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Lennar Shares Plunge 20% Amid Fraud Accusations
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Lennar shares [LEN
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]came under pressure Friday following fraud rumors after a letter questioning a late 1990s transaction surfaced on the Internet.
The letter to the U.S. Securities and Exchange Commission, the FBI and Internal Revenue Service from California pastor Barry Minkow, who served time in jail for stock fraud, concerned a deal between Lennar and developer Briarwood Capital LLC to build a housing project and golf course in California.
It was posted on Minkow's website, frauddiscovery.net.
In response the homebuilder issued a statement saying that Minkow's accusations were "false and inflammatory."
And on CNBC’s Closing Bell Lennar CEO Stuart Miller expressed absolute outrage over these rumors. He told us that “the notion that the ventures are being used as some kind of a scheme to build up a balance sheet is just not true.”
Miller adds that Lennar has, in turn, have filed litigation itself because they believe this is a scheme to extort money from the company.
“Under no circumstance have we used equity from one joint venture as collateral for another joint venture as is alleged.”
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Stock Action
The emergence of the letter drove down Lennar's shares in early trading, explains Fast Money trader Jon Najarian. 61,000 puts changed hands in the first hour of trading.
(Investors buy puts to either protect their stock positions or to bet on a further fall in stock prices.)
During intra-day trade, Lennar's shares had fallen as much as 28 percent to $8.23 but recovered some of their losses after the company's statement.
Najarian applauds Lennar for the way they're handling these allegations. He thinks the company is doing exactly the right thing concerning the circumstances. “You need to get out there front and center and head-off rumors. Ponzi scheme is a radio-active phrase.”
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CNBC.com with wires
Data is a real-time snapshot *Data is delayed at least 15 minutes
