Thirteen individuals, including an alleged member and an associate of the Lucchese organized crime family, are charged with racketeering and related offenses in an indictment unsealed in conjunction with arrests in the case.
The charges stem from the alleged extortionate takeover of FirstPlus Financial Group Inc. (FPFG), a publicly held company in Texas, and the subsequent looting of FPFG by members of the racketeering enterprise through a series of fraudulent consulting agreements and acquisitions involving companies controlled by Nicodemo S. Scarfo and Salvatore Pelullo.
The 25-count indictment filed in Camden, N.J., federal court charges Scarfo, a member of the Lucchese organized crime family of La Cosa Nostra (LCN), and Pelullo, an associate of the Lucchese and Philadelphia LCN families, with racketeering conspiracy and conduct including securities fraud, wire fraud, mail fraud, bank fraud, extortion, interstate travel in aid of racketeering, money laundering and obstruction of justice. The indictment also charges Scarfo‘s wife, Lisa Murray-Scarfo, with conspiracy to commit bank fraud and making false statements on a loan application for her role in securing a fraudulent mortgage to purchase a $715,000 house with proceeds from the racketeering enterprise’s criminal activity.
The indictment also names Nicodemo D. Scarfo (Scarfo Sr.), the imprisoned former boss of the Philadelphia family of LCN, and Vittorio Amuso, the imprisoned boss of the Lucchese family, as unindicted co-conspirators.
Nine other defendants””including attorneys William Maxwell, Cory Leshner, David Adler, Gary McCarthy and Donald Manno, and certified public accountant Howard Drossner“”are also variously charged with racketeering conspiracy, including securities fraud conspiracy, wire fraud, and other offenses. William Maxwell‘s brother John Maxwell, William Handley and John Parisi are charged with various offenses related to the conspiracy. Todd Stark is charged with conspiracy to provide ammunition for a 9mm handgun to Scarfo.
A number of the defendants were arrested in a coordinated law enforcement effort by special agents of the FBI; Department of Labor, Office of Inspector General; and the Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF). Scarfo, Handley, Leshner, Parisi, Adler, Drossner and Manno were arrested at their residences; Pelullo was arrested in Miami; and William Maxwell was arrested at his Houston office. McCarthy surrendered to the FBI In Philadelphia. Murray-Scarfo is expected to surrender to authorities in Camden, New Jersey. Stark and John Maxwell have yet to be apprehended. The defendants in custody in the New Jersey area will appear before U.S. Magistrate Judge Anne Marie Donio in Camden federal court.
According to court documents, Scarfo is a made member of the Lucchese family and became a member after an attempt on his life in 1989 following an internal struggle for control of the Philadelphia family. In the mid-1990s while Scarfo Sr. and Amuso were in federal prison in Atlanta, Georgia, Amuso arranged for Scarfo to become a member of the Lucchese family as a favor to Scarfo Sr. As a member of the Lucchese family, Scarfo was required to earn money and participate in the affairs of the Lucchese family.
According to the indictment, following his release from prison in 2005 on an unrelated charge, Scarfo was placed on supervised release and required to report to a probation officer. According to court documents, by participating in the affairs of what is described in the indictment as the Scarfo-Pelullo Enterprise, Scarfo and other members of the enterprise allegedly engaged in a systematic scheme to deceive and obstruct the probation department and the district court responsible for overseeing Scarfo‘s supervised release.
The indictment alleges that in April 2007, Scarfo, Pelullo, Texas attorney William Maxwell and others devised a scheme to take over FPFG, a financial services company in Texas. According to court documents, through threats of physical and economic harm, the Scarfo-Pelullo Enterprise assumed and maintained control of FPFG for the purpose of plundering its assets. The takeover was accomplished by replacing FPFG‘s board of directors with new figurehead members who served at the direction of Scarfo, Pelullo and other members of the enterprise. Once the takeover was completed, the figurehead board named William Maxwell as “special counsel” to FPFG, a position that he allegedly used to funnel millions of dollars to himself, Scarfo and Pelullo through fraudulent legal services and consulting agreements. The agreements, as well as FPFG‘s fraudulent acquisitions of companies controlled by Scarfo and Pelullo, were allegedly designed to mask the true identity and nature of the control exerted over FPFG and to conceal the source of the money fraudulently conveyed to Scarfo and Pelullo.
According to the indictment, the enterprise succeeded in its criminal objectives with the knowing assistance of Adler, Drossner and McCarthy“”who used their positions as professionals to ensure that the enterprise’s criminal activity was not revealed to law enforcement and regulatory authorities, including the U.S. Securities and Exchange Commission (SEC). As a public company, FPFG was required to submit periodic and annual filings to the SEC. The indictment alleges that the enterprise, led by Scarfo and Pelullo, repeatedly submitted false information, or omitted material information, in required SEC filings. As a result, FPFG‘s shareholders and the investing public had no idea that FPFG was being controlled by members and associates of organized crime. Manno, an attorney for Scarfo, allegedly abused his position as an attorney to further insulate Scarfo and the enterprise by deceiving Scarfo‘s probation officer and the district court. The indictment alleges that Manno‘s deception corruptly influenced Scarfo‘s supervised release by withholding information from the probation office and the district court regarding Scarfo’s source of income and his contact with convicted felons.
The indictment details a telephone call intercepted by law enforcement on Dec. 5, 2007, that illustrates the corrupt nature of Scarfo and Pelullo‘s control of FPFG. According to the indictment, Pelullo called Scarfo to tell him about the sudden death of a former FPFG executive described in the indictment as “Individual #4,” who had provided information to Pelullo and William Maxwell that they used to extort control of FPFG. At the time of his death, Individual #4 was employed by FPFG as a member of its “compliance team.” During the conversation, Scarfo and Pelullo expressed relief regarding Individual #4’s death. After laughing about how he was “crushed” that “the rat is dead,” Pelullo acknowledged that Individual #4 was “the only connection, the only tie to anything.” As the news sunk in to Scarfo, he stated, “Oh boy. Yeah, Sal, you wanna know something though? . . . That’s one that I know you can’t take credit for . . . [laughter] . . . and that’s the natural best thing. You know what I mean? . . . That is so like Enron-ish. You know what I mean?”
The indictment alleges that the enterprise’s criminal activity allowed Scarfo and Pelullo to live lavish lifestyles which included the purchase of an $850,000 yacht, a luxury home for Scarfo, a Bentley automobile for Pelullo, and thousands of dollars in jewelry for Scarfo‘s wife, Murray-Scarfo. As a direct result of the enterprise’s criminal activity, FPFG and its shareholders suffered a loss of at least $12 million.
The charges and allegations contained in the indictment are merely accusations, and the defendants are presumed innocent unless and until proven guilty.
Assistant Attorney General Lanny A. Breuer of the Criminal Division and U.S. Attorney Paul J. Fishman of the District of New Jersey made the announcement.
The case is being prosecuted by Trial Attorney Lisa C. Page of the Organized Crime and Gang Section in the Justice Department’s Criminal Division and Assistant U.S. Attorney Steven D’Aguanno of the New Jersey U.S. Attorney’s Office Organized Crime/Gangs Unit in Camden. The case was investigated by the FBI’s Newark Field Office; the Department of Labor, Office of Inspector General, Office of Labor Racketeering and Fraud Investigations, New York Region; and the ATF, Newark. The FBI Philadelphia Field Office and the SEC provided assistance.
“The indictment alleges that Mr. Scarfo and Mr. Pelullo used economic extortion and threats of violence to seize and maintain control of a publicly traded company, successfully removing its entire existing board of directors and management,” said Assistant Attorney General Breuer. “Once in control, they allegedly used their criminal enterprise to extract millions of dollars from the company to fund their lavish lifestyles. This prosecution demonstrates the Justice Department’s resolve to root out the influence of La Cosa Nostra wherever it exists.”
“According to the indictment, the defendants gave new meaning to “˜corporate takeover’ by looting a publicly traded company to benefit their criminal enterprise,” said U.S. Attorney Fishman. “Through rampant self dealing, fraudulent SEC filings and more traditional mob methods, the defendants allegedly stole $12 million from shareholders. Particularly in these economic times, investors should be free to invest in public companies without fear that violent criminal organizations are their puppetmasters. And the public deserves to rely with confidence on corporate officials and professionals whose positions require them to act in the best interest of shareholders, not members of organized crime.”
“The demise of Organized Crime has been greatly exaggerated,” said Michael B. Ward, Special Agent in Charge of the FBI’s Newark Field Office. “Criminal activities have evolved from the back alleys to the board rooms, but the same use of physical threats and intimidation to gain leverage and loot lucrative businesses for personal gain continues to this day. In response, the charges being brought against Nicky Scarfo Jr., Sal Pelullo and others represent law enforcement’s commitment to aggressively target the illegal activity of Organized Crime in any commercial business or venue.”