Scarfo, Pelullo, Maxwells Seek New Trial In FirstPlus Fraud Case

By George Anastasia
For Bigtrial.net

They want a do over.

And if they're granted a new trial, they don't want any mention of the mob.

That's the essence of a 72-page motion filed by lawyers for Salvatore Pelullo and joined by lawyers for Nicodemo Scarfo and brothers John and William Maxwell asking Judge Robert Kugler to overturn their convictions and order a retrial in the FirstPlus financial fraud case.

A hearing on the motion and the government's response is set for Monday. Sentencings, which were originally scheduled for Oct. 21, 22 and 23, have been moved to January for all four defendants.

The defense motion is built around the argument that organized crime involvement was improperly and inaccurately introduced into the fraud case and created undue prejudice for the defendants. Lawyers for the Maxwell brothers have also filed separate motions raising issues specific to their clients. John Maxwell, for example, argued again that he was only following the advice of professionals hired by the company and had no direct knowledge of the scam.

Kugler rejected similar arguments that were filed by the defense both before and during the lengthy six-month trial.

While it's unlikely the judge would reverse himself, the filings set the stage for a continued appeal on what was a major defense argument: the government created undue prejudice by introducing the spectre of organized crime in a case that had no proven mob connections.

The evidence in the case failed to conform to the picture painted for both the judge in pre-trial arguments and for the jury during the trial, Pelullo's court-appointed lawyers Troy Archie and Michael Farrell argued in their motion.

The "unsubstantiated allegations made the defendants criminals in the jurors' minds before the trial even started," the lawyers wrote. They argued that the prosecution relied on "gossip, hearsay, stereotypes, innuendo, appearance and image" rather than evidence in its attempt to present a case in which it was alleged that the defendants "had pilfered a public company in order to aggrandize the mob's wealth."

Scarfo, 48, and Pelullo, 46, were convicted of orchestrating the behind-the-scenes takeover of FirstPlus Financial Group in May 2007. The troubled Texas-based mortgage company was then looted, the government alleged, through bogus consulting contracts and straw business purchases that resulted in $12 million being siphoned out of the company.

Among other things, the prosecution alleged that the money was used to support the lavish lifestyles of Scarfo, the son of jailed Philadelphia mob boss Nicodemo D. "Little Nicky" Scarfo, and of Pelullo.

Those life styles included fancy cars -- Pelullo bought a $217,000 Bentley Continental -- expensive homes and a yacht (valued at $850,000) that was christened "Priceless."

The scam began to unravel in April 2008 when the FBI conducted a series of raids in New Jersey, Philadelphia and Texas. the raids targeted the FirstPlus offices in Irving, Texas, and the offices of businesses set up by Scarfo and Pelullo in Philadelphia and in the Atlantic City area. Pelullo's home in Elkins Park and Scarfo's $715,000 home in Atlantic County were also hit.

The government alleged among other things that Scarfo fraudulently obtained a mortgage for that home through the FirstPlus scam. Scarfo's wife, Lisa Murray-Scarfo, pleaded guilty to a mortgage fraud charge and is awaiting sentencing. Several other co-defendants also pleaded guilty prior to the start of the trial.

Scarfo and Pelullo were each found guilty of more than 20 counts, ranging from racketeering conspiracy and fraud to money-laundering and obstruction of justice. John Maxwell, the CEO of FirstPlus, and his brother, William, a lawyer hired by the company, were also convicted of racketeering conspiracy and related offenses. Three other defendants, including Scarfo's longtime criminal defense attorney Donald Manno, were found not guilty.

The trial opened in January and the verdicts were delivered on July 3.

The indictment handed up in the case also listed the elder Scarfo and Luchese crime family boss Vittorio "Vic" Amuso as unindicted co-conspirators. Both are serving lengthy federal prison terms and were inmates together in Atlanta at the time the scam was hatched.

But in the motion for a new trial, lawyers argued that there was no evidence -- other than Scarfo's familial tie to the his father -- to back up the government's claim that the mob was involved in the FirstPlus takeover.

"The Government has been allowed to visit the sins of the father upon the son," the motion reads in part, adding that the spectre of organized crime "infected the trial" and created an undue prejudice.

The defense said that the investigation began as an organized crime probe, but said when the evidence instead demonstrated that it was really a "garden variety white collar fraud," the government continued to promote it as a mob case, using organized crime references and allegations in wiretap affidavits, pre-trial motions and in arguments to the jury. The defense argued that those references and unsubstantiated claims created the unfair prejudice that tainted the case and that should result in the convictions being thrown out and a new trial ordered.

"The problem is that the Government refused to let go of the LCN/Scarfo fixation," the lawyers argued. "Instead of simply altering its theory to focus on the alleged FPFG fraud, the Prosecutors shoehorned their theory into an LCN mold that simply didn't fit."

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