Continue reading Medifast Files Lawsuit: Is 'Pimp Daddy' Defamatory?

Medifast Files Lawsuit: Is 'Pimp Daddy' Defamatory? originally appeared on BloggingStocks on Tue, 23 Feb 2010 10:20:00 EST. Please see our terms for use of feeds.

Lennar Corporation (NYSE: LEN) saw its shares plummet nearly 20% last Friday after Barry Minkow's Fraud Discovery Institute alleged that the homebuilder was improperly inflating its balance sheet, but the company isn't taking his inflammatory claims lying down. The beleaguered housing issue announced today that Minkow and his Fraud Discovery firm have been named as defendants in "a lawsuit alleging libel, extortion, and various criminal acts."

The official company statement reveals that Minkow & Co. are being added to a pre-existing lawsuit filed againt Nicolas Marsch III, who is accused of "hiring Minkow and his company to use any means available, including fraud, identity theft and manipulation of securities markets, to wrongfully and falsely harm Lennar's business and reputation because Lennar refuses to accede to Marsch's demands for tens of millions of dollars."

Unfortunately for Lennar, its dramatic rejection of Minkow's allegations isn't doing anything to boost its share price. The equity lost 8.8% today, easily outpacing the decline in the broader equities market. LEN has now shed roughly 31% since last Friday.

Meanwhile, in the options arena, put volume continues to dominate -- during the past 10 days, traders on the International Securities Exchange have bought to open 2.6 puts for every call. This ratio is hovering just 15 percentage points from an annual bearish peak.

Elizabeth Harrow is an analyst and financial writer in the research department at Schaeffer's Investment Research. She is featured in the video series Schaeffer's Daily Q&A on SchaeffersResearch.com.

Lennar Corp. gets litigious with Minkow as stock's slide persists originally appeared on BloggingStocks on Wed, 14 Jan 2009 16:41:00 EST. Please see our terms for use of feeds.

We recently presented a look at some of the most notorious financial felons of contemporary times.

Since then, news has included the indictment of Mark Cuban for insider trading in a case that is somewhat reminiscent of Martha Stewart's case. According to the SEC, the billionaire entrepreneur asked his broker to sell all his shares of Mamma.com after the company's CEO confidentially told him of an impending stock offering that would dilute the value of all existing shares. By selling before the information became public, Cuban is said to have sidestepped losses of more than $750,000. Cuban insists, though, that no agreement existed to keep the information confidential.

And then there was the indictment in Texas of Vice President Dick Cheney, along with former U.S. Attorney General Alberto Gonzales and others. There seems to be a conflict of interest between the vice president's influence on the federal agency that oversees federal immigration detention centers and his substantial holdings in Vanguard Group, which invests in private prison companies. But does the lame-duck county district attorney, who was a no-show in court, have the authority to bring charges against federal officials with regard to federally run institutions?

Continue reading Financial Felons: Where are they now and is there a next generation coming?

Financial Felons: Where are they now and is there a next generation coming? originally appeared on BloggingStocks on Tue, 25 Nov 2008 14:40:00 EST. Please see our terms for use of feeds.

This post is part of a feature in which he wonder whatever happened to some notorious financial felons. See all 17.

Barry Minkow was one of the youngest people to ever take a company public in the United States. He is remembered not for that feat, but for the massive financial fraud he committed via his company ZZZZ Best Co., Inc. The stock of the carpet cleaning company once had a value of $300 million, but it all came crashing down in the late 1980s.

Minkow and a few associates successfully fooled financial statement auditors into believing the company had millions of dollars of revenue each year. In reality, the revenues were 86% below what they were reported to be. Barry took over $20 million in loans from 15 banks and several individuals in furtherance of his fraud.

He was sentenced to 25 years in prison while still in his early twenties, and ultimately spent more than seven years in prison, all of it in maximum or medium security prisons. Minkow's sentence also included $26 million in restitution. While in prison, Minkow became a Christian and devoted his life to ministry.

Continue reading Financial Felons: Barry Minkow

Financial Felons: Barry Minkow originally appeared on BloggingStocks on Fri, 21 Nov 2008 10:17:00 EST. Please see our terms for use of feeds.

If you're interested in learning about the psychology and methodology of fraud -- and every investor should be -- there are two excellent videos now available on YouTube. I don't know the date on them, or what they were made for, but they're definitely worth watching.

The first is an interview with Barry Minkow, who was in federal prison at the time for the Zzzz Best fraud. The second features former Crazy Eddie CFO, Sam E. Antar.

When I listen to these former crooks explain what they did, it all sounds so easy. While their crimes occurred back in the 1980s, I wonder how much has changed.

Continue reading Ex-cons explain the basics of committing fraud

Ex-cons explain the basics of committing fraud originally appeared on BloggingStocks on Sat, 13 Sep 2008 15:10:00 EST. Please see our terms for use of feeds.

In the press release, the company announced that "USANA has agreed to withdraw its lawsuit and Mr. Minkow and the FDI have agreed that they will not trade in USANA's stock in the future, will remove information regarding USANA within their control from the internet, and will not publish any further statements about USANA."

Here's what's so messed up about this: USANA had accused Minkow of defamation but, in March, U.S. District Judge Tena Campbell tossed four claims against him, leaving only the allegation of a conspiracy to drive down the stock.

In other words, USANA was unable to demonstrate in court that any of Minkow's allegations were untrue -- and never really rebutted any of them in its PR effort to tar and feather him. But now Minkow will stop telling the public what he believes about USANA. The real loser here is anyone looking to hear another side to the USANA story: potential investors and potential distributors in the company's multi-level marketing business.

Continue reading USANA Health Sciences and Minkow settle lawsuit - a sad day for free speech

USANA Health Sciences and Minkow settle lawsuit - a sad day for free speech originally appeared on BloggingStocks on Tue, 29 Jul 2008 16:00:00 EST. Please see our terms for use of feeds.

Usana Health Sciences (NASDAQ: USNA) announced yesterday (subscription required) that the Special Committee of its Board of Directors had unanimously determined that founder, chairman, and CEO Myron Wentz's offer to take the company private at $26 per share undervalued the company, and recommended that shareholders reject it. Mr. Wentz declined to sweeten the offer, and so the deal appears to be dead in the water.

Here's where it gets kind of interesting: back in 2002, Wentz made an offer to take Usana private but then rescinded it, saying that "To allow our shareholders to benefit from any increased value, I have decided to terminate my current effort to acquire Usana's operating assets on the terms previously announced."

A cynic could suggest that Wentz made this latest buyout offer anticipating that it would be rejected as inadequate, given that it was for just over half the stock's 52-week high. Some analysts predicted when the offer was made that it was likely to be rejected. So what did Usana get out of the offer? Since ex-con turned short-selling gumshoe Barry Minkow began accusing the company of fraud last year, the company's stock has fallen precipitously and short interest has soared to more than 50% of the float. The announcement of Wentz's offer ran the stock up by about 20%, probably shaking out a good number of short sellers -- the offer may have helped precipitate a short squeeze, even if that wasn't the intent.

Earlier this week, Usana raised earnings guidance, giving the stock another jolt.

Usana rejects founder's going private offer originally appeared on BloggingStocks on Sat, 21 Jun 2008 17:40:00 EST. Please see our terms for use of feeds.

This post is part of a series on some of the most memorable companies that have disappeared.

In the mid-1980s, Barry Minkow was the toast of Wall Street. His Zzzz Best Carpet Cleaning company, which he started in his garage at age 16, was an overnight success and, by 19, he was a millionaire. Investors flocked to buy stock in the fast-growing company that was earning millions from lucrative restoration projects.

There was just one problem: the restoration projects weren't real, the company was little more than an elaborate Ponzi scheme, and Minkow wasn't making his money cleaning carpets. He was laundering money for the mob. After a Los Angeles Times reporter broke the story on Minkow's fraud, the scheme unraveled and Zzzz Best filed for bankruptcy. Minkow was charged with pretty much every white-collar crime known to man, and he spent seven and a half years in federal prison.

But that's only the beginning of the Barry Minkow story: Minkow attended college from his cell, was paroled early at the urging of the judge who sentenced him, and became a pastor in San Diego -- not far from the scene of his crimes. Using the skills he learned committing fraud, Minkow set about uncovering it and, to date, has helped the FBI and other government agencies bust up more than $1 billion in fraudulent investment schemes: an amount far larger than the crime Minkow perpetrated.

Most recently, Minkow has gained notoriety for his accusations of fraud at leading multilevel marketing companies Herbalife (NYSE: HLF) and Usana Health Sciences (NASDAQ: USNA).

Companies that vanished: Zzzz Best -- if it looks too good to be true ... originally appeared on BloggingStocks on Wed, 11 Jun 2008 12:36:00 EST. Please see our terms for use of feeds.

Continue reading Ex-con raises red flags at Herbalife

Ex-con raises red flags at Herbalife originally appeared on BloggingStocks on Fri, 11 Apr 2008 15:15:00 EST. Please see our terms for use of feeds.

The New York Times headline blares "French Trader Is Remembered as Mr. Average," and goes on to describe a mid-level employee with nothing in his background to suggest that he would become possibly the biggest rogue trader in the history of the world. The Times reported that:

He failed in a bid for town council in his 20s; he never rose higher than a green belt, a mid-level rank, after years of judo training -- because of his bad knees; and he attended an average college where he earned respectable but unremarkable grades.

It's anticlimactic in a way. We expect crooks and fraudsters to fit a certain image: brash, arrogant, reckless, charismatic. But few people know fraud better than Barry Minkow; in his teens and early 20s he perpetrated the infamous Zzzz Best fraud, spent seven and a half years in prison, and has since helped regulators uncover over a billion in fraud -- and he wouldn't be surprised.

Continue reading Rogue trader was 'Mr. Average': What were you expecting?

Rogue trader was 'Mr. Average': What were you expecting? originally appeared on BloggingStocks on Sat, 26 Jan 2008 11:40:00 EST. Please see our terms for use of feeds.

With the housing market in turmoil and numerous attorney generals taking a hard look at the sales tactics and unethical conduct of numerous mortgage salesman, it's probably a good time to look at one of the greatest real estate movies of all time: Glengarry GlenRoss.

With a cast including Al Pacino, Jack Lemmon, Kevin Spacey, Alec Baldwin, and a script by renowned playwright David Mamet, it's hard to go wrong. Glengarry GlenRoss focuses on the lives of four down-on-their-luck real estate salesmen whose lives are transformed when a slick motivator from downtown proposes a sales contest: The one with the most sales at the end of the week will receive a brand new Cadillac. The number two man will receive a set of knives, and the rest will be fired immediately.

What ensues is, of course, chaos: The fierce competition and desperation lead to moral compromise. I can't help but wonder how different the atmosphere at Glengarry was from those of the subprime mortgage shops that hired poorly trained salesman to sell toxic mortgages on commission. We are currently living through the consequences of the rampant greed -- and frequently, fraud -- that ensued.

Continue reading A movie for the subprime crisis: Glengarry GlenRoss

A movie for the subprime crisis: Glengarry GlenRoss originally appeared on BloggingStocks on Sun, 09 Dec 2007 17:40:00 EST. Please see our terms for use of feeds.

Authorities charge head of MX Factors with fraud originally appeared on BloggingStocks on Tue, 11 Sep 2007 19:10:00 EST. Please see our terms for use of feeds.

In addition to numerous misrepresentations about its own company, the management at Usana Health Sciences (NASDAQ: USNA) has also taken to slandering its chief critic, con-man turned gumshoe Barry Minkow. Now Minkow is fighting back.

In a letter to Usana President David Wentz and CFO Gil Fuller also posted on his Fraud Discovery Institute's website, Minkow writes:

I have struggled over the last several weeks to remain silent in response to the multiple slanderous accusations made by your company in both your SEC filings and public statements. You and your paid supporters have made one false accusation after another, including your
company's statement in the recent Forbes article:
"We believe everything he [Barry Minkow] says to be false," Usana spokesman Joseph
Poulos told Forbes.com. "He's a liar; he's a criminal -- he can't be trusted."
Now Mr. Poulos said this on the record to a national magazine knowing it not to be true because even he believes that everything I have said is not a lie or he would have prevented (just to give one example but be assured these examples could be readily multiplied) Mr. Waitley from resigning from the board of directors as our reporting of the non existence of his Masters degree from the Naval Academy was dead on (again just to provide one example).

Of course, anyone following the Usana story knows that Mr. Poulos is, at best, completely out of touch with reality. I recently did a post comparing him to Baghdad Bob. Minkow also shows the first real evidence of accounting fraud at the Salt Lake City multilevel marketing company. Read the letter to see that.

Oh snap! Barry Minkow fires back at Usana Health Sciences originally appeared on BloggingStocks on Mon, 13 Aug 2007 20:15:00 EST. Please see our terms for use of feeds.

Those of you who have been reading BloggingStocks regularly know that I'm a frequent critic of USANA Health Sciences Inc. (NASDAQ: USNA), the multi-level marketing company that has been under attack by critics led by ex-con turned fraud investigator Barry Minkow.

Now Forbes has joined the chorus of critics. With a story that has sent the stock down more than 7% today, Forbes raises questions about the viability and legality of Usana's business model. The author, Evelyn Rusli, reiterates New Zealand's National Business Review's report that the company is being investigated by the FBI.

Nothing much seems to have changed. Usana still has no idea why their auditor left but CFO Gil Fuller has become philosophical: "Life is too short to dwell too much on it."

In addition, the piece states that Usana may be in breach of the covenants on its credit facilities as a result of its extremely aggressive share buyback program.

Despite the fact that virtually all of Minkow's allegations have turned out to be true -- and the fact that Usana hasn't really rebuked a single one specifically -- the company keeps up the personal attacks and diversions: "We believe everything he says to be false," Usana spokesman Joseph Poulos told Forbes.com. "He's a liar; he's a criminal -- he can't be trusted."

Funny. I was just thinking the same thing about Usana.

Forbes slams Usana Health Sciences (USNA) originally appeared on BloggingStocks on Thu, 09 Aug 2007 10:45:00 EST. Please see our terms for use of feeds.

Remember Baghdad Bob the Iraqi Information Minister who insisted the US was nowhere near Baghdad, even as the media blared images of the invasion?

I'm not sure what happened to Muhammad Saeed al-Sahhaf (AKA Baghdad Bob) after the fall of Saddam Hussein's regime, but a recent AP article gives me an idea: Maybe he's signed on with USANA Health Sciences (NASDAQ: USNA) as a company spokesman.

Yesterday, USANA's auditing firm resigned, but the company basically insisted that it did so for no reason. Until recently, USANA has said relatively little regarding private investigator Barry Minkow's allegations of wrongdoing at the company, but that's been changing lately. Spokesman Joseph Poulos (Salt Lake Sam?) has stood up to defend his employer. The results have been, well... He seems about as disconnected from reality as Baghdad Bob was. Take a look at some of his most memorable quotes from the past few days:

"Why would anybody take this guy seriously? What is he an expert on? He isn't a forensic accountant. He just committed one very large crime once."

Continue reading Is Baghdad Bob working for USANA Health Sciences?

Is Baghdad Bob working for USANA Health Sciences? originally appeared on BloggingStocks on Wed, 18 Jul 2007 07:00:00 EST. Please see our terms for use of feeds.

USANA Health Sciences (NASDAQ: USNA) just can't seem to wake up from its PR nightmare.

After the close of the market yesterday, San Diego class-action lawyer Alexander M. Schack said he filed a lawsuit in California state court on behalf of hundreds of low-level distributors in the state. The suit is also seeking an injunction preventing the multi-level marketing company from recruiting in the state.

Needless to say, California is a huge market for USANA and, at the very least, the publicity could hurt the company's recruiting efforts there.

According to Robert FitzPatrick of Pyramid Scheme Alert, "The essence of the Usana scheme is the chain letter. Participants pay up to $1,000 to participate in the "binary compensation" plan. They buy the bogus "business centers" (pyramid positions). They then must continue to buy over $100 of goods (priced in some cases 20 times more than comparable products sold in retail stores) every month. Of each dollar that the participant pays in, 40% goes to the upline recruiters. Of that amount, 70% goes to the top 3% of the pyramid chain. Virtually no one
retails the products at retail price. The prime consumers of Usana are just the "Associates" (pyramid participants.) Thus $28 of each hundred spent by the new recruits goes directly to schemers at the top of the pyramid. The bottom 97% are a continuously churning group. 2/3rds of them quit within a year. None makes a profit unless they can climb into the 3% by recruiting other victims."

USANA responded by saying that the suit was without merit and "relies on false claims made by a stock fraud felon who stands to profit from a decline in USANA's stock price."

If USANA wants to stop the bleeding, it will need to come up with a better defense. Barry Minkow, who the company's statement refers to, has earned a strong reputation for uncovering fraud and deception and was mentioned in Newsday a few days ago for his work in shutting down a $16 million ponzi scheme in New York.

Authorities have commended Minkow because he has a track record of providing facts that can be used to shut down financial crimes in progress. If USANA wants people to believe it is something other than that, it will need to provide a rebuttal to the allegations, something that is hasn't done so far.

California distributors file lawsuit against USANA originally appeared on BloggingStocks on Fri, 22 Jun 2007 12:30:00 EST. Please see our terms for use of feeds.

In just the past few months, Usana Health Sciences (NASDAQ: USNA) has had more scandals surrounding biographical errors than any company or organization that I can think of. Take a look:

• Denis Waitley, a director at the company, decided not to stand for re-election after investigator Barry Minkow uncovered that the PhD listed in his biography came from a long-defunct diploma mill. He also does not possess a Master's degree, although one was reported in numerous SEC filings.
• Dr. Timothy Wood, Vice President of Research and Development at the company, claimed to have a PhD in biology, but it's actually in forestry, which seems less relevant at a company that makes nutritional supplements.
• Myron Wentz, the company's founder and Chairman, renounced his U.S. citizenship to "move" to the tax haven of Lichtenstein.
• And now, according to the Wall Street Journal, (subscription required), Dr. Ladd McNamara has left the company's medical advisory board after it was discovered that he no longer has a medical license. A Usana spokesman said that McNamara surrendered his license in Georgia in 2004 in response to allegations that he improperly prescribed medication to a family member. He also agreed to a lifetime ban from practicing medicine in Ohio.

Continue reading Another credentials flap for Usana and it blames ... short sellers!

Another credentials flap for Usana and it blames ... short sellers! originally appeared on BloggingStocks on Wed, 06 Jun 2007 16:00:00 EST. Please see our terms for use of feeds.

The epic battle of ex-con turned fraud investigator Barry Minkow vs. Usana Health Sciences (NASDAQ: USNA) gets more one-sided by the day. In a YouTube video posted on March 27th, Minkow visited numerous vitamin stores to show that Usana products are hopelessly overpriced compared to the competition. Usana contacted the owner of one of the stores, Nutrimart, threatening to sue him if he didn't demand that Minkow remove the video from YouTube. They accused him of unfair competition.

But Brian Mohr didn't back down. In an email, he told BloggingStocks that he had not even heard of Usana before he was approached by Minkow with request for comparable products. However since then, he has "discovered several people I already knew had been 'taken' by this company. I have numerous people that have stories of their involvement. I really feel this is a big story waiting to become even bigger. Layer upon layer peels back only to reveal more craziness."

Continue reading Minkow catches Usana Health Sciences fightin' dirty

Minkow catches Usana Health Sciences fightin' dirty originally appeared on BloggingStocks on Wed, 23 May 2007 18:40:00 EST. Please see our terms for use of feeds.

A piece in the Sunday New York Times tells the sad story of Richard Guthrie, a 92-year-old man who was defrauded of his life savings through an elaborate scheme perpetrated by criminals posing as telemarketers. These evil people take advantage of elders like Mr. Guthrie, who are particularly susceptible to fraud because they may be too trusting or lonely, and in dire financial straits. In Guthrie's case, he was living on the $800 per month he receives from Social Security. He passed the time since his wife passed away by entering sweepstakes contests, and the promoters frequently, and knowingly, sold his personal information to unscrupulous people.

Elder fraud strikes me as the most evil of white-collar crimes, and I did some looking around on the internet for resources for understanding and preventing the financial abuse of the elderly.

I have a copy of ex-con turned private investigator Barry Minkow's Frauds Gone Wild: Protecting Yourself from Elder Abuse. The DVD provides an entertaining look at the psychology of this crime, as well as offering an acronym that provides some suggestions for how to avoid being taken. While it strikes me as expensive at $17.99, it's a must for senior centers or church groups. Watch it with friends.

Fraud.org also has a nice section on elder fraud and telemarketing fraud, as well as Five Tips for Protecting Elders from Telemarketing Fraud. The Department of Justice also has a piece on why seniors are so vulnerable to fraud, and how to prevent it.

If you have elderly parents, or perhaps a neighbor, I strongly recommend reading through these materials, and discussing these issues with them. I had a nice talk about it with my grandmother today.

Protecting elders from fraud originally appeared on BloggingStocks on Mon, 21 May 2007 11:03:00 EST. Please see our terms for use of feeds.

The battle between ex-con turned gumshoe Barry Minkow and multi-level marketing company USANA Health Sciences, Inc. (NASDAQ: USNA) continues. A couple weeks ago, I spoke with Minkow about his efforts to discredit the company, and the company's subsequent decision to file a lawsuit against him. Minkow carried on today, releasing a press release questioning the academic credentials of a Usana director/spokesman, and posting a video on YouTube where he visited a handful of retail vitamin stores to compare the prices of Usana's products to those of other brands. From the press release:

"According to Barry Minkow, independent licensed private investigators who specialize in examining resumes could not confirm that Mr. Waitley had earned a M.A. degree from the Naval Post Graduate School, in Monterey, California. Moreover, the Doctorate, or a Ph.D. in Human Behavior from La Jolla University listed in Mr. Waitley's resume, appears to have come from a now defunct and never-accredited "diploma mill," according to Minkow. Both alleged degrees are listed on official S.E.C. filings...

"In other developments, the second segment of the FDI response to Usana has been posted on YouTube.com. In this segment, Barry Minkow brings a film crew to four vitamin stores and purchases numerous vitamin products to compare prices with Usana's top selling, Usana Health Pak 100(TM), which wholesales for $118.00 for a one-month supply. "There is no objective, rational person who can watch this segment and conclude that, compared to comparable vitamin packs sold in retail stores, that the Usana product offers the consumer with any savings whatsoever - but is actually hopelessly overpriced when compared with multiple products from different companies."

When I spoke with Barry Minkow about the new developments, he referred to a "smoking gun." I am inclined to agree. So far, the Fraud Discovery Institute has uncovered that the company's CEO became a resident of Lichtenstein to avoid taxes and uncovered evidence that a key director falsified his educational credentials. Unless Usana can come up with compelling rebuttals, investors have to ask: What else is Usana hiding?

Minkow finds more Usana dirt originally appeared on BloggingStocks on Wed, 28 Mar 2007 21:08:00 EST. Please see our terms for use of feeds.