Tuesday, June 17, 2014

FirstPlus Trial Heading To The Jury

By George Anastasia
For Bigtrial.net

After nearly six months of testimony and more than a week of detailed and grueling closing arguments, jury deliberations are set to begin in the FirstPlus Financial racketeering fraud trial of mobster Nicodemo S. Scarfo and six co-defendants.

Donald Manno, Scarfo's former criminal defense attorney and a co-defendant in the case, completed his closing arguments this morning. Manno, who is representing himself, was the final defense attorney to address the anonymously chosen jury panel.

A rebuttal closing argument this afternoon from the prosecution completed the argument phase of the trial, setting the stage for the start of deliberations tomorrow.

Manno was detailed and highly effective yesterday afternoon when he spoke to the jury for about an hour. The one-time federal prosecutor, who referred to himself in the third person, told the jury to consider the facts and not the "diversions, distortions and false circumstantial evidence" around which the prosecution has built its case.

"Don Manno was not involved in any conspiracy," he told the jury.

But he made it clear that he couldn't say the same thing for some of his co-defendants. In particular, he singled out Salvatore Pelullo and Scarfo, both of whom, he said, rejected his advice and lied to him. Manno argued that he was kept in the dark about many of the financial dealings involving FirstPlus, a troubled Texas-based mortgage company that authorities allege Pelullo and Scarfo secretly took control of in 2007.

Pelullo, described as the "key figure" in the fraud by Assistant U.S. Attorney Stephen D'Aguanno, used bogus consulting contracts and phony business transactions to siphon $12 million out of the company, the government alleges. Much of the money was used to finance a luxurious lifestyle that included the purchase of a $850,000 yacht, a $207,000 Bentley and a home near Atlantic City for $715,000 for Scarfo and his new wife, Lisa.

Manno, who is named in only five of the 25 counts in the case, was charged with fraud in connection with a mortgage for that house purchase. He opened his arguments yesterday by playing a tape in which he and Pelullo argued over what information Scarfo and Pelullo were providing on the mortgage application.

The tape was one of hundreds secretly recorded on FBI phone wiretaps during the FirstPlus investigation. The conversation, on March 5, 2008, took place as Lisa Murray Scarfo was preparing to go to a closing on the home purchase. The mortgage had been arranged through Pelullo and Peter Fox, a FirstPlus associate who died during the investigation.

Lisa and Nicky Scarfo were married on Feb. 14, 2008, three weeks before the deal closed. In papers filed with the mortgage company, she was listed as a single woman. Authorities alleged that Scarfo and Pelullo were deliberately keeping Scarfo's name off the mortgage papers. They also charge that W-2 forms and income tax filings that inflated Lisa Murray's income were used to get the mortgage approved.

Lisa Murray Scarfo has pleaded guilty to bank fraud and is awaiting sentencing.

In the conversation, Manno told Pelullo there was no reason to lie.

"You guys are fuckin' nuts," he said. "You're nuts."

"What are you doing here?" he asked at another point. "You're in a fuckin' fishbowl...The FBI is going to be all over this transaction...There's no reason to hide anything."

By lying about Lisa Murray's marital status, "you raise the spectre of fraud," Manno told Pelullo.

Manno told the jury he was unaware at that time that the financial documents filed with the mortgage application were fraudulent. Had he been part of that conspiracy, he told the jury, he wouldn't be raising a red flag about Murray's marital status. Manno didn't know about the fraud, he told the jury,  because Scarfo and Pelullo "lied to him."

Manno urged the jury to listen to the tape, to listen to the voice inflections. Borrowing a line from other closing arguments from both the prosecution and the defense, he said the taped conversations were a "window" into the minds of those who were talking and who were unaware they were being recorded.

He told the jury that Manno "was trying to protect people from committing crimes. And what do they do? They lie to him."

Manno's closing, which continued this morning, capped more than a week of arguments from defense attorneys in the case, including a marathon closing from Michael Farrell, Pelullo's court appointed attorney. Farrell spent nearly three days addressing the jury, showing them nearly 1,000 slides and offering a decidedly different spin on the events that the government alleges were an orchestrated fraud.

The overriding defense arguments in the case are that the FirstPlus financial collapse was brought on by government intervention and a faulty economy, not fraud, and that the spectre of organized crime was introduced by the prosecution in order to hype an otherwise mundane and technical financial case.

All seven defendants in the case are charged with racketeering conspiracy. The indictment also includes allegations of bank fraud, wire fraud and obstruction of justice. There are also two weapons offenses. The other defendants include former FirstPlus CEO John Maxwell, Maxwell's brother William, a lawyer who worked for FirstPlus, and lawyers David Adler and Gary McCarthy who were hired to handle SEC filings and others financial matters for the company.

Like Manno, several defendants, through their lawyers, sought to distance themselves from Pelullo, 46, a flamboyant Elkins Park businessman with two prior fraud convictions. .

Mark Catanzaro, the court-appointed attorney for John Maxwell, argued in his closing that his client was not guilty of any of the charges. He said Maxwell had depended on the advice of lawyers and others with SEC expertise when he signed off on documents that the government says were part of the fraud.

Maxwell was charged, Catanzaro argued, because he wouldn't go along with the government's theory of the case and agree to cooperate. "John Maxwell was taken along for the ride" because he wouldn't help the prosecution make its case against "those they really wanted, Nick Scarfo, Sal Pelullo and organized crime."

Catanzaro said Pelullo was one of those people who "has to make it sound more grandiose, make themselves more important" in whatever situation they find themselves.

"If Sal Pelullo caught a minnow he would tell you it was a shark," Catanzaro told the jury. "If it had taken 30 seconds to reel the fish in, it would have taken him the better part of the day. But only after the boat capsized three times. And the shark would have killed everybody but him."

Working with Pelullo, Catanzaro said, was "a Saturday Night Live skit." John Maxwell realized that, he said, and learned how to deal with him. "You get used to him and you turn him off."

Scarfo's lawyer, Michael Riley, also pointed to Pelullo, telling the jury that Scarfo's knowledge of what was going on at FirstPlus "came from Sal Pelullo." But returning to a theme that was part of Farrell's long winded argument, Riley said the government had tried to turn an organized crime investigation into a white collar fraud case. And, he argued, they had failed.

"They wrapped it up in Mafia smoke," he said. "...calling it organized crime when there was...not a substantial attempt to effectively investigate this case."

There was no mob involvement in FirstPlus, Riley said, despite attempts by the government to make it appear that way. He urged the jury to focus on that, adding that "Mr. Scarfo is not on trial for being a member of organized crime."

But Scarfo and Pelullo were on trial for racketeering conspiracy and fraud, charges that had some basis in fact based on the evidence surrounding the mortgage fraud count, Manno said in his closing yesterday. 

Returning to the taped conversation from March 5, 2008, Manno again said the only thing he was doing was acting as a "good lawyer" when he cautioned Pelullo not to lie about anything in the mortgage application.

"I don't want to create a little crack that some fuckin' FBI agent can take and run with," Manno said as the FBI witetap recorded it all.

"Not only did they create a crack," Manno told the jury, but by that point, the FBI was already listening in.

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