A member and an associate of the Lucchese organized crime family and two Texas brothers were convicted of racketeering and other charges after a six-month trial, U.S. Attorney Paul J. Fishman for the District of New Jersey and Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division announced.
Nicodemo S. Scarfo, 49, of Galloway, N.J., a member of the Lucchese organized crime family of La Cosa Nostra (LCN) and Salvatore Pelullo, 47, of Philadelphia, an associate of the Lucchese and Philadelphia LCN families, were convicted of all the counts against them, including racketeering conspiracy and related offenses, including securities fraud, wire fraud, mail fraud, bank fraud, extortion, money laundering and obstruction of justice. Two other defendants, William and John Maxwell, were also convicted. Co-defendants David Adler, Gary McCarthy and Donald Manno were acquitted on all counts.
“Today, four people stand convicted for giving new meaning to ‘corporate takeover’ – looting a publicly traded company to benefit their criminal enterprise,” U.S. Attorney Fishman said. “The defendants stole more than $12 million from shareholders through rampant self-dealing, fraudulent SEC filings and intimidation. The public should not have to worry that the interests of shareholders are being subverted to benefit organized crime or for other corrupt ends.”
“Nicodemo Scarfo, Salvatore Pellulo and their cohorts used threats of physical and economic harm to take over a publicly traded financial firm, then callously and systematically looted the company out of millions of dollars to buy luxury items for themselves,” Assistant Attorney General Caldwell said. “As a result of today’s guilty verdict, this mafia member and his conspirators now face substantial prison sentences.”
The jury deliberated two weeks before delivering its verdicts following a six-month trial before U.S. District Judge Robert B. Kugler in Camden federal court. The defendants were charged in an indictment returned in 2011 by a federal grand jury in Camden. It named Nicodemo D. Scarfo (Scarfo Sr.) – Nicodemo S. Scarfo’s father and the imprisoned former boss of the Philadelphia LCN family – and Vittorio Amuso, the imprisoned boss of the Lucchese family, as conspirators.
Five other defendants – Cory Leshner, Howard Drossner, John Parisi, Todd Stark, and Scarfo’s wife, Lisa Murray-Scarfo – have previously pleaded guilty to various charges related to their roles in the criminal scheme.
According to documents filed in this case and the evidence at trial:
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.
In April 2007, Scarfo, Pelullo and others devised a scheme to take over FirstPlus Financial Group Inc. (FPFG), a publicly held company in Texas. Scarfo and Pelullo used threats of economic harm to intimidate and remove the prior management and board of directors of replaced those officers with individuals beholden to Scarfo and Pelullo, including William Maxwell, an attorney from Houston, Texas, and his brother, John Maxwell, of Irving, Texas, who acted as the company’s CEO.
Once the takeover was completed, the figurehead board named William Maxwell as “special counsel” to FPFG, a position that he used to funnel $12 million 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 to conceal the source of the money fraudulently conveyed to Scarfo and Pelullo.
In a telephone call intercepted by law enforcement, Pelullo called Scarfo to tell him about the sudden death of a former FPFG executive. This former executive had provided information to Pelullo and Maxwell that they used to extort control of FPFG. At the time of his death, he was a member of FPFG’s “compliance team.” Scarfo and Pelullo expressed relief regarding his death. After laughing about how he was “crushed” that “the rat is dead,” Pelullo acknowledged that the executive was “the only connection, the only tie to anything.” Scarfo replied: “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.”
Scarfo and Pelullo used their illicit gains to fund extravagant purchases, including an $850,000 yacht for both defendants, a luxury home for Scarfo, a Bentley automobile for Pelullo, and thousands of dollars in jewelry for Scarfo’s wife. As a direct result of the enterprise’s criminal activity, FPFG and its shareholders suffered a loss of at least $12 million.
The conspiracy to commit bank fraud count carries a maximum potential penalty of 30 years in prison and a $1 million fine; the RICO conspiracy, wire fraud conspiracy, wire fraud, conspiracy to obstruct justice counts each carry a maximum potential penalty of 20 years in prison and a $250,000 fine; the conspiracy to commit money laundering and felon in possession of a weapon counts each carry a maximum potential penalty of 10 years in prison and a $250,000 fine; the securities fraud conspiracy, conspiracy to make false statements in a loan application and conspiracy to transfer firearms to a prohibited person counts each carry a maximum potential penalty of five years in prison and a $250,000 fine.
Sentencing for Scarfo is scheduled for Oct. 22, 2014; for Pelullo, Oct. 21, 2014; and for both Maxwell brothers, Oct. 23, 2014.
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