Financial pitchman Dean Vagnozzi has settled SEC fraud complaint for $5 million

Montgomery County financial pitchman Dean Vagnozzi, once well-known through his ubiquitous radio ads and free dinner seminars, has agreed to pay $5 million to resolve a complaint from the U.S. Securities and Exchange Commission that he helped defraud investors in the Par Funding lending firm.

To help pay back the investors, Vagnozzi agreed to “disgorge” $4.5 million, and pay $161,000 more in interest and a $400,000 civil penalty. In large part, his payment will come from money already seized by a court-appointed federal receiver.

The filing Thursday of courts papers with Vagnozzi’s payment agreement was the first disclosure of the money to be paid out by the owners of Par Funding and other financial salespeople who hawked investments along with Vagnozzi. The defendants dropped their opposition to the SEC case in November.

In the sweeping lawsuit brought in 2020, the SEC said Par Funding, Vagnozzi, and other defendants hid from 1,200 investors that one of the lending firm’s founders, Joseph W. LaForte, had served prison time for past financial crimes.

The SEC also said Par Funding, Vagnozzi, and the others raised nearly $500 million by misleading investors about Par Funding’s reckless pattern in granting high-interest loans to small businesses, the resulting high loan defaults, lack of business insurance, and history of regulatory troubles.

His lawyer, George Bochetto, noted that under the settlement with the SEC, Vagnozzi neither admitted nor denied the allegations brought by the agency.

For Vagnozzi, 53, this 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 once spent heavily on advertising in the Philadelphia market, up to $20,000 a week. His spots on KYW-1060 and WPHT-1210 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. At his dinner sessions, he would display big checks of payments to investors.

Vagnozzi’s firm is no longer registered to do business in Pennsylvania, though he still has a state insurance license, records showed.

Bochetto declined comment on whether Vagnozzi plans to resume selling investments or insurance. “He’s still got a lot of people who believe in him,” Bochetto said.

Vagnozzi is “an expert salesman,” agreed Joe Brock, a former Teamsters union official who sunk more than $200,000 into various funds recommended by Vagnozzi but turned into a severe critic. Brock started a Facebook page for disappointed investors and was among scores who watched periodic online court hearings in the case, brought in Florida, where Par Funding moved its office in 2017.

Par Funding provided high-interest loans, at rates as high as 50%, to small businesses and merchants. In turn, it promised generous paybacks to investors, at rates as high as 14% a year. It also aggressively pursued borrowers who fell behind, with critics saying its tactics at times crossed the line into making threats.

LaForte, 50, and his wife, Lisa McElhone, founded Par Funding in Philadelphia in 2011, shortly after his release from prison. He served two terms behind bars after pleading guilty to a $14 million mortgage scam and helping run an illegal offshore gambling operation.

Vagnozzi has said he knew of LaForte’s criminal record, but didn’t tell investors about it; he said his lawyer told him he didn’t have to.

He has since sued the lawyer, John Pauciulo, and his firm, Eckert Seamans. Pauciulo has denied wrongdoing and said Vagnozzi made his own business decisions.

Even after the payment, Vagnozzi will apparently remain a wealthy man. In a filing in the civil case, Vagnozzi said his business made an $8 million profit between 2018 and 2020.

His $4.5 million disgorgement represents a relatively small amount of the money at stake in the SEC’s case.

The bigger payments are expected to come from LaForte, his wife and a former Par official, Joseph Cole Barleta. The SEC faces a deadline of April 12 to declare how much it thinks they should pay.

McElhone, 42, who also operates a nail salon in Old City, said in a court filing in 2020 that her net worth was almost $800 million. LaForte and his wife bought a $5.8 million home in Jupiter, Fla., in 2019, in addition to a $2.4 million home they already owned in Lower Merion and a $2.6 million lodge in the Poconos.

LaForte is awaiting trial on federal firearms charges in Philadelphia after authorities found weapons in a search of his homes, something prohibited because he is a convicted felon. Prosecutors in that case and lawyers in the SEC suit have also said there is an ongoing FBI and IRS criminal investigation into Par Funding and that a criminal grand jury has been gathering evidence. No charges have been filed.

In all, Par Funding took in about $480 million from investors. It promised high returns, but stopped making payments to investors in April 2020, shortly before the SEC brought suit.

Of the money invested, according to documents in the case, Par Funding paid the investors back $230 million over the years.

According to a Jan. 31 accounting file in the case, the receiver has taken control of about $160 million in cash and property that can be used to make investors whole.

That still leaves the investors nearly $100 million short.

However, of the money it lent out, borrowers still owe at least $400 million. The receiver has been attempting to collect that debt, though much of it appears to be difficult, if not impossible, to recoup.

Still, Bochetto said that he and Vagnozzi “are optimistic there’s going to be very, very substantial recoveries” for investors.

Vagnozzi and his former lawyer, Pauciulo, both face other lawsuits by investors who blame them for losses. Those suits were stayed by a court order pending the outcome of the overall SEC civil cases against Vagnozzi.

Staff writer Craig R. McCoy contributed to this article.