Dean Vagnozzi’s lawyer John Pauciulo settles with SEC for $125,000 in Par Funding case

The lawyer who provided the legal green-light to years of commercials hawking unregistered Par Funding investments has agreed to pay $125,000 to settle Securities and Exchange Commission accusations that he knowingly or recklessly provided wrong information to investors who put millions into the firm, the SEC said Thursday.

John W. Pauciulo, of Malvern in Chester County, was also barred from arguing before the SEC for at least five years. He “made material misstatements and omissions” in documents and videos for investors, notably failing to disclose that one of Par Funding’s founders, Joseph LaForte, had been imprisoned twice for financial crimes.

Pauciulo sat next to King of Prussia financial pitchman Dean Vagnozzi as the pair talked up LaForte’s Par Funding, a lender founded in Philadelphia. Last year, LaForte and other Par executives agreed to drop their opposition to an SEC lawsuit labeling their business a fraud. The SEC is seeking $360 million from four Par principals. Vagnozzi has agreed to pay $5 million to resolve SEC complaints against him.

The SEC says more than $500 million of Par’s “unregistered, fraudulent” securities were sold to investors from 2012 until 2020, when the agency won an injunction from a federal judge, shutting down Par, and filed civil fraud charges against its owners and a group of salespeople.

“Among other things, Pauciulo said that the investments did not need to be registered with the SEC, and that they complied with the securities law and gave full disclosure” to investors, the SEC added. “However, Pauciulo knew or was reckless in not knowing” that the funds should have been registered, because they were pitched to the general public.

Pauciulo did not respond to calls seeking comment. The SEC said the lawyer settled “without admitting or denying” the agency’s findings.

Pauciulo, 56, was a partner for 12 years at Eckert Seamans Cherin & Mellott in Philadelphia, where he chaired the firm’s Financial Transactions group. The firm said later Thursday: “It is unfortunate that John Pauciulo, who is no longer affiliated with the firm, was involved in a matter that resulted in his settling an SEC enforcement action against him.”

Eckert also noted in its statement that the firm itself was not charged by the SEC.

Before joining Eckert, Pauciulo was a partner at another Philadelphia corporate law firm, White & Williams LLP. A graduate of Temple Law School and Villanova University, he worked from 1990 until 1992 as an SEC lawyer. Pauciulo left Eckert in May and set up his own practice.

In its 2020 lawsuit, the SEC filed civil fraud charges against LaForte; his wife, Lisa McElhone; and others, including Vagnozzi.

LaForte and his partners are still fighting in court about how much they will have to pay. The SEC says it has seized cash and property — including a corporate jet, art, and dozens of homes, mostly in Philadelphia — purchased by Par’s executives but says they are worth less than what is needed to make investors whole.

The SEC is also trying to collect up to $400 million in debt from the small merchants who were Par borrowers but notes that many are bankrupt or out of business and unlikely to pay.

Pauciulo’s client, Vagnozzi, raised more than $100 million from investors through the sales of Par notes in a series of at least seven private funds, for which Pauciulo provided legal representation, according to the SEC. Pauciulo also advised the managers of at least 25 other investment funds, many run by agents Vagnozzi recruited.

To attract buyers, Vagnozzi advertised “alternatives” to the stock market on KYW-1060, the Philadelphia news radio station, and WPHT-1210, a conservative talk-radio station, and at seminars and free dinners, according to other SEC filings.

Par paid Vagnozzi and other salespeople 20% interest on the investments they brought in. The salespeople, in turn, paid investors about 10% interest and kept the difference, according to the SEC settlement in Pauciulo’s case.

The SEC cited occasions when Pauciulo told investors the funds were exempt from SEC registration — at a dinner, in phone calls with potential investors, on a radio show, and in videos that also featured Vagnozzi’s sales pitches.

But “Pauciulo knew or was reckless in not knowing” that these “general solicitation” pitches to the public required that the Par investments be registered with the SEC, according to the agency’s statement.

After Par stopped paying investors in April 2020, Pauciulo joined Vagnozzi in video calls to Par investors in which he “failed to disclose” problems affecting Par assets and regulatory actions against Par and Vagnozzi.

Vagnozzi’s agreement earlier this year to pay the $5 million was the third time since 2019 that he has agreed to pay large sums to resolve complaints from regulators. In two previous cases, he paid a total of more than $1 million to settle cases brought by Pennsylvania and federal officials.

Vagnozzi, who has no broker’s license to sell securities, made a specialty of selling financial products not available on the stock market. Vagnozzi has since said he blames these government inquiries on Pauciulo’s advice.

Vagnozzi once spent heavily on advertising in the Philadelphia market, up to $20,000 a week. His spots on KYW and WPHT would pop up many times a day, seven days a week, voiced by Vagnozzi himself. He also advertised on CNN, Fox News, CBS, and CNBC television.

Though they worked together closely for years — and were jointly sued by investors demanding their money back — in 2021, Vagnozzi sued Pauciulo and Eckert Seamans, accusing his lawyer of giving him bad advice that cost him, his staff and his clients when Vagnozzi followed counsel’s assurances.

In court papers filed in response to Vagnozzi’s lawsuit, Pauciulo denied misleading Vagnozzi, and said the investment salesman had made his own business decisions.

On Thursday, Vagnozzi’s lawyer in the Pauciulo suit, George Bochetto, said the SEC settlement supported Vagnozzi’s arguments against his former lawyer.

Besides paying $125,000 to the court-ordered receivership collecting funds for Par investors, Pauciulo faces the five-year bar against appearing before the SEC in legal cases. After that, he could reapply if he can show he has avoided disbarment, criminal convictions, or additional violations of the securities laws the SEC says he broke.