841 11032011151020 scarfo, nicodemo et al. arrests, indictment pr final

United States Attorney
District of New Jersey
FOR IMMEDIATE RELEASE CONTACT: Rebekah Carmichael
November 1, 2011 Office of Public Affairs
www.justice.gov/usao/nj (973) 645-2888

LUCCHESE ORGANIZED CRIME FAMILY MEMBER AND ASSOCIATE AMONG
13 ARRESTED, CHARGED FOR RACKETEERING AND OTHER OFFENSES,
INCLUDING ILLEGAL TAKEOVER OF PUBLICLY TRADED COMPANY

Attorneys and Accountant Also Charged as Members of Racketeering Enterprise

CAMDEN, N.J. – Thirteen individuals, including an alleged member and an associate of
the Lucchese organized crime family, are charged with racketeering and related offenses in an
Indictment unsealed this morning in conjunction with arrests in the case, New Jersey U.S.
Attorney Paul J. Fishman and Assistant Attorney General Lanny A. Breuer of the Department of
Justice’s Criminal Division announced.

The charges stem from the alleged extortionate takeover of FirstPlus Financial Group,
Inc. (“FPFG”), a publicly held company in Texas, and the subsequent looting of FPFG by
members of the racketeering enterprise through a series of fraudulent consulting agreements and
acquisitions involving companies controlled by Nicodemo S. Scarfo and Salvatore Pelullo.

The 25-count Indictment filed in Camden federal court charges Scarfo, a member of the
Lucchese organized crime family of La Cosa Nostra (“LCN”), and Pelullo, an associate of the
Lucchese and Philadelphia LCN Families, with racketeering conspiracy – with conduct including
securities fraud, wire fraud, mail fraud, bank fraud, extortion, interstate travel in aid of
racketeering, money laundering and obstruction of justice. The Indictment also names
Nicodemo D. Scarfo (“Scarfo Sr.”), the imprisoned former boss of the Philadelphia family of La
Cosa Nostra, and Vittorio Amuso, the imprisoned boss of the Lucchese family, as unindicted co-
conspirators.

Nine other defendants – including attorneys William Maxwell, Cory Leshner, David
Adler, Gary McCarthy and Donald Manno, and certified public accountant Howard Drossner –
are also variously charged with racketeering conspiracy, including securities fraud conspiracy,
wire fraud, and other offenses. The Indictment also charges Scarfo’s wife, Lisa Murray-Scarfo,
with conspiracy to commit bank fraud and making false statements on a loan application for her
role in securing a fraudulent mortgage to purchase a $715,000 house with proceeds from the
racketeering enterprise’s criminal activity. William Maxwell’s brother John Maxwell, William
Handley and John Parisi are charged with various offenses related to the conspiracy. Todd Stark
is charged with conspiracy to provide ammunition for a 9mm handgun to Scarfo.

A number of the defendants were arrested this morning in a coordinated law enforcement
effort by special agents of the FBI; Department of Labor, Office of Inspector General; and the

Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF). Scarfo, Handley, Leshner, Parisi,
Adler, Drossner and Manno were arrested at their residences; Pelullo was arrested in Miami; and
William Maxwell was arrested at his Houston office. McCarthy surrendered to the FBI this
morning in Philadelphia. Murray-Scarfo is expected to surrender to authorities in Camden.
Stark and John Maxwell have yet to be apprehended. The defendants in custody in the New
Jersey area will appear this afternoon before U.S. Magistrate Judge Anne Marie Donio in
Camden federal court.

“According to the Indictment, the defendants gave new meaning to ‘corporate takeover’
by looting a publicly traded company to benefit their criminal enterprise,” said U.S. Attorney
Fishman. “Through rampant self dealing, fraudulent SEC filings and more traditional mob
methods, the defendants allegedly stole $12 million from shareholders. Particularly in these
economic times, investors should be free to invest in public companies without fear that violent
criminal organizations are their puppetmasters. And the public deserves to rely with confidence
on corporate officials and professionals whose positions require them to act in the best interest of
shareholders, not members of organized crime.”

“The Indictment alleges that Mr. Scarfo and Mr. Pelullo used economic extortion and
threats of violence to seize and maintain control of a publicly traded company, successfully
removing its entire existing board of directors and management,” said Assistant Attorney
General Breuer. “Once in control, they allegedly used their criminal enterprise to extract
millions of dollars from the company to fund their lavish lifestyles. This prosecution
demonstrates the Justice Department’s resolve to root out the influence of La Cosa Nostra
wherever it exists.”

“The demise of Organized Crime has been greatly exaggerated,” said Michael B. Ward,
Special Agent in Charge of the FBI’s Newark, N.J., Field Office. “Criminal activities have
evolved from the back alleys to the board rooms, but the same use of physical threats and
intimidation to gain leverage and loot lucrative businesses for personal gain continues to this
day. In response, the charges being brought against Nicky Scarfo Jr., Sal Pelullo and others
represent law enforcement’s commitment to aggressively target the illegal activity of Organized
Crime in any commercial business or venue.”

According to the Indictment unsealed this morning in Camden federal court:

Scarfo is a made member of the Lucchese family, having become a member after an
attempt on his life in 1989 following an internal struggle for control of the Philadelphia family.
In the mid-1990s while Scarfo Sr. and Amuso were in federal prison in Atlanta, Amuso arranged
for Scarfo to become a member of the Lucchese family as a favor to Scarfo Sr. As a member of
the Lucchese family, Scarfo was required to earn money and participate in the affairs of the
Lucchese family.

Following his release from prison in 2005 on an unrelated charge, Scarfo was placed on
supervised release and required to report to a probation officer. In participating in the affairs of

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what is described in the Indictment as the Scarfo-Pelullo Enterprise, Scarfo and other members
of the Enterprise engaged in a systematic scheme to deceive and obstruct the probation
department and the District Court responsible for overseeing Scarfo’s supervised release.

In April 2007, Scarfo, Pelullo, Texas attorney William Maxwell and others devised a
scheme to take over FPFG, a financial services company in Texas. Through threats of physical
and economic harm, the Scarfo-Pelullo Enterprise assumed and maintained control of FPFG for
the purpose of plundering its assets. The takeover was accomplished by replacing FPFG’s board
of directors with new figurehead members who served at the direction of Scarfo, Pelullo, and
other members of the Enterprise. Once the takeover was completed, the figurehead board named
William Maxwell as “special counsel” to FPFG, a position that he used to funnel millions of
dollars to himself, Scarfo and Pelullo through fraudulent legal services and consulting
agreements. The agreements, as well as FPFG’s fraudulent acquisitions of companies controlled
by Scarfo and Pelullo, were designed to mask the true identity and nature of the control exerted
over FPFG and conceal the source of the money fraudulently conveyed to Scarfo and Pelullo.

The Enterprise succeeded in its criminal objectives with the knowing assistance of Adler,
Drossner, and McCarthy – who used their positions as professionals to ensure that the
Enterprise’s criminal activity was not revealed to law enforcement and regulatory authorities,
including the U.S. Securities and Exchange Commission (“SEC”). As a public company, FPFG
was required to submit periodic and annual filings to the SEC. Led by Scarfo and Pelullo, the
Enterprise repeatedly submitted false information, or omitted material information, in required
SEC filings. As a result, FPFG’s shareholders and the investing public had no idea that FPFG
was being controlled by members and associates of organized crime. Manno, as Scarfo’s
attorney, abused his position to further insulate Scarfo and the Enterprise by deceiving Scarfo’s
probation officer and the District Court. Manno’s deception corruptly influenced Scarfo’s
supervised release by withholding information from the Probation Office and the District Court
regarding Scarfo’s source of income and his contact with convicted felons.

The Indictment details a telephone call intercepted by law enforcement on Dec. 5, 2007,
that illustrates the corrupt nature of Scarfo and Pelullo’s control of FPFG. Pelullo called Scarfo
to tell him about the sudden death of a former FPFG executive described in the Indictment as
“Individual #4,”who had provided information to Pelullo and William Maxwell that they used
extort control of FPFG. At the time of his death, Individual #4 was employed by FPFG as a
member of its “compliance team.” During the conversation, Scarfo and Pelullo expressed relief
regarding Individual #4’s death. After laughing about how he was “crushed” that “the rat is
dead,” Pelullo acknowledged that Individual #4 was “the only connection, the only tie to
anything.” As the news sunk in to Scarfo, he stated, “Oh boy. Yeah, Sal, you wanna know
something though? . . . That’s one that I know you can’t take credit for . . . [laughter] . . . and
that’s the natural best thing. You know what I mean? . . . That is so like Enron-ish. You know
what I mean? Kenneth Lay, he bailed out and took a heart attack.”

The Enterprise’s criminal activity allowed Scarfo and Pelullo to live lavish lifestyles
which included the purchase of an $850,000 yacht, a luxury home for Scarfo, a Bentley

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automobile for Pelullo, and thousands of dollars in jewelry for Scarfo’s wife, Murray-Scarfo. As
a direct result of the Enterprise’s criminal activity, FPFG and its shareholders suffered a loss of
at least $12 million.

The charges and allegations contained in the Indictment are merely accusations, and the
defendants are presumed innocent unless and until proven guilty.

U.S. Attorney Fishman praised special agents of the FBI, under the direction of Special
Agent in Charge Ward in Newark, for leading the investigation; as well as special agents of the
Department of Labor, Office of Inspector General, Office of Labor Racketeering and Fraud
Investigations, under the direction of Special Agent in Charge Robert Panella, New York
Region; and the ATF, under the direction of Matthew W. Horace in Newark. He also thanked
the FBI under the direction of Special Agent in Charge George C. Venizelos in Philadelphia for
its vital assistance, and the SEC for its role.

The government is represented by Assistant U.S. Attorney Steven D’Aguanno of the
New Jersey U.S. Attorney’s Office Organized Crime/Gangs Unit in Camden and Trial Attorney
Lisa C. Page of Organized Crime and Gang Section in the Department of Justice’s Criminal
Division in Washington.

The defendants and charges in the Indictment are outlined in the attached chart, along
with the maximum potential prison sentence per count if convicted. Each count also carries a
maximum $250,000 fine, with the exception of Count 20 (money laundering conspiracy) which
carries a maximum $500,000 fine and Count 21 (bank fraud conspiracy) which carries a
maximum $1 million fine.

11-433 ###

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U.S. v. Scarfo et al. Indictment

Defendant Count/Charges Maximum Potential Penalty

Nicodemo S. Scarfo, 46, of Count 1: RICO conspiracy 20 years in prison
Galloway, N.J.
Count 2: Securities fraud Five years in prison
conspiracy
Count 3: Wire fraud 20 years in prison
conspiracy

Counts 4 through 16: Wire 20 years in prison
fraud
Counts 17 through 19: 20 years in prison
Wire fraud
Count 20: Money 20 years in prison
laundering conspiracy
Count 21: Bank fraud 30 years in prison
conspiracy
Count 22: False statement Five years in prison
in loan application
conspiracy
Count 23: Obstruction of 20 years in prison
justice conspiracy
Count 24: Firearms Five years in prison
conspiracy
Count 25: Felon in 10 years in prison
possession of firearms

Salvatore Pelullo, 44, of Count 1: RICO conspiracy 20 years in prison
Philadelphia, Pa.
conspiracy
conspiracy
fraud

-5-


Wire fraud
conspiracy
in loan application
conspiracy
justice conspiracy
conspiracy
William Maxwell, 52, of Count 1: RICO conspiracy 20 years in prison
Houston, Texas
conspiracy
Count 3: Wire Fraud 20 years in prison
Conspiracy
fraud
Wire fraud
conspiracy
in loan application
conspiracy
justice conspiracy

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conspiracy
John Maxwell, 59, of Irving, Count 1: RICO conspiracy 20 years in prison
Texas
conspiracy
conspiracy
fraud
Wire fraud
conspiracy
in loan application
conspiracy
conspiracy
William Handley, 61, of Count 1: RICO conspiracy 20 years in prison
Miami, Fla.
conspiracy
conspiracy
fraud
Wire fraud

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conspiracy
in loan application
conspiracy
Cory Leshner, 28, of West Count 1: RICO conspiracy 20 years in prison
Reading, Pa.
conspiracy
conspiracy
fraud
Wire fraud
conspiracy
in loan application
conspiracy
conspiracy
John Parisi, 50, of Atlantic Count 1: RICO conspiracy 20 years in prison
City, N.J.
conspiracy
conspiracy
fraud

-8-


Wire fraud
conspiracy
in loan application
conspiracy
justice conspiracy
conspiracy
David Adler, 64, of Count 1: RICO conspiracy 20 years in prison
Chappaqua, N.Y.
conspiracy
conspiracy
fraud
Wire fraud
Howard Drossner, 50, of Count 1: RICO conspiracy 20 years in prison
Ambler, Pa.
conspiracy
conspiracy
fraud
Wire fraud

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conspiracy
in loan application
conspiracy
Gary McCarthy, 53, of Count 1: RICO Conspiracy 20 years in prison
Berwyn, Pa.
conspiracy
conspiracy
fraud
Wire fraud
Donald Manno, 65, of Count 1: RICO conspiracy 20 years in prison
Medford, N.J.
conspiracy
in loan application
conspiracy
Justice Conspiracy
Lisa Murray-Scarfo, 32, Count 21: Bank fraud 30 years in prison
Galloway, N.J. conspiracy

-10-


in loan application
conspiracy
Todd Stark, 43, of Ocean Count 24: Firearms Five years in prison
City, N.J. conspiracy

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