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Case: ZZZZ Best

Case: ZZZZ Best. ACG 6686 – PROF. GRAY GROUP 3: ANDRES SUAREZ MARIA FERNANDEZ DE CASTRO SONIA CANESSA-GONZALEZ. Case: ZZZZ Best. About the company - 1987: Company specializing: Carpet cleaning Insurance restoration Owner:Barry Minkow – 21 yrs old Six years in business

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Case: ZZZZ Best

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  1. Case: ZZZZ Best ACG 6686 – PROF. GRAY GROUP 3: ANDRES SUAREZ MARIA FERNANDEZ DE CASTRO SONIA CANESSA-GONZALEZ

  2. Case: ZZZZ Best About the company - 1987: Company specializing: Carpet cleaning Insurance restoration Owner:Barry Minkow – 21 yrs old Six years in business Market Value exceeding $211 million

  3. Case: ZZZZ Best Summary of events: • Started out of parents’ garage-1981 • Shift in primary business to insurance restoration • Bank financing – Forgery of Financials • Public offering – Only choice to avoid discovery • Auditors were deceived with staged jobs and phony documents • Disgruntled customer contacted media about Minkow’s business practices

  4. Case: ZZZZ Best Fraudulent Actions: • Steal checks, kite checks, over and double billed customers • Inflated unaudited financial statements • Altered Tax returns • Fictitious sales and receivables • New bank financing was used to cover debt due • Phony insurance projects • Collusion of top executives and insurance adjusters • Auditor deception

  5. Case: ZZZZ Best How could have this been prevented? • Basic analytical techniques (ratios) • Independent confirmation • Audit of internal controls • Thorough background check of owners and executive management • Common sense/Due diligence: Analysis of current economic/geographical trends in the industry

  6. Case: ZZZZ Best COURT VERDICT: JANUARY 1988 • 57 count indictment • 11 individuals, including Minkow • Minkow convicted and sentenced to 25 yrs • Ordered to make restitution

  7. Case: ZZZZ Best MINKOW NOW: • Served nearly 8 years but in a regular prison • Got two masters degrees in religion, now is a pastor for a community bible church in San Diego • He is still paying back a $ 7 million dollar loan to UBS. • He has a consulting practice, his company has exposed an estimated $ 1 billion in fraud.

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