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Barry Minkow’s short trip from ex-felon to current-felon

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Barry Minkow’s short trip from ex-felon to current-felon

It’s been a tough few weeks for Barry Minkow, as Patrick Byrne has done a fine job chronicling recently. Minkow’s sudden return from ex-felon to current-felon has come as a surprise to some, but not to the Deep Capture team; for we have, over nearly four years, sought to raise awareness of Minkow’s place in a much broader, criminal stock manipulation ecosystem.

Those who need to get caught up will appreciate the following review, with some additional information thrown in for color.

Following his release from prison for stock manipulation, Minkow created the Fraud Discovery Institute (FDI), which, according to a disclaimer on the FDI website, was originally funded by fees collected in return for “various training sessions as well as public speaking engagements.”

FDI’s ostensibly altruistic motivation persisted until spring of 2007. At that time, verbiage was added to the company disclaimer revealing two additional sources of revenue: “short positions” and “third party payers.” This was Minkow’s subtle disclosure of the fact that he would subsequently be paying the bills by means of the profits derived from trading (in this case, short-selling) ahead of FDI’s attacks on public companies, and that these attacks would be financed by third parties who felt Minkow’s motives, one must presume, were aligned with their own.

This evolution in FDI’s incentive structure – from karmic to economic – was a fateful one for Minkow, as it marks the beginning of his march down a path that by all appearances leads to prison. Given its significance, it will be the primary emphasis of the remainder of this piece.

We now know that the change to FDI’s disclaimer was timed in accordance with its publication of an attack on USANA (NASDAQ:USNA), a publicly traded company in whose stock Minkow had previously purchased hundreds of put options, anticipating they would increase in value as the company’s stock fell (that is, buying a put against a company’s stock is just one way to bet that its price is going to fall).

How Minkow came to target USANA is both instructive and well-documented, thanks to the testimony Minkow gave when deposed in the defamation suit USANA brought in response to the attack (though it’s since been equally well-documented that being under oath is by no means a guarantee Minkow will tell the truth).

According to Minkow, one summer day in 2006, entirely without warning, fellow convicted stock manipulator Sam Antar called to announce that he would be sending Minkow $100,000 – no strings attached. Together with $150,000 sent in the months to follow, Antar handed Minkow $250,000 of the nearly $300,000 used to finance the USANA attack.

This payment is interesting for myriad reasons, two of which follow:

First, Minkow currently finds himself in a familiar role as defendant in a defamation suit borne of one of FDI’s more recent attacks – this time against public company Lennar. A source familiar with the lawsuit tells me that in his deposition in the case, Sam Antar testified that the $250,000 he gave Minkow bought Antar access to Minkow’s operation, and that Antar paid it anticipating that he would eventually create a comparable business based on the FDI model. Strikingly, the source also reveals that Antar went out of his way, under oath, to express hatred toward his then-wife Robin Antar, whose personal bankroll was without doubt the actual source of the funds, assuming they did in fact originate anywhere near Sam.

Second, arguing against the possibility that the money was indeed Antar’s is the fact that public records reveal that within months of Antar’s $250,000 gifts, the State of New York issued a warrant for unpaid taxes against him in the amount of $473.15. That tax debt remains unpaid to this day.

In his subsequent divorce from Robin, Sam was unable to cover the cost of his own attorney, and was forced to beg the former Mrs. Antar to pay for both hers and his. Additionally, Antar’s remaining $60,000 SEC-ordered fine (brought about by his involvement in the Crazy Eddie stock scam) appears to remain unpaid. Finally, a 2008 civil judgment ordering Antar to repay a $200,000 debt to real estate financier Morris Cohen has been actively ignored by Antar.

Point being: the $250,000 Antar gave Minkow both financed the USANA attack and bought Antar access to FDI’s operations. What’s less clear is the origin of the money, given the amount of evidence indicating Antar himself has a net worth well below zero.

According to Minkow, he and Antar first agreed to collaborate on the USANA attack in October of 2006.

Interestingly, that’s the same month in which Gary Weiss, an outspoken defender of illegal, manipulative short selling, went out of his way to introduce Antar to the readers of his blog. The occasion was a comment Antar made on a column penned by Herb Greenberg, yet another defender of illegal short selling and the man who would, just days before FDI’s USANA attack, announce to the world that Minkow and Antar had recently joined him for lunch.

From that day on, the blogs operated by Weiss and Antar operated in close synch with one another and both made effusive praise of Minkow a consistent element in their writing.

FDI’s USANA attack was published in February of 2007 but remained largely unnoticed until March 15, when the Wall Street Journal wrote about it.

One month later, a clear anti-USANA PR offensive was launched by FDI.

Within the space of three days, Gary Weiss again made a special effort to introduce his readers to blogging accountant Tracy Coenen, a recent addition to the FDI team. Together, Antar, Weiss and Coenen carefully coordinated their blog subject matter and cross linking, in order to achieve maximum visibility on search engines, all the while heaping thick praise on Minkow’s efforts.

Two more events coincided with this mid-April PR blitz: class action securities attorney Howard Sirota (operating anonymously) became a frequent and rabidly anti-USANA participant in online discussions of the company’s stock. Sirota, as it turns out, is a close friend of Sam Antar’s and has represented the late Anthony Bruan, who is significant in that he contributed $10,000 toward the financing of FDI’s USANA attack.

Clearly, Antar brought both Sirota and Bruan into the picture — Sirota likely with an eye toward leading a shareholder class action suit against USANA, and Bruan hoping to make a quick few bucks shorting the stock.

When his true identity was publicly revealed by me in June of 2007, Sirota defended his several months’ worth of anonymous attacks on USANA and at the same time revealed that he had also bought put options in the stock, anticipating it would fall in response to Minkow’s actions.

In his deposition in the case, Minkow testified that Sam Antar had similarly either sold shares of USANA short or had invested in speculative put options.
Perhaps most significantly, the middle of April 2007 saw a dramatic and sustained surge in delivery failures of USANA shares, which is generally a result of a concerted effort to illegally depress the price of the stock.

In other words, FDI’s mid-April anti-USANA PR blitz appears to have been timed to coincide with a manipulative trading scheme intended to apply significant, artificial downward pressure on USANA’s share price.

Furthermore, this effort involved Sam Antar, Tracy Coenen, Gary Weiss, Howard Sirota, and of course, Barry Minkow.

In the years that have followed, Weiss, Coenen, Antar and Minkow have grown quite close and effusive in their affection for one another. Coenen, who knows nothing about corporate finance, has even joined Weiss in defending illegal, manipulative short selling and attacking companies victimized by the practice.

Antar, for his part, revealed under oath that he was paid $30,000 by Minkow for his support of FDI’s attack on Lennar (though he promises to pay it all back).

Tracy Coenen testified that she was paid $50,000 by FDI for her work on the same project. Gary Weiss has yet to be asked what he got for his trouble, but in light of the phrase he used in the inaugural post on his own blog – “only a fool writes for free” – we can surmise there was something in it for him, too.

To top it all off, Tracy Coenen got Minkow, Antar and Weiss each to pen an enthusiastically positive review of a book related to accounting fraud she published during this period (and while Minkow’s review remains indelibly printed inside the book, Tracy’s had the good sense to remove that one from her website).

We can also surmise that Minkow was beyond pleased with Weiss’s support for FDI’s efforts, given the fact that Minkow tends to cite a post from Weiss’s blog, verbatim and in toto, when explaining away the lawsuit USANA brought in response to FDI’s attack. (As an aside, that particular post by Weiss ends as follows: “Congratulations, Barry, and keep up the good work.”)

Notably, Minkow has been subjected to substantial criticism by the judge overseeing the Lennar suit – in which Minkow is the primary defendant – for, among other things, the destruction of evidence. This includes email communication from Minkow to Antar and Coenen. Most significantly, these same emails have also been deleted by Antar and Coenen – strongly suggesting a conspiracy by these three not only to defraud, but to cover-up.

Thus far, only Minkow has been held to account for these dark deeds, but the gears of justice grind fine yet slow, and the eventual inclusion of — at the very least — Antar and Coenen seems inevitable.

Posted in AntiSocialMedia with Judd Bagley, Featured Stories, The Deep Capture CampaignComments (36)

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The ties that bind Sam Antar and Barry Minkow

What seems to bother critics of AntiSocialMedia.net more than anything else is their inability to disprove the things written here.

That’s because AntiSocialMedia.net deals in facts. Period.

Often, having made my case, I’ll take the additional step of drawing conclusions based on the facts. It’s never easy leaving the comfort of what I know to be true for what I suspect is true — particularly when reputations are involved. Yet, with a single (quickly rectified) exception, every conclusion extrapolated here has proven accurate.

And, in at least one case, my conclusions have proven much more accurate than even I could have anticipated.
To learn more about that case, let us return to June of 2007.

At that time, I concluded that convicted stock manipulator Sam Antar and securities class action litigator Howard Sirota were working in concert with convicted stock manipulator Barry Minkow’s Fraud Discovery Institute (FDI) to manipulate the share price of USANA, a public company.

You can review my reasoning (which, I urge you to keep in mind, Sam Antar characterized as being “filled with deception, innuendo, deflection, insensitivity, and arrogance”) here.

Many things have happened since the post was published, most notably the deposition of Minkow, whom USANA is suing for reasons that I expect will soon appear obvious. You may access the deposition transcript, in two parts, here and here.

In his deposition, Minkow confirms that to say he and Sam Antar were “doing business together” was the understatement of the fiscal year.

Minkow states, under oath, the following:
At some point in the past two or three years, Sam Antar came to be a “spiritual advisor” to Minkow. But unlike a traditional spiritual advisor, Antar didn’t ask for money…he was handing it out.

According to Minkow, in mid-2006, Antar sent him, unsolicited and with no strings attached: $100,000. This was Antar’s way of saying: “Thank you…you’ve been an example for me that you can come back from failure.”

Shortly thereafter, and by pure coincidence, Minkow decided to use Antar’s money to finance FDI’s attack on USANA, which was published and delivered to the SEC on February 20, 2007 (precisely the same day as Minkow’s second book was published), but not before Minkow established a short position in USANA stock, as well as investing in put options (both of which gain value as a stock loses value).

Minkow says that in total, Antar’s support for FDI has exceeded $250,000.

Additionally, Minkow disclosed two payments totaling $40,000 by hedge fund manager (and frequent Herb Greenberg advisor) Whitney Tilson, and $10,000 by Anthony Bruan, owner of Cactus Capital.

Remember Howard Sirota? Bruan is a long-time Sirota law client, dating back to some high-profile scrapes with the securities laws in 2001.

Sam Antar is also a long-time client of Howard Sirota’s law practice.

For those of you keeping score at home, that means at least $260,000 – nearly 90% – of the disclosed $300,000 used to finance FDI’s attack on USANA, came from associates of Howard Sirota, who makes a living leading shareholder lawsuits against public companies, à la Milberg Weiss.

Here’s where things get strange…
Consulting public records, I discovered that on February 27, 2007 (seven days after FDI’s USANA report was released), the New York State Department of Taxation and Finance issued a warrant for unpaid taxes against Sam E. Antar, in the amount of $473.15.

A bankruptcy attorney I consulted with on this issue cautioned that from time to time these warrants are filed erroneously. Hoping to rule out that possibility, I conducted a deeper search and discovered that unpaid taxes are nothing new to Sam Antar. Indeed, between 1987 and 2007, Antar amassed over $333,000 in tax liens, warrants and judgments on the city, state and federal levels, in addition to just under $60,000 in judgments and liens by private creditors in 1992 and 1993.

None of these debts was discharged by Antar’s Chapter 7 bankruptcy filing in 1998.

My point being, Sam’s history suggests this most recent – and nearly one year later, unsatisfied – tax warrant was not the result of an error.

And yet, from Minkow’s deposition, we’re supposed to believe that someone who can’t pay a $500 tax bill is in a position to give Minkow gifts totaling at least $250,000 – motivated by nothing more than the spirit of fraud fighting?

As noted in my earlier post on this topic, Howard Sirota was caught bashing (though in an unusually civil manner, to his credit) USANA stock on Yahoo Finance under the screen name StanleySargoy. In his first such post, dated April 14, 2007, Sirota declares (and Minkow’s deposition later confirms) that Sirota was shorting USANA stock, in addition to being long USANA put options.

Interestingly, five trading days later, USANA appeared on the Reg SHO Threshold Securities list for the first time.

Whether or not Sirota’s short position was a legitimate one, this post to Yahoo Finance by StanleySargoy in 2003 shows Sirota’s clear understanding of the relationship between public perception of a company and its share price, and of the value of using the media and other venues to spread negative information specifically for the purpose of lowering share price.

Based on these facts, I am led to conclude:

  1. Sam Antar’s $250,000 “gift” wasn’t a gift, but the cost of a commissioned, negative report on USANA, intended to adversely impact USANA’s share price.
  2. The money Antar gave Minkow wasn’t Antar’s at all. I suspect it belonged to someone else using Antar as an intermediary.
  3. In addition to shorting USANA, Sirota likely intended to lead one of the (several) class action suits brought against the company in the months following release of Minkow’s report. That he did not do so just might be a consequence of his having been identified as StanleySargoy in this blog.
  4. Finally, but likely most importantly, is my belief that this is a clear case of illegal stock manipulation.

If this sounds implausible, please remember that it is precisely the sort of activity Sirota’s counterparts at the law firm of Milberg Weiss are accused of engaging in. To learn more, you may either read this 105 page indictment of Milberg Weiss, or (as I would recommend) invest a few minutes watching an excellent presentation explaining how this sort of thing is happening on a broader scale than you could possibly imagine.

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At the time much of the content on DeepCapture.com was written, the Great Financial Crisis of 2008 was either on the verge of happening or had just occurred. In those days, emotions among this publication’s contributors were raw and, in an effort to get their warnings noticed and appropriate blame placed, occasionally hyperbolic language and shocking imagery were employed.

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