Lennar Refutes Minkow Claims, Says Didn't Siphon Cash
January 12 2009 - 9:22AM
Dow Jones News
DOW JONES NEWSWIRES
Saying it "never treated its joint ventures like a Ponzi
scheme," Lennar Corp. (LEN) refuted claims by investor Barry
Minkow, who on Friday accused the company of improperly boosting
cash on its balance sheet in an Internet scheme.
Lennar's stock price fell 20% Friday on the missive from
Minkow's Fraud Discovery Institute. The stock rebounded 3.2%
pre-market to $9.44.
The company on Monday issued a vehement denial of the claims
from the former convict turned fraud crusader, who sometimes takes
short positions on the shares of the companies he attacks. That has
given Wall Street pause.
Lennar Chief Operating Officer Jon Jaffe said that he never
received a mortgage on his home or any other debt connected to the
company and that Lennar "has never siphoned cash from one joint
venture to another."
In a written report and Web video, Minkow criticized Lennar's
practice of putting large amounts of debt in off-balance-sheet
joint ventures, saying there is insufficient disclosure about them
to investors. Lennar has about $4 billion in off-balance-sheet debt
through 116 joint ventures and has typically given very few details
about these arrangements.
He also took aim at a $5 million loan taken out by Jaffe in 2007
that Minkow claims was obtained 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. Lennar said Monday the loan "was obtained
from sources wholly independent from Lennar and with no assistance
from Lennar or any of its business partners."
Lennar added it intends "to take appropriate action against the
responsible parties."
Minkow claims to have uncovered two dozen cases of fraud since
2003 and has won kudos from the FBI for his role in busting frauds
on the Internet in the real-estate field and elsewhere.
-By Katherine Wegert, Dow Jones Newswires; 201-938-5400;
katherine.wegert@dowjones.com
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