Par Funding founder says he expects to face criminal charges — and soon

A founder of Par Funding — the Philadelphia lender facing civil charges of defrauding 1,200 investors — filed a court document Friday saying that he will likely be charged with federal crimes that could include securities fraud, wire fraud, tax offenses, money laundering, extortion, and obstruction.

Joseph LaForte, 51, made the unusual disclosure while asking a Philadelphia Common Pleas Court judge to freeze for six months any action on a new civil suit brought against him and his brother by the court-appointed receiver in the Par Funding scandal.

That civil suit contends the brothers were paid $9 million in cash “kickbacks or commissions” from a borrower whom Par Funding had lent $93 million. LaForte denied the charges.

LaForte’s lawyers detailed the criminal investigation to argue that it would be unfair for him to fight both a criminal case and civil lawsuit at the same time.

His lawyers said that would give him two untenable choices — to reveal information in the civil case useful to federal prosecutors or take the Fifth Amendment and thereby weaken his defense in the civil suit.

In a sweeping lawsuit brought in 2020, the U.S. Securities and Exchange Commission said that Par Funding had defrauded its investors who put up $540 million so the firm could make high-interest loans to smaller merchants. The SEC said Par Funding didn’t tell its investors or even its own lawyer that LaForte had served time for a pair of financial crimes, including a $14 million mortgage ripoff.

The SEC said that Par also hid its risky lending policies and the resulting high loan-default rate of the firms to which it lent money. The regulator said LaForte, his wife, Lisa McElhone, and other owners and a roster of financial pitchmen siphoned off tens of millions of dollars before the SEC stepped in.

While federal prosecutors said publicly last year they were investigating LaForte for financial crimes, Friday’s disclosure broke new ground by asserting that charges were “imminently likely.” LaForte listed federal prosecutors, the FBI, and the IRS as investigating him.

The U.S. Attorney’s Office declined comment later Friday on LaForte’s filing.

Without admitting wrongdoing, those who profited from Par Funding have dropped their opposition to the SEC action and agreed to disgorge money. U.S District Judge Rodolfo A. Ruiz II, who sits in Fort Lauderdale, must now decide how much to order them to repay investors.

Though Par Funding operated mainly out of Philadelphia and had its main office in Old City, the SEC filed its case in Florida, where Par Funding had moved its headquarters in 2017. Ruiz named a Miami lawyer, Ryan Stumphauzer, as the receiver in the case. He, in turn, is being assisted by Philadelphia attorney Gaetan Alfano.

In his filing, LaForte predicted that the coming federal charges would be added onto a firearms case he is already facing. The FBI arrested LaForte in 2020 after they raided his $2.4 million home in Haverford and seized four handguns, two shotguns, and a rifle. His trial on charges of illegal possession of firearms by a felon is scheduled for October.

LaForte and McElhone founded Par Funding in Philadelphia in 2011 shortly after he got out of prison. He served time for the mortgage fraud and a conviction for running an illegal offshore gambling operation.

In an affidavit attached to the filing, prominent defense lawyer Brian McMonagle, part of LaForte’s defense team, says that he met with three federal prosecutors in March and they told him that a federal grand jury was hearing evidence about LaForte.

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