FBI agents raided the Old Town offices of Par Funding, the company at the heart of an alleged $ 500 million investment program and the subject of a large civil complaint by the Securities and Exchange Commission the United States.
Officers executed search warrants Tuesday morning at locations including two Par Funding offices in the Old City, a spokesperson for the FBI office in Philadelphia said.
In the recent high-profile civil lawsuit against Par and others alleging financial fraud, the SEC relied on at least one recording in which a “confidential FBI source” spoke to one of the pitchmen who raised funds from program investors.
In an unusual move for the SEC, the complaint also repeatedly cited information from undercover agents posing as investors. “All undercover activity and referenced recordings described in the complaint were carried out strictly under the direction and order of law enforcement,” the agency wrote.
Carrie Adamowski, spokeswoman for the FBI office in Philadelphia, declined to discuss the ongoing investigation, citing FBI policy. No one has been charged with a crime.
The SEC complaint was filed in Florida federal court against the owners of Par Funding, Joseph W. LaForte, 50, and his wife, Lisa McElhone, 40, formerly of Philadelphia; and Perry S. Abbonizio, 62, resident of Montgomery County. Among others named in the complaint was Dean Vagnozzi, 51, a businessman for the King of Prussia. He is known in the Philadelphia area for his “Better Financial Plan” radio commercials, free meal seminars and mailings. He urged investors to invest money in au pair financing instruments.
In a court order made public Friday afternoon, a Florida federal judge froze the assets of Par Funding at the request of the SEC, preventing owners from withdrawing up to $ 482 million in money from investors in the funds. accounts they control.
U.S. District Judge Rodolfo A. Ruiz also appointed a receiver with control of the company’s books and the power to hire lawyers and accountants to oversee the companies.
The judge ruled that the SEC had shown “a reasonable probability” that the defendants “will harm the investing public by continuing to violate federal securities law unless they are immediately detained.”
Ruiz also found “good reason to believe” that they could “dissipate, conceal or transfer” assets unless they are frozen.
In a statement Friday, Vagnozzi’s attorney, Brian P. Miller, said that “based on all of the information Mr. Vagnozzi has been provided by Par,” the company “appears to be a legitimate business” in financial difficulty. due to the financial crisis triggered by the coronavirus.
Vagnozzi, the lawyer said, “is hopeful the court will allow Par to operate in a way that allows him to recover money from borrowers, rather than liquidate and cause losses to everyone.” Vagnozzi’s investor funds “are a big creditor of Par,” he added.
Miller also said, “This case only concerns part of Mr. Vagnozzi’s business.”
Lawyer Brett A. Berman, representing LaForte, McElhone and Par Funding did not return the calls on Friday. Abbonizio could not be reached for comment.
Opposing the SEC’s demands, attorneys for Par Funding said in a court filing that the agency was seeking to “take over a legitimate operating business” and freeze its assets before it even had the possibility of defending oneself.
LaForte helped found Par in 2011 after he was released from prison on two convictions. It lends money by cash advance to small businesses. It then pays investors a portion of its profits.
According to the SEC, Par charged small businesses up to 400% interest on its loans, told investors the default rate on that loan was around 1%, and promised to pay them at least 10%. annual interest and repay their principal only once. year.
But earlier this year, investors learned that Par could no longer pay that interest rate and that it would take seven years to pay back all of their principal. The SEC said the 1% default rate was wrong.
A Philadelphia lawyer who challenged Par Funding in civil court on behalf of the borrowers said Friday he was happy with the SEC’s action.
“It’s definitely a victory for small businesses that have been plagued… over the past few years,” Shane Heskin said. “They suffered business failures because of [Par’s] predatory tactics.
In another development on Friday, the parent company of KYW Newsradio – where Vagnozzi often had ads showcasing its investment strategies – said it would no longer run its ads.
“In light of the serious allegations in the complaint,” said Entercom, the parent company, “KYW Newsradio currently has no on-air advertising and no plans for future advertising of A Better Financial Plan. “
Correction: An earlier version of this story listed an old and incorrect address for the funding office of the peer wanted by the FBI on Tuesday.