Deals with lawyers, financiers yield an additional $100 million for Par Funding victims
The swindled investors are expected to recover 80 cents on every dollar they lost after further settlements in the case.
While founders head to prison, investors in Par Funding, the Philadelphia-based Ponzi scheme that cost investors a total of $250 million, now look like they could get back more than 80 cents of every $1 they lost.
More than 1,500 investors in January and March collected checks totaling $110 million, or about 44 cents for every dollar they put into the defunct Old City small-business lender, with funds taken from company founders and salesmen.
Since last winter, the court-ordered receivership that oversees Par has settled with insurers for a lawyer who was a key player in Par’s fundraising, and a family group of the company’s early financiers. With other funds, these agreements free nearly $100 million more to send people who lost money investing in Par.
Starting in 2012, Par raised more than half a billion dollars to fund high-interest “cash advance” loans to small businesses that didn’t qualify for traditional bank financing. The company paid investors back with monthly checks yielding double-digit annual returns but defaulted in March 2020, months after reports in The Inquirer reviewed risks for these unregistered securities.
The Securities and Exchange Commission won a federal court order seizing the business in July 2020. Last year, Florida-based federal Judge Rodolfo Ruiz ruled Par was a Ponzi scheme, with founder Joseph LaForte and his close associates diverting hundreds of millions to pay for Main Line and Florida resort homes, investment properties, cars, boats, a jet plane, and other items.
LaForte and other Par insiders have separately pleaded guilty to criminal conspiracy and extortion charges in connection with what Philadelphia federal Judge Mark Kearney called “thuggish” tactics against late-paying borrowers and others who stood in the way of their profits.
Par investor Robert Hawrylak, 70, a Boothwyn retiree, says he’s gotten back $22,000 but is still out $32,000 and has had to keep working part-time jobs to pay his bills. He hopes there’s “more to come,” he said.
The payments have been funded by cash and property taken from LaForte and family members and business associates, and through settlements with salesmen who recommended Par to clients, including Montgomery County-based Perry Abbonizio and Dean Vagnozzi, after they agreed not to challenge the SEC’s civil fraud allegations against them.
Additional funds court-appointed receiver Ryan Stumphauzer and his lawyers are preparing to distribute include:
$31 million freed up in a settlement with members of the Chehebar family, who own Rainbow Stores and other businesses. The Chehebars had demanded $36 million from the receiver after investing nearly $50 million in Par but accepted just $3 million in an April 29 settlement, enabling the receiver to release the rest of the money from escrow.
$32 million from insurers for Eckert Seamans, under a Feb. 28 settlement. Par investors blamed the corporate law firm for letting its former partner John Pauciulo collect their money for Par through funds he set up but failed to register with the SEC, and failing to warn of the risks.
$35 million previously collected from Par, its owners, and associates that the receiver said in an April 30 report is now ready for payment to investors.
The settlement figures are after fees paid to lawyers. The Eckert settlement also excludes several million paid to Vagnozzi and his lawyer, George Bochetto. Vagnozzi, whose KYW and talk-radio ads attracted investors to Par Funding, said he, too, was a victim of the Par scheme and his former adviser Pauciulo’s failures.
In a report to Ruiz on April 30, the receivership warned that early Par investors who got back all their money, plus interest, may face “clawback claims” demanding they pay back that interest to help more recent investors collect more.
There are other potential sources of cash that could boost total payments to cover all the principal lost by investors.
Receivers sold LaForte’s former Haverford home, jewelry, paintings, Center City stores and apartments, a Manitou XT pontoon boat, Pocono house, and other assets. They still hold LaForte’s former home in Jupiter, Fla., his Cherubini yacht, and other property worth in all more than $12 million, as well as the former Par offices and neighboring stores and apartments in Old City Philadelphia at 20 N. Third St. and 205-B Arch St., all of which could be sold and the proceeds sent to investors.
Also, the receivership has filed for a $10.5 million refund from the IRS from taxes Par paid on phony profits the company booked to deceive investors into thinking it was making money.
The receiver still hopes to collect around $8 million from 10 unpaid Par loans. Hundreds of others have been written off as uncollectible.
Among other borrowers, the receivership won an $800,000 court judgment against Steve Odzer, also known as Tzvi Ozer, and by other names. Odzer‘s janitorial business, B&T, at one time was listed as Par‘s largest borrower. Odzer‘s prior bank fraud conviction was pardoned by President Donald Trump.
Odzer has separately sued the Chehebar family in federal court in New York, alleging that their financing was “integral” to Par and the “ruin” it brought to borrowers charged high rates of interest on loans they mostly could not pay. Lawyers for the Chehebars didn’t return calls seeking comment.
Still undetermined is the fate of a Cessna jet worth $6 million and $14 million in investment funds seized by the FBI but never turned over to the receivership.
After the SEC’s complaint, federal prosecutors in Philadelphia filed criminal charges against LaForte; his wife, Lisa McElhone; Par‘s chief financial officer, Joseph Cole Barleta; LaForte’s brother and head debt collector, James LaForte; collector Gino “Joe” Gioe; and broker Abbonizio, who told investors he was a part-owner of Par. Vagnozzi and other company outsiders who helped Par raise cash were not criminally charged.
Joseph LaForte pleaded guilty to a firearms violation, racketeering conspiracy, tax fraud conspiracy, wire fraud, and obstruction of justice for the 2023 ambush beating of receiver‘s lawyer Gaetan Alfano on a Center City street. He was ordered to pay $315 million in restitution, and sentenced March 26 to 15½ years in federal prison.
James LaForte pleaded guilty to racketeering conspiracy, extortion, tax fraud conspiracy, wire fraud, obstruction of justice for attacking the lawyer, and threats against Abbonizio and others. He was sentenced to 11 years and five months in prison and ordered to pay $2.5 million in restitution.
Gioe pleaded guilty to two counts of extortion and one count of conspiracy. He was sentenced in April to 18 months in federal prison and ordered to pay $949,000 to victims.
Barleta, McElhone, Abbonizio, and the Colorado accountants who prepared Par‘s tax returns also pleaded guilty and face sentencing later this year.
This story was updated to correct the additional amount of money available to Par Funding’s investors.