Great Park Home Builder Lennar Corp. Sues Whistle-Blower
The Wall Street Journal reports today that Lennar is suing high-profile investigator Barry Minkow for libel and extortion in spreading "false and scurrilous" claims.
Lennar says Mr. Minkow's charges against the company, which were widely disseminated last week on the Internet, were "designed to severely and fraudulently manipulate and did manipulate the public market for Lennar's securities by disseminating false and defamatory statements about Lennar."
Lennar immediately issued a statement saying Minkow is working on behalf of a disgruntled former client. Minkow disclosed to the Journal that he is being paid $50,000 to $100,000 to investigate Lennar for Palm Springs real estate developer Nicolas Marsch, who is embroiled in several lawsuits with Lennar over soured real estate deals.
Besides seeing red flags with Lennar's $4 billion in off-balance-sheet debt through 116 joint ventures that investors have received few details about, and what Minkow called a "giant Ponzi scheme" land deal with the California Public Employees Retirement System that landed in bankruptcy court, the investigator takes aim at a $5 million loan taken out by Lennar's chief operating officer, Jon Jaffe, in 2007. The Journal reports:
[Minkow] claims that Mr. Jaffe obtained the loan from a California real-estate broker who has done business with a Lennar business partner and that the broker also has made a big profit on property adjacent to a Lennar development.
Mr. Jaffe denied that Lennar had business dealings with the broker who extended the loan. Mr. Jaffe said he took out the loan to pay for renovations on his six-bedroom, ocean-front home in Laguna Beach, Calif., recently appraised for $18 million. "My loans on my home had nothing to do with Lennar," Mr. Jaffe said.
Minkow has a colorful background. A convicted stock-fraud felon who was imprisoned for his role in masterminding the ZZZZ Best stock swindle in the 1980s, Minkow has been praised by the FBI since his release for uncovering frauds in real estate, on the Internet and elsewhere. He said of Lennar's legal move against him, "When you get sued you know you are right. We are just getting started."