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Given the extent of fraud in this case, Should ZZZZ Bests accounting firm be

held responsible for not discovering the fraudulent activities?

What are the responsibilities of the broker and financial analyst in recommend$-$

ing the company to investors? To what extent are they Responsible for their investment recommendations?

Barry Minkow founded ZZZZ Best Co$.,$ a carpet$-$cleaning firm, when he was $15$ years

old. He ran the business from his family's garage in Reseda, California. The company

became one of the biggest carpet$-$cleaning firms in California, and Minkow was a

millionaire by age $18.$ Minkow took his company public by selling its stock when he

was $21,$ and his personal worth was estimated at close to $$10$ million. At that time

ZZZZ Best $("$Zee Best"$)$ had $1,300$ employees and $1987$ sales of $$4\mathrm{.}8$ million. Minkow

boldly predicted that $1988$ revenues would exceed $$50$ million.

In July $1990,$ ZZZZ Best management filed for bankruptcy protection and sued

Minkow for misappropriating $$21$ million in company funds. In addition, several

customers accused ZZZZ Best of overcharging them in a credit card scam. Minkow

publicly admitted the overcharges but blamed them on subcontractors and employ$-$

ees. He also said he had fired those responsible and had personally repaid the

charges.

The Securities and Exchange Commission $($SEC$)$ and other law enforcement

agencies began investigating Minkow and his company. It became apparent that

ZZZZ Best was built on a foundation of lies, dishonesty, and inconsistent account$-$

ing practices. The company had submitted phony credit card charges and had

issued press releases claiming millions of dollars in bogus contracts, sending the

price of the company's stock even higher. The SEC investigated other charges,

including possible phony receivables, bogus financial accounting statements,

organized crime connecTions and securities law violations by Minkow and other excecutives. The Sec placed an independent trustee in charge of the company until its accounting records could be examined.

The Los Angeles Police Department investigated charges that ZZZZ Best was a

money$-$laundering operation for organized crime. The investigation linked Minkow

and $ZZZZ$ Best with drug dealings and organized crime members.

These allegations ultimately led Minkow to resign from ZZZZ Best for "health

reasons." But his resignation was not the end of his troubles. ZZZZ Best's new

management sued Minkow for embezzling $$3$ million of the company's funds for

his personal use and misappropriating $$18$ million to perform fictitious insurance Restoration work. The suit charged thatMinkow actually diverted this money to an associate refurbishing business which was part of an elaborate scheme designed to allow Minkow to take corporate funds for his own and others personal use. According to the suit, these disrepancies in the company accounting practices were the reasons behind the bankruptucy filing.as a result ZZZZ best accounting firm quit.

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