841 11032011151020 scarfo, nicodemo et al. arrests, indictment pr final

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841 11032011151020 scarfo, nicodemo et al. arrests, indictment pr final

  1. 1. United States Attorney District of New JerseyFOR IMMEDIATE RELEASE CONTACT: Rebekah CarmichaelNovember 1, 2011 Office of Public Affairswww.justice.gov/usao/nj (973) 645-2888 LUCCHESE ORGANIZED CRIME FAMILY MEMBER AND ASSOCIATE AMONG 13 ARRESTED, CHARGED FOR RACKETEERING AND OTHER OFFENSES, INCLUDING ILLEGAL TAKEOVER OF PUBLICLY TRADED COMPANY Attorneys and Accountant Also Charged as Members of Racketeering Enterprise CAMDEN, N.J. – Thirteen individuals, including an alleged member and an associate ofthe Lucchese organized crime family, are charged with racketeering and related offenses in anIndictment unsealed this morning in conjunction with arrests in the case, New Jersey U.S.Attorney Paul J. Fishman and Assistant Attorney General Lanny A. Breuer of the Department ofJustice’s Criminal Division announced. 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 bymembers of the racketeering enterprise through a series of fraudulent consulting agreements andacquisitions involving companies controlled by Nicodemo S. Scarfo and Salvatore Pelullo. The 25-count Indictment filed in Camden federal court charges Scarfo, a member of theLucchese organized crime family of La Cosa Nostra (“LCN”), and Pelullo, an associate of theLucchese and Philadelphia LCN Families, with racketeering conspiracy – with conduct includingsecurities fraud, wire fraud, mail fraud, bank fraud, extortion, interstate travel in aid ofracketeering, money laundering and obstruction of justice. The Indictment also namesNicodemo D. Scarfo (“Scarfo Sr.”), the imprisoned former boss of the Philadelphia family of LaCosa Nostra, and Vittorio Amuso, the imprisoned boss of the Lucchese family, as unindicted co-conspirators. Nine other defendants – including attorneys William Maxwell, Cory Leshner, DavidAdler, 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. 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 herrole in securing a fraudulent mortgage to purchase a $715,000 house with proceeds from theracketeering enterprise’s criminal activity. William Maxwell’s brother John Maxwell, WilliamHandley and John Parisi are charged with various offenses related to the conspiracy. Todd Starkis charged with conspiracy to provide ammunition for a 9mm handgun to Scarfo. A number of the defendants were arrested this morning in a coordinated law enforcementeffort by special agents of the FBI; Department of Labor, Office of Inspector General; and the
  2. 2. 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; andWilliam Maxwell was arrested at his Houston office. McCarthy surrendered to the FBI thismorning in Philadelphia. Murray-Scarfo is expected to surrender to authorities in Camden.Stark and John Maxwell have yet to be apprehended. The defendants in custody in the NewJersey area will appear this afternoon before U.S. Magistrate Judge Anne Marie Donio inCamden federal court. “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. AttorneyFishman. “Through rampant self dealing, fraudulent SEC filings and more traditional mobmethods, the defendants allegedly stole $12 million from shareholders. Particularly in theseeconomic times, investors should be free to invest in public companies without fear that violentcriminal organizations are their puppetmasters. And the public deserves to rely with confidenceon corporate officials and professionals whose positions require them to act in the best interest ofshareholders, not members of organized crime.” “The Indictment alleges that Mr. Scarfo and Mr. Pelullo used economic extortion andthreats of violence to seize and maintain control of a publicly traded company, successfullyremoving its entire existing board of directors and management,” said Assistant AttorneyGeneral Breuer. “Once in control, they allegedly used their criminal enterprise to extractmillions of dollars from the company to fund their lavish lifestyles. This prosecutiondemonstrates the Justice Department’s resolve to root out the influence of La Cosa Nostrawherever it exists.” “The demise of Organized Crime has been greatly exaggerated,” said Michael B. Ward,Special Agent in Charge of the FBI’s Newark, N.J., Field Office. “Criminal activities haveevolved from the back alleys to the board rooms, but the same use of physical threats andintimidation to gain leverage and loot lucrative businesses for personal gain continues to thisday. In response, the charges being brought against Nicky Scarfo Jr., Sal Pelullo and othersrepresent law enforcement’s commitment to aggressively target the illegal activity of OrganizedCrime in any commercial business or venue.” According to the Indictment unsealed this morning in Camden federal court: Scarfo is a made member of the Lucchese family, having become a member after anattempt 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, Amuso arrangedfor Scarfo to become a member of the Lucchese family as a favor to Scarfo Sr. As a member ofthe Lucchese family, Scarfo was required to earn money and participate in the affairs of theLucchese family. Following his release from prison in 2005 on an unrelated charge, Scarfo was placed onsupervised release and required to report to a probation officer. In participating in the affairs of -2-
  3. 3. what is described in the Indictment as the Scarfo-Pelullo Enterprise, Scarfo and other membersof the Enterprise engaged in a systematic scheme to deceive and obstruct the probationdepartment and the District Court responsible for overseeing Scarfo’s supervised release. In April 2007, Scarfo, Pelullo, Texas attorney William Maxwell and others devised ascheme to take over FPFG, a financial services company in Texas. Through threats of physicaland economic harm, the Scarfo-Pelullo Enterprise assumed and maintained control of FPFG forthe purpose of plundering its assets. The takeover was accomplished by replacing FPFG’s boardof directors with new figurehead members who served at the direction of Scarfo, Pelullo, andother members of the Enterprise. Once the takeover was completed, the figurehead board namedWilliam Maxwell as “special counsel” to FPFG, a position that he used to funnel millions ofdollars to himself, Scarfo and Pelullo through fraudulent legal services and consultingagreements. The agreements, as well as FPFG’s fraudulent acquisitions of companies controlledby Scarfo and Pelullo, were designed to mask the true identity and nature of the control exertedover FPFG and conceal the source of the money fraudulently conveyed to Scarfo and Pelullo. 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 theEnterprise’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, FPFGwas required to submit periodic and annual filings to the SEC. Led by Scarfo and Pelullo, theEnterprise repeatedly submitted false information, or omitted material information, in requiredSEC filings. As a result, FPFG’s shareholders and the investing public had no idea that FPFGwas being controlled by members and associates of organized crime. Manno, as Scarfo’sattorney, abused his position to further insulate Scarfo and the Enterprise by deceiving Scarfo’sprobation officer and the District Court. Manno’s deception corruptly influenced Scarfo’ssupervised release by withholding information from the Probation Office and the District Courtregarding 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. Pelullo called Scarfoto 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 usedextort control of FPFG. At the time of his death, Individual #4 was employed by FPFG as amember of its “compliance team.” During the conversation, Scarfo and Pelullo expressed reliefregarding Individual #4’s death. After laughing about how he was “crushed” that “the rat isdead,” Pelullo acknowledged that Individual #4 was “the only connection, the only tie toanything.” As the news sunk in to Scarfo, he stated, “Oh boy. Yeah, Sal, you wanna knowsomething though? . . . That’s one that I know you can’t take credit for . . . [laughter] . . . andthat’s the natural best thing. You know what I mean? . . . That is so like Enron-ish. You knowwhat I mean? Kenneth Lay, he bailed out and took a heart attack.” The Enterprise’s criminal activity allowed Scarfo and Pelullo to live lavish lifestyleswhich included the purchase of an $850,000 yacht, a luxury home for Scarfo, a Bentley -3-
  4. 4. automobile for Pelullo, and thousands of dollars in jewelry for Scarfo’s wife, Murray-Scarfo. Asa direct result of the Enterprise’s criminal activity, FPFG and its shareholders suffered a loss ofat least $12 million. The charges and allegations contained in the Indictment are merely accusations, and thedefendants are presumed innocent unless and until proven guilty. U.S. Attorney Fishman praised special agents of the FBI, under the direction of SpecialAgent in Charge Ward in Newark, for leading the investigation; as well as special agents of theDepartment of Labor, Office of Inspector General, Office of Labor Racketeering and FraudInvestigations, under the direction of Special Agent in Charge Robert Panella, New YorkRegion; and the ATF, under the direction of Matthew W. Horace in Newark. He also thankedthe FBI under the direction of Special Agent in Charge George C. Venizelos in Philadelphia forits vital assistance, and the SEC for its role. The government is represented by Assistant U.S. Attorney Steven D’Aguanno of theNew Jersey U.S. Attorney’s Office Organized Crime/Gangs Unit in Camden and Trial AttorneyLisa C. Page of Organized Crime and Gang Section in the Department of Justice’s CriminalDivision in Washington. The defendants and charges in the Indictment are outlined in the attached chart, alongwith the maximum potential prison sentence per count if convicted. Each count also carries amaximum $250,000 fine, with the exception of Count 20 (money laundering conspiracy) whichcarries a maximum $500,000 fine and Count 21 (bank fraud conspiracy) which carries amaximum $1 million fine.11-433 ### -4-
  5. 5. U.S. v. Scarfo et al. IndictmentDefendant Count/Charges Maximum Potential PenaltyNicodemo S. Scarfo, 46, of Count 1: RICO conspiracy 20 years in prisonGalloway, N.J. Count 2: Securities fraud Five years in prison conspiracy Count 3: Wire fraud 20 years in prison conspiracy Counts 4 through 16: Wire 20 years in prison fraud Counts 17 through 19: 20 years in prison Wire fraud Count 20: Money 20 years in prison laundering conspiracy Count 21: Bank fraud 30 years in prison conspiracy Count 22: False statement Five years in prison in loan application conspiracy Count 23: Obstruction of 20 years in prison justice conspiracy Count 24: Firearms Five years in prison conspiracy Count 25: Felon in 10 years in prison possession of firearmsSalvatore Pelullo, 44, of Count 1: RICO conspiracy 20 years in prisonPhiladelphia, Pa. Count 2: Securities fraud Five years in prison conspiracy Count 3: Wire fraud 20 years in prison conspiracy Counts 4 through 16: Wire 20 years in prison fraud -5-
  6. 6. Defendant Count/Charges Maximum Potential Penalty Counts 17 through 19: 20 years in prison Wire fraud Count 20: Money 20 years in prison laundering conspiracy Count 21: Bank fraud 30 years in prison conspiracy Count 22: False statement Five years in prison in loan application conspiracy Count 23: Obstruction of 20 years in prison justice conspiracy Count 24: Firearms Five years in prison conspiracyWilliam Maxwell, 52, of Count 1: RICO conspiracy 20 years in prisonHouston, Texas Count 2: Securities fraud Five years in prison conspiracy Count 3: Wire Fraud 20 years in prison Conspiracy Counts 4 through 16: Wire 20 years in prison fraud Counts 17 through 19: 20 years in prison Wire fraud Count 20: Money 20 years in prison laundering conspiracy Count 21: Bank fraud 30 years in prison conspiracy Count 22: False statement Five years in prison in loan application conspiracy Count 23: Obstruction of 20 years in prison justice conspiracy -6-
  7. 7. Defendant Count/Charges Maximum Potential Penalty Count 24: Firearms Five years in prison conspiracyJohn Maxwell, 59, of Irving, Count 1: RICO conspiracy 20 years in prisonTexas Count 2: Securities fraud Five years in prison conspiracy Count 3: Wire fraud 20 years in prison conspiracy Counts 4 through 16: Wire 20 years in prison fraud Counts 17 through 19: 20 years in prison Wire fraud Count 20: Money 20 years in prison laundering conspiracy Count 21: Bank fraud 30 years in prison conspiracy Count 22: False statement Five years in prison in loan application conspiracy Count 24: Firearms Five years in prison conspiracyWilliam Handley, 61, of Count 1: RICO conspiracy 20 years in prisonMiami, Fla. Count 2: Securities fraud Five years in prison conspiracy Count 3: Wire fraud 20 years in prison conspiracy Counts 4 through 16: Wire 20 years in prison fraud Counts 17 through 19: 20 years in prison Wire fraud Count 20: Money 20 years in prison laundering conspiracy -7-
  8. 8. Defendant Count/Charges Maximum Potential Penalty Count 21: Bank fraud 30 years in prison conspiracy Count 22: False statement Five years in prison in loan application conspiracyCory Leshner, 28, of West Count 1: RICO conspiracy 20 years in prisonReading, Pa. Count 2: Securities fraud Five years in prison conspiracy Count 3: Wire fraud 20 years in prison conspiracy Counts 4 through 16: Wire 20 years in prison fraud Counts 17 through 19: 20 years in prison Wire fraud Count 20: Money 20 years in prison laundering conspiracy Count 21: Bank fraud 30 years in prison conspiracy Count 22: False statement Five years in prison in loan application conspiracy Count 24: Firearms Five years in prison conspiracyJohn Parisi, 50, of Atlantic Count 1: RICO conspiracy 20 years in prisonCity, N.J. Count 2: Securities fraud Five years in prison conspiracy Count 3: Wire fraud 20 years in prison conspiracy Counts 4 through 16: Wire 20 years in prison fraud -8-
  9. 9. Defendant Count/Charges Maximum Potential Penalty Counts 17 through 19: 20 years in prison Wire fraud Count 20: Money 20 years in prison laundering conspiracy Count 21: Bank fraud 30 years in prison conspiracy Count 22: False statement Five years in prison in loan application conspiracy Count 23: Obstruction of 20 years in prison justice conspiracy Count 24: Firearms Five years in prison conspiracyDavid Adler, 64, of Count 1: RICO conspiracy 20 years in prisonChappaqua, N.Y. Count 2: Securities fraud Five years in prison conspiracy Count 3: Wire fraud 20 years in prison conspiracy Counts 4 through 16: Wire 20 years in prison fraud Counts 17 through 19: 20 years in prison Wire fraudHoward Drossner, 50, of Count 1: RICO conspiracy 20 years in prisonAmbler, Pa. Count 2: Securities fraud Five years in prison conspiracy Count 3: Wire fraud 20 years in prison conspiracy Counts 4 through 16: Wire 20 years in prison fraud Counts 17 through 19: 20 years in prison Wire fraud -9-
  10. 10. Defendant Count/Charges Maximum Potential Penalty Count 20: Money 20 years in prison laundering conspiracy Count 21: Bank fraud 30 years in prison conspiracy Count 22: False statement Five years in prison in loan application conspiracyGary McCarthy, 53, of Count 1: RICO Conspiracy 20 years in prisonBerwyn, Pa. Count 2: Securities fraud Five years in prison conspiracy Count 3: Wire fraud 20 years in prison conspiracy Counts 4 through 16: Wire 20 years in prison fraud Counts 17 through 19: 20 years in prison Wire fraud Count 20: Money 20 years in prison laundering conspiracyDonald Manno, 65, of Count 1: RICO conspiracy 20 years in prisonMedford, N.J. Count 20: Money 20 years in prison laundering conspiracy Count 21: Bank fraud 30 years in prison conspiracy Count 22: False statement Five years in prison in loan application conspiracy Count 23: Obstruction of 20 years in prison Justice ConspiracyLisa Murray-Scarfo, 32, Count 21: Bank fraud 30 years in prisonGalloway, N.J. conspiracy -10-
  11. 11. Defendant Count/Charges Maximum Potential Penalty Count 22: False statement Five years in prison in loan application conspiracyTodd Stark, 43, of Ocean Count 24: Firearms Five years in prisonCity, N.J. conspiracy -11-

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