheedled at least $300,000 in loans and other payments which she has little prospect of ever seeing returned. (I recounted Minkow’s interactions with this woman in my Fortune article, where I referred to her as “Linda,” not her real name, to protect her privacy.)

Another victim singled out in the government’s sentencing memo is one I will refer to here as “B.W.” Assistant U.S. Attorney Mark W. Pletcher describes what happened to him in the following passage, whose narrative power I cannot improve upon:

In late 2008, [B.W.]’s wife was diagnosed with cancer, and defendant, as the pastor at SDCBC, counseled [his] family during her illness and death. Soon after she passed away, [B.W.] met with defendant to discuss honoring his wife by making a donation in her name. At that time, defendant indicated he was working [with] an organization, Samaritan’s Purse, which needed money to build a hospital in Darfur, Sudan. Defendant instructed [B.W.] to draft the $75,000 check payable to SDCBC and that he would forward the money. As instructed, [B.W.] wrote the check to SDCBC, noting Samaritan’s Purse and Darfur in the subject line and “for deposit only” on the back. Shortly thereafter, defendant forwarded to [B.W.] an email purportedly from a “Jim Loscheder” of Samaritan’s Purse, confirming receipt of the [B.W.] gift as “applause from heaven.”

Defendant signed his email, “Love in Christ, Barry.”

Defendant also forwarded the “Jim Loscheder” confirmation email to [B.W.]’s daughter … writing: “I believe we are honoring your mom’s heart directly helping the sick and needy in Darfur through this hospital construction … I sent it to your dad but wanted you to see this because of how important it is for me for you to see what is going on through mom’s gift to this outreach.”

Nearly two years later, in 2011, amid the unraveling web of lies, [B.W.] contacted Samaritan’s Purse directly, only to learn they never received his gift, and Jim Loschieder (note the correct spelling) does work at Samaritan’s Purse, but he never sent the email purporting to thank [B.W.] for the gift.

That sounds like the Barry Minkow I remember.