Beginnings of ZZZZ Best
Minkow grew up in a Jewish family in Reseda in the San Fernando Valley. When he was nine years old, his mother got him a job as a telemarketer with the carpet-cleaning business where she worked. At the age of 15—while a sophomore at Cleveland High School, Minkow started ZZZZ Best in his parents' garage with three employees and four phones. In the early years, he had to rely on friends to drive him to jobs since he didn't have a driver's license.
At first, Minkow struggled to meet basic expenses. Two banks closed his business account because California law didn't allow minors to sign binding contracts, including checks. He was also plagued by customer complaints and demands for payment from suppliers. At times, he found it difficult even to meet payroll. Faced with a shortage of operating capital, he financed his business via check kiting, stealing and selling his grandmother's jewelry, staging break-ins at his offices, and running up fraudulent credit card charges.
Soon after, Minkow branched into the "insurance restoration" business. With the help of Tom Padgett, an insurance claims adjuster, Minkow forged numerous documents claiming that ZZZZ Best was involved in numerous restoration projects for Padgett's company. Padgett and Minkow formed a fake company, Interstate Appraisal Services, that verified the details of the restorations to Minkow's bankers. Flush with loans from these banks, Minkow expanded ZZZZ Best across Southern California.
ZZZZ Best differed in part from a typical Ponzi in that its carpet-cleaning business was very real. Indeed, the carpet-cleaning division won high marks for its quality. However, its insurance restoration division, which eventually accounted for 86 percent of company revenues, was nonexistent. Minkow raised money by factoring his accounts receivable for work under contract, as well as floating funds through several banks in an elaborate check kiting scheme.
Minkow was able to devote his entire time to ZZZZ Best after graduating in 1985. However, still short of cash, he was forced to get a loan from Jack Catain, a Los Angeles businessman who had ties to organized crime. Catain later sued Minkow for not paying him his share of ZZZZ Best's profits, but Minkow claimed Catain was a usurer. The suit was still working its way through the courts at the time of Catain's death in 1987. Other organized-crime figures turned up as Minkow's advisers, which unnerved several ZZZZ Best employees. For instance, a major shareholder, Maurice Rind, had been convicted of securities fraud in 1976. Minkow was also a business partner with Robert Viggiano, a convicted jewel thief and reputed loanshark.
Read more about this topic: Barry Minkow
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