Lucchese organized crime family member and associate among 13 arrested, charged for racketeering and other offenses, including illegal takeover of publicly traded company
FOR IMMEDIATE RELEASE |
November1, 2011 |
Attorneys and Accountant Also Charged as Members of Racketeering Enterprise
CAMDEN, N.J. – 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 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 of Justice’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 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 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 – with 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 names Nicodemo D. Scarfo (“Scarfo Sr.”), the imprisoned former boss of the Philadelphia family of La Cosa Nostra, 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. 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. 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 this morning 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 this morning 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 New Jersey area will appear this afternoon before U.S. Magistrate Judge Anne Marie Donio in Camden 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. 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 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.”
“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 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.”
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 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, 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.
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. In participating in the affairs of what is described in the Indictment as the Scarfo-Pelullo Enterprise, Scarfo and other members of the Enterprise engaged in a systematic scheme to deceive and obstruct the probation department and the District Court responsible for overseeing Scarfo’s supervised release.
In April 2007, Scarfo, Pelullo, Texas attorney William Maxwell and others devised a scheme to take over FPFG, a financial services company in Texas. 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 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 designed to mask the true identity and nature of the control exerted over 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 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. Led by Scarfo and Pelullo, the Enterprise 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, as Scarfo’s attorney, abused his position to further insulate Scarfo and the Enterprise by deceiving Scarfo’s probation officer and the District Court. 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. 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 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? Kenneth Lay, he bailed out and took a heart attack.”
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.
U.S. Attorney Fishman praised special agents of the FBI, under the direction of Special Agent in Charge Ward in Newark, for leading the investigation; as well as special agents of the Department of Labor, Office of Inspector General, Office of Labor Racketeering and Fraud Investigations, under the direction of Special Agent in Charge Robert Panella, New York Region; and the ATF, under the direction of Matthew W. Horace in Newark. He also thanked the FBI under the direction of Special Agent in Charge George C. Venizelos in Philadelphia for its vital assistance, and the SEC for its role.
The government is represented by Assistant U.S. Attorney Steven D’Aguanno of the New Jersey U.S. Attorney’s Office Organized Crime/Gangs Unit in Camden and Trial Attorney Lisa C. Page of Organized Crime and Gang Section in the Department of Justice’s Criminal Division in Washington.
The defendants and charges in the Indictment are outlined in the attached chart, along with the maximum potential prison sentence per count if convicted. Each count also carries a maximum $250,000 fine, with the exception of Count 20 (money laundering conspiracy) which carries a maximum $500,000 fine and Count 21 (bank fraud conspiracy) which carries a maximum $1 million fine.
11-433
U.S. v. Scarfo et al. Indictment
Defendant |
Count/Charges |
Maximum Potential Penalty |
Nicodemo S. Scarfo, 46, of Galloway, N.J. |
Count 1: RICO conspiracy |
20 years in prison |
Count 2: Securities fraud conspiracy |
Five years in prison |
|
Count 3: Wire fraud conspiracy |
20 years in prison |
|
Counts 4 through 16: Wire fraud |
20 years in prison |
|
Counts 17 through 19: Wire fraud |
20 years in prison |
|
Count 20: Money laundering conspiracy |
20 years in prison |
|
Count 21: Bank fraud conspiracy |
30 years in prison |
|
Count 22: False statement in loan application conspiracy |
Five years in prison |
|
Count 23: Obstruction of justice conspiracy |
20 years in prison |
|
Count 24: Firearms conspiracy |
Five years in prison |
|
Count 25: Felon in possession of firearms |
10 years in prison |
|
Salvatore Pelullo, 44, of Philadelphia, Pa. |
Count 1: RICO conspiracy |
20 years in prison |
Count 2: Securities fraud conspiracy |
Five years in prison |
|
Count 3: Wire fraud conspiracy |
20 years in prison |
|
Counts 4 through 16: Wire fraud |
20 years in prison |
|
Counts 17 through 19: Wire fraud |
20 years in prison |
|
Count 20: Money laundering conspiracy |
20 years in prison |
|
Count 21: Bank fraud conspiracy |
30 years in prison |
|
Count 22: False statement in loan application conspiracy |
Five years in prison |
|
Count 23: Obstruction of justice conspiracy |
20 years in prison |
|
Count 24: Firearms conspiracy |
Five years in prison |
|
William Maxwell, 52, of Houston, Texas
|
Count 1: RICO conspiracy |
20 years in prison |
Count 2: Securities fraud conspiracy |
Five years in prison |
|
Count 3: Wire Fraud Conspiracy |
20 years in prison |
|
Counts 4 through 16: Wire fraud |
20 years in prison |
|
Counts 17 through 19: Wire fraud |
20 years in prison |
|
Count 20: Money laundering conspiracy |
20 years in prison |
|
Count 21: Bank fraud conspiracy |
30 years in prison |
|
Count 22: False statement in loan application conspiracy |
Five years in prison |
|
Count 23: Obstruction of justice conspiracy |
20 years in prison |
|
Count 24: Firearms conspiracy |
Five years in prison |
|
John Maxwell, 59, of Irving, Texas |
Count 1: RICO conspiracy |
20 years in prison |
Count 2: Securities fraud conspiracy |
Five years in prison |
|
Count 3: Wire fraud conspiracy |
20 years in prison |
|
Counts 4 through 16: Wire fraud |
20 years in prison |
|
Counts 17 through 19: Wire fraud |
20 years in prison |
|
Count 20: Money laundering conspiracy |
20 years in prison |
|
Count 21: Bank fraud conspiracy |
30 years in prison |
|
Count 22: False statement in loan application conspiracy |
Five years in prison |
|
Count 24: Firearms conspiracy |
Five years in prison |
|
William Handley, 61, of Miami, Fla. |
Count 1: RICO conspiracy |
20 years in prison |
Count 2: Securities fraud conspiracy |
Five years in prison |
|
Count 3: Wire fraud conspiracy |
20 years in prison |
|
Counts 4 through 16: Wire fraud |
20 years in prison |
|
Counts 17 through 19: Wire fraud |
20 years in prison |
|
Count 20: Money laundering conspiracy |
20 years in prison |
|
Count 21: Bank fraud conspiracy |
30 years in prison |
|
Count 22: False statement in loan application conspiracy |
Five years in prison |
|
Cory Leshner, 28, of West Reading, Pa. |
Count 1: RICO conspiracy |
20 years in prison |
Count 2: Securities fraud conspiracy |
Five years in prison |
|
Count 3: Wire fraud conspiracy |
20 years in prison |
|
Counts 4 through 16: Wire fraud |
20 years in prison |
|
Counts 17 through 19: Wire fraud |
20 years in prison |
|
Count 20: Money laundering conspiracy |
20 years in prison |
|
Count 21: Bank fraud conspiracy |
30 years in prison |
|
Count 22: False statement in loan application conspiracy |
Five years in prison |
|
Count 24: Firearms conspiracy |
Five years in prison |
|
John Parisi, 50, of Atlantic City, N.J. |
Count 1: RICO conspiracy |
20 years in prison |
Count 2: Securities fraud conspiracy |
Five years in prison |
|
Count 3: Wire fraud conspiracy |
20 years in prison |
|
Counts 4 through 16: Wire fraud |
20 years in prison |
|
Counts 17 through 19: Wire fraud |
20 years in prison |
|
Count 20: Money laundering conspiracy |
20 years in prison |
|
Count 21: Bank fraud conspiracy |
30 years in prison |
|
Count 22: False statement in loan application conspiracy |
Five years in prison |
|
Count 23: Obstruction of justice conspiracy |
20 years in prison |
|
Count 24: Firearms conspiracy |
Five years in prison |
|
David Adler, 64, of Chappaqua, N.Y. |
Count 1: RICO conspiracy |
20 years in prison |
Count 2: Securities fraud conspiracy |
Five years in prison |
|
Count 3: Wire fraud conspiracy |
20 years in prison |
|
Counts 4 through 16: Wire fraud |
20 years in prison |
|
Counts 17 through 19: Wire fraud |
20 years in prison |
|
Howard Drossner, 50, of Ambler, Pa. |
Count 1: RICO conspiracy |
20 years in prison |
Count 2: Securities fraud conspiracy |
Five years in prison |
|
Count 3: Wire fraud conspiracy |
20 years in prison |
|
Counts 4 through 16: Wire fraud |
20 years in prison |
|
Counts 17 through 19: Wire fraud |
20 years in prison |
|
Count 20: Money laundering conspiracy |
20 years in prison |
|
Count 21: Bank fraud conspiracy |
30 years in prison |
|
Count 22: False statement in loan application conspiracy |
Five years in prison |
|
Gary McCarthy, 53, of Berwyn, Pa. |
Count 1: RICO Conspiracy |
20 years in prison |
Count 2: Securities fraud conspiracy |
Five years in prison |
|
Count 3: Wire fraud conspiracy |
20 years in prison |
|
Counts 4 through 16: Wire fraud |
20 years in prison |
|
Counts 17 through 19: Wire fraud |
20 years in prison |
|
Count 20: Money laundering conspiracy |
20 years in prison |
|
Donald Manno, 65, of Medford, N.J. |
Count 1: RICO conspiracy |
20 years in prison |
Count 20: Money laundering conspiracy |
20 years in prison |
|
Count 21: Bank fraud conspiracy |
30 years in prison |
|
Count 22: False statement in loan application conspiracy |
Five years in prison |
|
Count 23: Obstruction of Justice Conspiracy |
20 years in prison |
|
Lisa Murray-Scarfo, 32, Galloway, N.J. |
Count 21: Bank fraud conspiracy |
30 years in prison |
Count 22: False statement in loan application conspiracy |
Five years in prison |
|
Todd Stark, 43, of Ocean City, N.J. |
Count 24: Firearms conspiracy |
Five years in prison |
