Barry Minkow, a convicted con man who became a minister and anti-fraud crusader, is in talks with U.S. prosecutors in Miami to plead guilty to insider trading of Lennar Corp. (LEN), his lawyer said.

“Barry is looking forward to getting this behind him and on with the rest of his life,” Alvin E. Entin, Minkow’s attorney, said in a telephone interview today from San Juan, Puerto Rico. Minkow faces a maximum five-year sentence under the proposed deal in which he would plead guilty to a single securities fraud count. The plea may take a week to negotiate, Entin said.

After serving a prison sentence for fraud from 1988 to 1995, Minkow became a minister and founded the Fraud Discovery Institute, which stated as its mission the exposure of corporate fraud. The institute said it supported itself by trading against companies where it found executives misrepresented their credentials or allegedly committed other types of fraud. Minkow’s exposes led to resignations of executives at companies such as Microsemi Corp. (MSCC) and Intrepid Potash Inc. (IPI)

In January 2009, Minkow issued a report alleging that Lennar operated joint ventures “like a Ponzi scheme,” triggering a 20 percent one-day drop in the Miami-based homebuilder’s shares. The company denied the accusations and later sued Minkow in state court in Miami, alleging he conspired to extort money and caused reputational harm.

Default Judgment

In December 2010, Florida Judge Gill Freeman entered a default judgment against Minkow in the lawsuit, saying “Minkow has withheld key documents, destroyed or discarded important evidence, concealed the identity of material witnesses, willfully violated court orders and engaged in actions to cloud his misconduct.”

Federal prosecutors haven’t charged Minkow in the Lennar insider trading matter, his lawyer said. He is negotiating a deal to plead guilty to one count of “trading on information that wasn’t otherwise public,” Entin said. Alicia Valle, spokeswoman for the U.S. Attorney in Miami, didn’t immediately return a call seeking comment.

In a March 30, 2010, e-mailed statement, Minkow denied that he had a position in Lennar’s stock at the time he issued the report.

Always Shorting

“Always assume we are shorting any public company we report on,” he said in the e-mail. “I had a 3 hour, 1400.00 2008 profit from a Lennar trade -- BEFORE any report was issued so technically I could not say I had never shorted Lennar. But in the spirit of the law, we all know that the question pertains to the period in which we released information and the answer to that question is no -- when Lennar’s stock dropped 40% in 2 days in 2009 January I was not short.”

Minkow didn’t immediately return a call or e-mail at his church and the Fraud Discovery Institute in San Diego seeking comment. Lennar spokesman Marshall Ames didn’t immediately respond to an e-mail seeking comment.

At age 16, Minkow began a carpet-cleaning company, ZZZZ Best Co., in Southern California. He took it public and the value eventually exceeded $211 million, according to a 1987 Wall Street Journal article.

Carpet Business

To make his business appear successful, Minkow prepared fake receipts that fooled auditors and investors. When the scheme fell apart, he was convicted in 1988 of 57 counts of fraud and conspiracy and sentenced to 25 years in prison. He served more than seven years before being released in 1995.

Minkow recently resigned as pastor of the San Diego-based Community Bible Church, where he began preaching after leaving prison, according to a letter from the church obtained by Bloomberg.

“Pastor Barry no longer considers himself above reproach as he has agreed to plead guilty to a criminal count related to the Lennar lawsuit,” the letter from church elders to parishioners said.

To contact the reporter on this story: John Gittelsohn in New York at johngitt@bloomberg.net

To contact the editor responsible for this story: Kara Wetzel at kwetzel@bloomberg.net and; David E. Rovella at drovella@bloomberg.net