CAMDEN — Nicodemo S. Scarfo, a Galloway Township resident who is the son of a former mob boss with Atlantic City ties, was named in a 107-page indictment Tuesday that said he and a partner from Philadelphia forcibly took over the Texas financial services firm FirstPlus Financial Group in late spring 2007 and allegedly looted it for $12 million through a string of fraudulent acquisitions and consulting agreements over a year.
Ultimately, Scarfo and associates planned a “pump-and-dump” scheme, which would artificially boost the price of shares and allow the principals to cash out, as their “piece de resistance,” U.S. Attorney Paul J. Fishman said, but federal agents stepped in before that could happen.
Scarfo, 46, was arrested Tuesday morning at his home in Galloway Township, and he appeared in front of U.S. Magistrate Judge Ann Marie Donio on Tuesday afternoon.
He appeared rumpled and unshaven, wearing mismatched sweat clothes, bound in chains. He sought a public attorney, saying all he had was $125 in a checking account. A hearing on bail and his request for a public defender will take place in court at 11 a.m. Friday.
Scarfo was named in 25 counts, including racketeering, wire fraud, and firearms charges, in addition to conspiracy counts over wire fraud, money laundering, bank fraud and obstruction of justice. He faces a maximum of 175 years in federal prison and $7 million in fines, according to a release from the U.S. Attorney’s Office.
Beyond the indictment, Scarfo faces seven additional charges since the alleged crimes happened when he was under supervised release following 33 months in prison for a 2002 conviction of running a gambling operation.
The indictment unsealed Tuesday named 13 people, including Scarfo’s wife, Lisa Murray-Scarfo, 32, of Galloway Township, alleged associate John Parisi, 50, of Atlantic City, and Todd Stark, 43, of Ocean City.
Murray-Scarfo was named in one count of bank fraud conspiracy and one count of conspiring to make a false statement in a loan application for a house she lived in with Scarfo after they married in February 2008.
Murray-Scarfo was not arrested: She appeared in court on her own recognizance. She sat in the back row of the courtroom for more than three hours before being called forward. Having had time to prepare, she wore a white cotton sweater and brown pants.
Like her husband, she did not enter a plea and said she wanted a public defender.
She was released on $250,000 unsecured bond, with travel restricted to New Jersey and eastern Pennsylvania. She was ordered to have no contact with any co-defendant, other than her husband.
She declined comment afterward.
Parisi, Scarfo’s cousin, was named in 24 of the 25 counts that Scarfo faces, and Stark was named in a single count of firearms conspiracy. Parisi was released on a $250,000 bond secured by $50,000.
Scarfo is the son of Nicodemo “Little Nicky” Scarfo, 82, the former head of the Philadelphia mafia, now serving a life sentence at the United States Penitentiary Atlanta on murder and racketeering charges. Throughout the 1970s, he was considered the Philadelphia mob’s point person in Atlantic City.
The U.S. Attorney’s Office in a release described the younger Scarfo as “an associate of the Lucchese Organized Crime Family,” who was “made” in the family following a 1989 attempt on his life during an internal struggle for control.
The indictment also said that the conspirators were influenced by other Lucchese family members, including the elder Scarfo, who mailed a letter with information on earlier prosecutions to attorney Donald Manno, 65, of Medford, Burlington County, who forwarded the material to the younger Scarfo.
The indictment also discussed the roles of the elder Scarfo and Vittorio “Vic” Amuso, the reputed boss of the Lucchese crime family, as unindicted co-conspirators. Fishman said federal authorities declined to prosecute either, citing their advanced age and the fact that their lengthy sentences are de-facto life sentences. Amuso, 77, is serving a life sentence in a Beaumont, Texas, federal prison on murder and racketeering charges.
At a press conference Tuesday afternoon, Fishman described an alleged criminal conspiracy that ran from late spring 2007 to late spring 2008, using a network of attorneys and an accountant to set up the transactions, ultimately taking $12 million from the shareholders of the firm.
“According to the indictment, the defendants gave new meaning to the term ‘corporate takeover’ by looting a publicly traded company to benefit their criminal enterprise,” Fishman said.
Fishman said that Scarfo and his partner Salvatore Pelullo, 44, of Philadelphia, used threats of economic and physical harm to members of the company to gain control of FirstPlus — forcing the board of directors to resign, while new ones friendly to their enterprise were appointed.
Fishman declined to say how Scarfo and his associates became aware of FirstPlus, or how federal agents knew to start investigating.
At one point, members of the alleged conspiracy threatened to claim an unspecified member of the board engaged in financial improprieties, later threatening the board member with litigation if the person didn’t turn over control. The threat was successful, and the indictment said “figurehead” board members were appointed.
Subsequently, the indictment alleges, in June 2007, following the takeover, Pelullo told a new board member that “if you ever rat, your wives will be (raped) … and your children will be sold off as prostitutes.”
Scarfo and Pelullo used their new control of the firm to execute legal services and consulting agreements that allowed them to funnel cash out of the company on a monthly basis.
The board-named attorney and co-defendant William Maxwell, 53, of Houston, as a special counsel at $100,000 per month, allowing him to enter consulting agreements at his discretion. The indictment said the board eventually paid him $3.5 million.
In one agreement, Maxwell paid Pelullo’s corporate alter-ego Seven Hills Management LLC $1.5 million between May 2007 and March 2008, and Seven Hills then executed what the indictment called a “fraudulent consulting agreement” with Scarfo’s firm Learned Associates of North America LLC worth $33,000 a month. This agreement netted Scarfo $425,000 in total.
The indictment also said that the pair used these companies to own shell companies, Rutgers Investment Group LLC, Globalnet Enterprises LLC and The Premier Group LLC. The indictment said that FirstPlus bought the three shell companies for a total of nearly $7 million and 2.6 million shares of FirstPlus stock when they were worth far less than that, transferring the funds to Pelullo and Scarfo.
Scarfo and Pelullo used FirstPlus’ corporate money to buy an array of items, from $825,000 for an 83-foot Falcon luxury yacht named “Priceless” through corporate subsidiaries, to a $625,000 Mitsubishi turbo-propeller airplane.
The indictment said that the yacht was used to visit Scarfo’s father in prison and then to attend the corporate Christmas party in Atlantic City.
Scarfo also used the money to buy a $715,000 home in Egg Harbor Township, including a $215,000 downpayment.
But to conceal the house from Scarfo’s probation agents, the indictment said, Pelullo and an attorney manipulated an income-tax filing for his wife, Murray-Scarfo, which was used to get the $500,000 mortgage needed for the balance, the indictment said. They eventually lost the Egg Harbor Township home after the federal raid in May 2008 cut off the flow of illicit cash.
Scarfo and Murray-Scarfo married Feb. 14, 2008, and, the indictment said, the following day $140,000 was transferred from an trust account in the name of Scarfo’s mother that he controlled, to an escrow account controlled by Donald Manno, 65, of Medford, another attorney named in the indictment.
The indictment said that despite Murray-Scarfo signing a promissory note to repay the funds, Manno, Scarfo and Pelullo arranged to have a “gift letter” drafted and a house went to settlement.
But law enforcement stepped in shortly thereafter, cutting off the source of funds and the indictment said the house went to foreclosure.
Among Scarfo’s other expenses were, according to the indictment:
_$1,240 per month leasing an Audi A6
_$1,700 per month for a Brigantine condominium
_$3,069 per month for a home he purchased for an ex-wife
_In excess of $29,000 on jewelry for his current wife, Murray-Scarfo, including a white gold engagement ring with a 2.01 carat princess cut diamond, and a 14-carat white gold tennis bracelet with approximately 100 brilliant cut diamonds
_A $10,000 deposit on an Audi A8 worth more than $100,000
Pelullo also bought a Bentley Continental GT convertible for $216,964, the indictment said.
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