Barry Minkow: Identify The Affected Party In The Case

Identify the affected party in the case. (internal and external parties and consequences)

Internal party

Barry Minkow

A federal grand jury indicted Minkow and ten other ZZZZ Best insiders on 54 counts of racketeering, securities fraud, money laundering, embezzlement, mail fraud, tax evasion, and bank fraud in January 1988. In his indictment, Minkow is accused of draining his company of assets while bilking banks and investors. Additionally, Minkow has been accused of setting up false companies, writing false invoices, and conducting fake restoration tours. Approximately 90 percent of the company's revenue was fraudulent, according to prosecutors (Murphy, Kim; Miller, Alan C, 1988). A superseding indictment was won by prosecutors on June

Padgett

Thomas G. Padgett, a spokesman for white supremacist causes who met Minkow, who is Jewish, while lifting weights in a San Fernando Valley gym, admitted to running a sham appraisal company created to handle phony cleanup jobs and to convincing an army of bankers, accountants, and lawyers that the jobs were genuine.

The ZZZZ Best operation resulted in total losses that "easily exceed" $70 million, according to Assistant U.S. Atty. James R. Asperger, who assisted Padgett, whom prosecutors have placed in the "second tier of culpability" among the 12 people indicted in the case.

"In a classic con artist's sting, Padgett met with investors, bankers, lawyers, accountants, underwriters, and others," Asperger wrote in a court memorandum.

"I don't think Barry Minkow could have started without Mr. Padgett's willingness to lie and verify fictitious restoration jobs," the prosecutor continued.

Padgett, a Westchester resident, pleaded guilty to four counts of securities fraud, bank fraud, and mail fraud in connection with the phony insurance restoration scheme in February.

Padgett's attorney, Raul Ayala, said his client is sorry for his part in the scheme and has worked closely with the FBI, providing a detailed account of the fraud and what led up to

An appellate court ruled neither Ernst nor its partner was liable to Union Bank of California (American Institute of CPAs, 1991).

ZZZZ Best's financial statements for the three months ending July 31, 1986, were audited by Ernst & Whinney. A preliminary prospectus for Z Best's $100 million stock offering included a draft copy of this review report. Union said it extended credit to ZZZZ Best based on its preliminary prospectus, Ernst's oral representations about ZZZZ Best's growth, and Z Best's professional reputation.

It was Ernst & Whinney's unprofessional attitude toward the ZZZZ Best audit that damaged the company's reputation.

Accounting and auditing firm

The scandal's consequences would primarily be a professional embarrassment for auditing and accounting firms. The American Institute of Certified Public Accountants quickly altered the auditing standards of the accounting profession in the United States, prompting auditors to become more proactive in combating fraud.

The shareholders

In this case, the shareholders did receive a $35 million settlement from Ernst & Whinney, the firm's auditors (Dr. Matthew Partridge,