Orange County Register

Jaffe (Register photo)

Lennar Corp. said today it added an ex-con who became a fraud detective to an existing federal lawsuit, charging the San Diego operative with “false and scurrilous claims” that sent the home building company’s stock into a tailspin Friday.

San Diego resident Barry Minkow and his company, Fraud Discovery Institute, accused Lennar of ripping off small developers it partners with, calling the company “a financial crime in progress” and likening Lennar to Enron Corp. by calling it “Lenn-Ron.”

The battle started after Minkow issued a statement on the Web and posted a video on YouTube questioning a $5 million loan made to Lennar Chief Operating Officer Jon Jaffe for his home in Laguna Beach’s Emerald Bay. Jaffe is the highest-ranking executive working out of Lennar’s West Coast office in Aliso Viejo.

Minkow (from FDI Web site)

Minkow — who went to jail for orchestrating the ZZZZ Best stock scam two decades ago — asserted that the $5 million “third trust deed” loan exceeds the home’s value since it comes on top of about $5 million in existing debt on the property. He intimates that the loan could be a “disguised kick-back” by mortgage broker Robert Venneri, possibly because Lennar tipped him off that it would buy land in Kern County near a property Venneri was thinking of buying. Minkow alleged that Venneri made a 455% profit on his Kern County property. In his video, he said:

“Whenever we look at things and see a third trust deed that over-encumbers the home given by a no-name lender, it causes us to do some digging. And what we found … is that Mr. Jaffe got a loan from Mr. Venerri and Mr. Veneri is connected with Lennar and SunCal in Kern County, and it’s a related-party transaction that is undisclosed and the thing that tipped it off was a $5 million third trust deed loan given in the worst real estate market over-encumbering the primary residence of Mr. Jaffe. You couldn’t make this stuff up.”

Lennar reported that Minkow’s accusations resulted Friday in the selling of an unprecedented 58 million shares of Lennar’s stock and caused a 20% drop in its price.

The company issued a statement Monday disputing many of Minkow’s facts and denying that there’s any connection between Lennar and mortgage broker Venneri or his firms, Canyon Finance Inc. and Gulfstream Finance. It also denied having a partnership with SunCal Cos. in Kern County:

“There is no connection between (Venneri’s Kern County) properties and Jon’s loan or Lennar. … By any measure, the loan was made on the basis of conservative underwriting guidelines. There was substantial equity in Jon’s house to fully secure the loan. At the time of the loan, the house was appraised at $18 million by an independent appraiser on behalf of the lender. … Together with the $5 million loan, the total (debt) equaled $10 million, a loan-to-value ratio of 55%.”

Lennar added Minkow to an existing federal court suit involving Nicholas Marsch III, a disgruntled former partner in a north San Diego County development known as the Bridges and the Lakes at Rancho Santa Fe. Lennar’s press release today accuses Marsch of paying Minkow $50,000 to $100,000 to generate harmful information, then attempting to extort the homebuilder into acceding “to Marsch’s demands for tens of millions of dollars.”

In addition to libel and extortion, the firm alleged that there was “an illegal attempt to obtain confidential bank account information” from Venneri’s bank. It also accused Minkow of identity theft and manipulation of securities markets.

Neither Minkow nor Jaffe could be reached for comment.

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