Tuesday, June 3, 2014

Closing Arguments Due In FirstPlus Fraud Trial

By George Anastasia
For Bigtrial.net

Closing arguments are expected to begin tomorrow morning in the multi-million dollar fraud trial of mobster Nicodemo S. Scarfo, his business partner Salvatore Pelullo and five co-defendants.

Assistant U.S. Attorney Steven D'Aguanno is scheduled to address the jury after Judge Robert Kugler completes a lengthy explanation of the laws that apply in the case. Kugler began his jury charge today and spoke for about three hours. He will likely spend another hour before turning the case over to the prosecution for its final arguments.

The complicated case revolves around allegations that Scarfo, 48, and Pelullo, 46, secretly took control of FirstPlus Financial, a troubled Texas mortgage company, in 2007 and then systematically siphoned nearly $12 million from the firm throughout phony business deals and bogus consulting contracts.

The sixteen member jury panel (four are alternates) has heard nearly five months of testimony and has seen thousands of pieces of evidence that the prosecution says lays out the fraud in exacting detail. But the defense, in an argument that is expected to be repeated again and again during closings, has said that the government has overstated and sensationalized the evidence and that the failure of FirstPlus was a result of a poor economy, not fraud and criminality.

Scarfo's mob connections, he is the son of jailed Philadelphia mob boss Nicodemo D. "Little Nicky" Scarfo, added yet another twist to the story. The defense claims the spectre of organized crime was thrown into the case -- among the witnesses was a former FBI organized crime specialist -- in order to hype an otherwise drab business story built around tedious financial statements and laborious SEC filings.

But the prosecution has alleged -- and has used wiretapped conversations to support its contention -- that Pelullo and Scarfo used threats and intimidation to wrest control of FirstPlus in the summer of 2007. Pelullo, who was a behind-the-scenes consultant to FirstPlus, orchestrated the takeover, according to the government, and resorted to verbal threats to advance the scheme which included seating a new board of directors in October 2007 that answered directly to Pelullo and Scarfo.

Pelullo has been described as a mob associate and a mob wannabe. He has two prior fraud convictions.

Scarfo, who has convictions for racketeering and gambling, was identified as a made member of the Luchese crime family and a one-time capo, or captain, in that organization. Testimony has also included details about an attempted mob hit on Halloween night in 1989 in which Scarfo was shot and nearly killed.

His lawyer, Michael Riley, has told the jury that his client has been targeted not for anything he has done, but for who he is. His name and his father's infamous reputation nearly got him killed, Riley said while implying that those same factors were key elements in the government's decision to charge him in the current case.

Also on trial are former FirstPlus CEO John Maxwell, Maxwell's brother William, a lawyer who worked for FirstPlus, and attorneys David Adler, Gary McCarthy and Donald Manno. Manno, who was Scarfo's criminal defense attorney for years, has represented himself during the trial.

The case, which began in January, has included testimony for several former company insiders, including Cory Leshner whose stint on the witness stand provided some of the most damaging testimony. Leshner is one of six co-defendants indicted along with Scarfo and the others who pleaded guilty. He is the only one to testify for the government. Scarfo's wife, Lisa Murray-Scarfo and his cousin, John Parisi, also entered guilty pleas. Leshner, Parisi and Murray-Scarfo have not been sentenced.

The evidence introduced during the trial broke the defense into three sections.

Scarfo, Pelullo and the Maxwell brothers were portrayed as the most actively involved in the systematic looting of the company. Much of the cash funneled as consulting fees to companies controlled by Scarfo and Pelullo went through William Maxwell, who was on a $100,000 monthly retainer (plus expenses) to First Plus.

Two of the other lawyers, Adler and McCarthy, were tied to what the government alleges were failures to properly account for business dealings with the SEC or other government regulators. Manno was tied to fraud allegations centered primarily on an escrow account that the government alleges was set up to allow Scarfo and his wife to purchase a $715,000 home outside of Atlantic City.

The home was one of several lavish purchases allegedly financed with cash taken from FirstPlus. The government also alleged that Scarfo and Pelullo purchased an $850,000 yacht (named Priceless), a company jet and luxury automobiles. Pelullo spent $217,000 on a black, 2006 Bentley Continental GT, according to testimony. Scarfo leased an Audi S6 for $1,200-a-month on the company's dime, authorities allege.

The FirstPlus investigation became public in May 2008 when the FBI staged a series of coordinated raids in Philadelphia, South Jersey, Miami -- where Pelullo had a condo and where the yacht was docked -- and Irving, TX, where FirstPlus was based.

More than three years later, in November 2011, a federal grand jury in Camden handed up a 107-page, 24-count indictment outlining the charges in the case. Scarfo's 84-year-old father and another jailed mob leader, Vittorio "Vic" Amuso, 80, were named unindicted co-conspirators. Amuso was the boss of the Luchese crime family. He is serving a life sentence. The elder Scarfo is serving a 55-year term for murder and racketeering. His earliest release date, according to prison records, is 2033 when he will be 103 years old.

Kugler has dismissed a handful of counts during the course of the trial, but none of the major charges. The closing arguments are expected to last several days (the jury does not sit on Fridays). D'Aguanno's closing could run into Thursday. Scarfo's attorney is expected to offer the first defense closing, followed by lawyers for Pelullo, the Maxwell brothers, Adler, McCarthy and then Manno.

Under the rules of federal criminal trials, the prosecution will then get the last word, offering a rebuttal closing. Jury deliberations are expected to begin late next week at the earliest. Scarfo and Pelullo face the stiffest potential sentences, up to 30 years in prison.

George Anastasia can be contacted at George@bigtrial.net.