Fraud Discovery Institute (co-founded by convicted felon, turned fraud fighter) Barry Minkow released a trailer for its upcoming documentary entitled, “Too Big to Go to Jail: The Lennar Story.” According to Fraud Discovery's press release, the documentary:
Reveals a disturbing pattern of apparent fraudulent behavior by Lennar Corporation ranging from the falsification of government documents to the utilization of joint ventures to conceal debt and siphon cash from unwitting joint venture partners.
The trailer released Tuesday specifically includes:
FDI also releases stunning, never before seen clip from film allegedly confirming the falsification of a government document by Lennar Corporation (NYSE: LEN).
The trailer features a Sandee Bradshaw, who purchased her home from Lennnar, describing a meeting with Lennar Texas President Sean Chandler where he allegedly admitted to Lennar's falsfication of a HUD document relating of soil samples.
Link to watch the trailer
Back in early January 2009, Fraud Discovery started investigating Lennar on behalf of Nicholas Marsch, a paying client involved in a contentious litigation with the company. Usually, when Minkow investigates other companies, he takes a short position in the company's securities.
In a January 2009 video posted on Youtube, Minkow alleged that Lennar is a "financial crime in progress" and added:
We know fraud and you're just fraud.... I'll be back very soon with interviews from past employees and interviews from experts that further corroborate how Lennar Corporation is a financial crime in progress and will not be allowed to get away with this by taking advantage of people any more.
The trailer posted Tuesday on Fraud Discovery's website is a continuation of Minkow's efforts to document an alleged "financial crime in progress" by Lennar.
When Fraud Discovery started investigating Lennar, it started a website called "Lenn-ron.com" to document findings from its investigation of Lennar and issued a detailed report which alleges "Top Ten Red Flags for Fraud at Lennar Corporation." Download links: Full Report, Addendums 1-10, Addendums 11-17, and Addendums 18-22.
Among the alleged "red flags" identified were allegations that Lennar was siphoning off cash from its joint venture partners and in one case "caused CalPERS (the California Public Retirement Fund) to lose approximately $1 billion" while it profited over $100 million.
A few days ago, the Wall Street Journal reported (subscription required):
Federal criminal investigators are looking into possible wrongdoing involving investment transactions of public pension funds including CalPERS, according to people familiar with the matter.
Justice Department investigators in Los Angeles have been looking at whether potentially illegal payments were made to influence decisions on where to invest public pension-fund money, these people said. Among the matters being examined, they said, are investments made by the California Public Employees' Retirement System, the nation's biggest public pension fund by assets.
In light of the Wall Street Journal article, Fraud Discovery Institute wants the Justice Department to carefully examine Lennar's dealing with CalPERS. Fraud Discovery's press release says:
FDI continues to keep a close eye on the latest developments concerning Lennar's deal with CalPERS - one of the red flags FDI included in its initial report on the homebuilder. According to the Wall Street Journal, a criminal probe is underway in Los Angeles specifically targeting large investments made by CalPERS that were put together by the "pay-to-play" middlemen.
"To my knowledge, CalPERS had no bigger loss than the $1.2 billion loss handed to the organization by Lennar through Victor Macfarlane of MacFarlane Partners. Although I could be wrong, in my years of experience with criminal investigations on both the defense and prosecuting end of the process, I do not see how a criminal probe could be completed without a thorough examination of a deal that resulted in a $1.2 billion loss within an 18-month time span."
According to noted forensic accountant and author Tracy Coenen, many of the alleged "Red Flags" have already been proven correct. You can read her blog reports on Lennar here.
Disclosure: I am a convicted felon and a former CPA. As the criminal CFO of Crazy Eddie, I helped Eddie Antar and other members of his family mastermind one of the largest securities frauds uncovered during the 1980's. I committed my crimes, simply because I could.
If it weren't for the efforts of the FBI, SEC, Postal Inspector's Office, US Attorney's Office, and class action plaintiff's lawyers who investigated, prosecuted, and sued me, I would still be the criminal CFO of Crazy Eddie today.
I do not own any Lennar securities, long or short. I have assisted Fraud Discovery Institute (co-founded by convicted felon, turned fraud fighter Barry Minkow) in researching another company, called InterOil.