3 ZZZZ Best Officers Enter Guilty Pleas

Three top officials of Barry Minkow’s ZZZZ Best carpet cleaning company pleaded guilty Thursday to fraud charges, admitting that they helped the whiz kid set up a multimillion-dollar insurance restoration hoax but claiming Minkow was the brains behind the operation.

Mark L. Morze, 37, the senior vice president who headed the restoration business, Charles Arrington III, 27, the company’s chief operations officer, and Daniel Krowpman, 42, a ZZZZ Best director who posed as a major supplier for the operation, were the highest-level company officials yet to enter pleas in the case, which is set for trial July 6.

Morze and Krowpman each pleaded guilty to securities fraud, bank fraud and tax charges. Arrington, who was primarily responsible for the bankrupt company’s legitimate carpet cleaning operations, pleaded guilty to securities fraud and mail fraud charges.

All three men claimed that Minkow was the architect of the hoax, which enabled his failing company to gain more than $25 million in public stock offerings and bank loans by fraudulently convincing investors that the company was engaged in lucrative insurance restoration work.

“I signed things I shouldn’t have signed, and I said things I shouldn’t have said, because Barry told me to say them,” Krowpman said.

“I can see why Mr. Minkow got along with Mr. Krowpman real well,” U.S. District Judge Dickran Tevrizian remarked at one point.

Morze, who faces up to 15 years in prison and a $750,000 fine for his role in the scheme, acted as bookkeeper and accountant for the firm, creating a phony paper trail to convince other securities firms, banks and attorneys that ZZZZ Best’s fictitious insurance jobs were genuine.

Assistant U.S. Atty. James Asperger said Morze led attorneys and accountants on staged tours of phony job sites in Sacramento, San Diego and Dallas. When meetings were held with potential ZZZZ Best investors, Morze would drop in briefly as the purported chief of the company’s restoration business, but whiz out again before any probing questions could be asked.

“What he did was at the direction of Mr. Minkow,” Morze’s attorney, Anthony Glassman, emphasized outside the courtroom. “My client inherited a situation that already existed.”

Krowpman, a distributor for Cornwell Tools Co.--a large company that is otherwise not involved in the ZZZZ Best case--helped generate paper work showing that Cornwell was supplying large quantities of tools for the phony insurance work, when in fact it was not, Asperger said.

Arrington admitted to signing a variety of false invoices and shipment orders to, again, help make it appear that the insurance restoration work was legitimate.

“Mr. Minkow, who was my boss, told me to do so,” he said. “It was just basically making up false paper work. I was chief operations officer, and I had a responsibility to the public . . .” Arrington admitted. “I was a little naive.”

Minkow, 21, has claimed he was the victim of “savvy businessmen” within his own company who were really directing the illegal enterprises.

The three pleas entered Thursday lend credence to the prosecution’s view, Asperger said, that Minkow was “the commander in chief, the one who was directing things, (who) was running things, and he was fully in control.”

A total of six of the 12 ZZZZ Best officials and associates originally indicted have now pleaded guilty.