By Helen Chernikoff and Doris Frankel
NEW YORK (Reuters) - Shares of Lennar Corp
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.
Lennar issued a statement saying that Minkow's accusations were "false and inflammatory" and that he was an agent of Nicolas Marsch III, whose civil litigation against Lennar was just dismissed by a California Superior Court judge.
Lennar, whose shares regained some of their losses after the statement, also said it was investigating possible wrongdoing by Marsch and Minkow and that they may have tried to illegally obtain information relating to Marsch's legal proceedings against Lennar.
Minkow responded by telling Reuters that his paying client in the case was Briarwood Capital.
He also said that he and his institute were not short Lennar shares and that they had not bought put options on Lennar.
The emergence of the letter drove down Lennar's shares in early trading, said Jon Najarian, a founder of website optionmonster.com.
"We believe the comments on this website is the catalyst for this harsh sell-off in Lennar shares and where 61,000 puts changed hands in the first hour of trading," Najarian said.
Investors buy puts to either protect their stock positions or to bet on a further fall in stock prices.
The report also received coverage on CNBC.
Lennar's shares fell as much as 28 percent to $8.23 but recovered some of their losses after the company's statement.
They were down 14 percent at $9.81 during afternoon trading on the New York Stock Exchange.
Minkow, who served more than seven years in jail for stock fraud, now works to uncover fraud through his Fraud Discovery Institute.
(Reporting by Helen Chernikoff and Doris Frankel; Editing by Ted Kerr)
