Par Funding probe: Principals indicted in long-running Philly financial fraud
Prosecutors charged founder and CEO Joseph LaForte and wife Lisa McElhone with counts including conspiracy, wire fraud, securities fraud, tax evasion, obstruction of justice, and perjury.
Federal authorities on Tuesday accused a beleaguered Philadelphia cash advance company and its principals of committing what prosecutors described as an “astronomical fraud” that fleeced investors out of $550 million and threatened its business customers with Mafia-style threats of intimidation and violence.
In a 133-page court filing, prosecutors charged Old City-based Par Funding; its founder Joseph LaForte; his wife, Lisa McElhone; his brother, James LaForte; and the company’s chief financial officer, Joseph Cole Barleta, with counts of conspiracy, extortion, wire and securities fraud, tax evasion, obstruction of justice, witness tampering and perjury — charges that could send them to prison for decades and force them to forfeit more than $416 million in proceeds.
The case, which follows a 2020 lawsuit filed by the U.S. Securities and Exchange Commission and an FBI raid on the company’s offices later that year, constitutes one of the U.S. Justice Department’s most significant efforts to date to crack down on predatory practices within the multibillion-dollar merchant cash advance industry.
Critics have likened the industry — which offers quick loans at high interest rates to businesses suffering cash crunches and deemed too risky to borrow from traditional banks — to payday lenders, who offer similar services to individuals and whose tactics have drawn scrutiny from regulators for years.
Court filings unsealed Tuesday paint Par Funding and LaForte — a two-time felon who founded the company after his release from federal prison in 2011 — as one of the most egregious actors in the business.
The company and its principals raised more than a half-billion dollars from investors between 2016 and 2021 by making what prosecutors described as “materially false and fraudulent statements” about the business’ leadership and financial health.
All the while, the indictment alleges, Par Funding lent out that money to borrowers who were bombarded with aggressive collection efforts including public shaming campaigns, death threats, and visits from muscled goons when they failed to pay up.
One borrower said a collector for the company had threatened to stick a fork in his head if he didn’t pay off his debts. Another told authorities she’d been threatened with having her hands cut off.
Those tactics proved exceedingly lucrative, according to the indictment. Between 2016 and 2020, it said, the business paid LaForte and McElhone more than $95 million, much of which they are accused of funneling through separate businesses and failing to fully report on their personal income taxes.
“The charges in this case involve an astronomical fraud loss,” Assistant U.S. Attorney Alexandra M. Lastowski said at a court hearing Tuesday.
LaForte, 52, of Haverford, was not available for comment. His lawyer, Brian J. McMonagle, declined to discuss the allegations after the hearing, at which his client was ordered detained pending a detention hearing scheduled for next week.
Previously, LaForte has pushed back against the fraud allegations and dismissed the claims of extortion of his business’ clients as “absurd and patently false stories” from “disgruntled ex-customers” hoping to escape paying the money they owed.
It was not clear Tuesday whether McElhone, 44 — who is listed on company records as Par Funding’s CEO, despite prosecutors’ assertion that she fulfilled that role in name only — had retained an attorney.
Cole Barleta — who prosecutors said was named Par Funding’s CFO in 2012 despite not having a college degree and minimal work experience aside from a gig moonlighting as a competitive food eater — told a federal judge Tuesday he was still searching for an attorney to represent him in the case.
Broadly, the allegations contained in Tuesday’s indictment mirror accusations first lodged in the SEC’s civil fraud lawsuit — a case which prompted a federal judge in Florida to order LaForte and McElhone to pay more than $200 million. They have appealed that judgment.
All three — as well as Perry Abbonizio, another Par Funding principal who pleaded guilty to conspiracy charges earlier this year — are accused of promising investors double-digit returns while keeping them in the dark about the company’s finances and who was running the business day to day.
» READ MORE: How Philly investors were drawn into what SEC alleges is $500 million fraud
While McElhone was the company’s CEO on paper, investigators say she rarely set foot in the office and instead served as a proxy for LaForte. He was legally barred from selling securities because of his felony convictions in 2006 for a $14 million real estate Ponzi scheme and in 2009 for operating an illegal offshore gambling operation.
None of that was disclosed to investors, prosecutors said Tuesday. But that wasn’t the only negative information the company allegedly hid.
At swanky solicitation events hosted in King of Prussia and Wildwood, Fla., LaForte often boasted of the low default rate on Par Funding’s loans and the company’s profitability.
“Just to brag about the company, we’re probably the most profitable cash advance company in the United States — or maybe the world,” he told potential investors at one 2019 meeting, according to the indictment.
In reality, prosecutors said, between 2016 and 2020 the business was operating at yearly deficits as high as $70 million — often hidden by false representations in their books and driven by the company’s failure to properly underwrite loans they were issuing to borrowers.
According to the indictment, the need to collect on loans the business was issuing prompted Par Funding’s aggressive collections efforts led by LaForte, his brother James, and another employee — Renato “Gino” Gioe, a reputed associate of New York’s Gambino crime family who served as an “enforcer” for the company.
Gioe pleaded guilty to charges last year. In Tuesday’s filings, prosecutors described him traveling across the country — often at Joseph LaForte’s instruction — to harass and intimidate borrowers whose payments had fallen in arrears.
Threatening one borrower in Los Angeles in 2018, Gioe said failure to pay up could affect the business owners’ “wives, households and children,” according to an exchange quoted in the indictment.
He has admitted later telling the same business owner about a suspicious car accident involving another person who failed to cover their debts.
Joseph LaForte allegedly threatened other delinquent borrowers that he’d blow up their homes or kidnap their children if they didn’t start paying up.
“I’m going to put a bomb in your car and when you turn it on, it’s gonna blow and you’re going to go with it,” prosecutors said he told a Long Island electrician in 2019.
James LaForte, who prosecutors said once identified himself as a “soldier for the family,” allegedly threatened to kill a Miami business owner and his family if he didn’t pay.
And when the federal dragnet began to descend upon Par Funding and its owners, James LaForte allegedly attacked an attorney representing a court-appointed receiver in the SEC case on a Center City street.
He pleaded not guilty to that crime in March. Tuesday’s indictment expands on those charges, also accusing his brother of being involved in that Feb. 28 attack as well as threats made to witnesses, including Abbonizio, in the days that followed.
Joseph LaForte, meanwhile, remains under indictment in a separate case stemming from several firearms investigators found in his possession during a 2020 raid on his home despite his felony record prohibiting him from owning them.
Read the indictment: