Minkow Disappeared After Firm Collapsed, Ex-Employee Testifies

A former top official of the ZZZZ Best carpet cleaning company broke into tears repeatedly Friday as he told a federal jury how the company’s charismatic young leader, Barry Minkow, confessed that the business was collapsing and then disappeared as the company erupted into “pandemonium.”

“He came into my office and told me he was resigning because there were large problems with the restoration work, and that was about it,” Charles Arrington III said of his meeting with Minkow on July 1, 1987.

Two days later, Minkow’s resignation became public, and Minkow disappeared from ZZZZ Best’s corporate offices, Arrington said.

“What resulted from that was pretty much pandemonium,” he testified. “TV stations were camped outside, stockholders were calling. . . . It’s pretty much a day I’d like to forget in my life, to tell you the truth.”

Fraud Trial

Minkow, 22, is on trial in Los Angeles federal court on charges of masterminding a multimillion-dollar securities fraud based on an elaborate scheme to make it look like his Reseda-based company had launched a lucrative business repairing fire and water damage to buildings for insurance companies.

In one of the most damaging days of testimony since the trial began last week, federal prosecutors played a videotape of a ZZZZ Best Christmas party in December, 1986, in which Minkow, clad in a white tuxedo, handed out trophies to many of the employees who would be indicted with him only a little more than a year later.

As a visibly distraught Minkow held his hand over his eyes, jurors watched Minkow on videotape congratulating Mark Morze, the financial officer who later admitted helping Minkow falsify financial documents to make it appear that ZZZZ Best’s non-existent insurance restoration jobs were real.

“If it wasn’t for his outstanding ingenuity and his ability to handle the restoration work in the way that it was done, and his financial ability . . .,” Minkow said as the assembled ZZZZ Best employees applauded.

‘So Ambitious’

The video camera panned over a sea of cheering employees, and one of them said Minkow was the key to the company’s success. “Barry himself is so dynamic and so motivated and so ambitious that it rubs off on people,” he said. “It’s sort of contagious, like a disease.” In the background, a chorus played over and over, “There’s no easy way out, there’s no shortcut home.”

Minkow’s attorney, David Kenner, has admitted that the insurance restoration jobs were phony but said Minkow was beaten and threatened into committing the fraud by a group of mobsters who had secretly taken over the company.

Under questioning by Assistant U.S. Atty. Gordon Greenberg, Arrington said Minkow enjoyed “friendly” relations with many of the purported mobsters and that he never saw evidence of any beatings.

Worked Out Together

Daniel Krowpman, the man who allegedly beat Minkow when the young executive ran behind on some payments, was still working out with Minkow at a gym when the purported beatings were going on, Arrington testified.

Arrington, one of 10 former ZZZZ Best associates who have already pleaded guilty in the case, is awaiting sentencing on one count of mail fraud and one count of securities fraud.