Founder of union city, new jersey-based brokerage firm pleads guilty to role in $1 million kickback conspiracy
FOR IMMEDIATE RELEASE
March 31, 2011
NEWARK, N.J. – The founder and president of the Union City, New Jersey-based brokerage firm Montclair Funding Group, LLC (MFG) admitted today to his role in a wire fraud conspiracy including a secret kickback scheme which defrauded his co-conspirator’s former business partners of approximately $1 million, U.S. Attorney Paul J. Fishman announced.
Rory Donadio, a/k/a “James R. Donadio,”41, of New York, entered his guilty plea to an Information charging him with wire fraud conspiracy before U.S. District Judge Dennis M. Cavanaugh in Newark federal court.
According to documents filed and statements made in court at this and related proceedings:
Donadio admitted that he conspired with others between 2005 and 2009 – including Mathew Sheldon, 36, of Brooklyn, N.Y., who was then the part-owner, underwriter, and legal counsel for the New York-based litigation funding company Law Funder, LLP – to commit wire fraud in connection with the business relationship between MFG and Law Funder. Last week, the U.S. Attorney’s Office charged Sheldon with conspiracy to commit wire fraud in relation to the scheme, and the Complaint against him remains pending.
Law Funder, which extends loans to plaintiffs in pending civil litigation, would get new clients either directly or through broker services, and would pay fees to the referring brokers. Donadio conspired with Sheldon to design and execute a secret kickback scheme. Donadio admitted that Sheldon agreed to refer clients who had contacted Law Funder directly to Donadio at MFG, and that after Donadio prepared those referrals he would send them back to Sheldon for consideration. In exchange for the referrals, Donadio agreed to pay Sheldon a kickback of half of the broker’s fee resulting from any referral that Law Funder approved. The scheme resulted in more than approximately $1 million in fraudulent payments to Sheldon.
Donadio and Sheldon concealed the kickback scheme from the co-conspirator’s former business partners, Law Funder, and others by, among other means, using code words, such as “Giants” or the letter “G,” in records which referred to related transactions. During the conspiracy, the pair met repeatedly to identify the coded transactions and calculate the amount payable to the co-conspirator pursuant to the kickback scheme, which was paid using wire transfers and other means.
Donadio admitted that he and his co-conspirator used proceeds from the scheme to purchase illegal drugs, engage in illicit gambling, and patronize prostitutes in New York, New Jersey, and elsewhere.
U.S. Attorney Fishman credited special agents of the FBI, under the direction of Special Agent in Charge Michael B. Ward, for the investigation leading to the arrest and charges. He also thanked postal inspectors of the Newark division of the U.S. Postal Inspection Service, under the direction of Acting Inspector in Charge Thomas E. Boyle.
The count to which Donadio pleaded guilty carries a maximum potential penalty of 20 years in prison and a $250,000 fine. Sentencing is currently scheduled for July 18, 2011.
As for Sheldon, the charges and allegations contained in the Complaint are merely accusations, and the defendant is considered innocent unless and until proven guilty.
The government is represented by Assistant U.S. Attorney André M. Espinosa of the U.S. Attorney’s Office Economic Crimes Unit in Newark.
This case was brought in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force. President Obama established the interagency Financial Fraud Enforcement Task Force to wage an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes. The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general, and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes.
Defense counsel: Anthony J. Fusco, Esq., Passaic, N.J.