Lennar Refutes Minkow Claims, Says Didn't Siphon Cash

   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; [e-mail]

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