This article was a press release by the US District Attorney (Eastern District) which was published on February 27, 2023. The team at Beacon Client Solutions reports on cases which promote justice for small business owners against predatory lenders and Merchant Cash Advance companies who choose to use unfair tactics to hurt their clients.
PRESS RELEASE
Par Funding Principals Charged in a RICO Indictment in Addition to Pending Charges of Securities Fraud, Extortion, Tax Crimes, Perjury, and Obstruction
Tuesday, February 27, 2024
PHILADELPHIA – A second superseding indictment was filed yesterday charging a violation of the Racketeer Influenced and Corrupt Organizations Act (RICO) by three principals of Complete Business Solutions Group, Inc. d/b/a Par Funding (“Par Funding”) and also charging various other crimes included in a previous superseding indictment, including securities fraud, extortionate collection of credit, tax crimes, perjury, obstruction of justice, witness retaliation, and witness tampering, announced United States Attorney Jacqueline C. Romero. These principals are Joseph LaForte, 52, Joseph Cole Barleta (“Joe Cole”), 39, and James LaForte, 46.
A separate indictment was filed charging Joseph LaForte, and his wife, Lisa McElhone, 43, with tax evasion, a conspiracy to avoid paying taxes, and a scheme to avoid paying approximately $1.6 million in income taxes due to the State of Pennsylvania by fraudulently claiming that their residence was Florida, when in fact they resided in Pennsylvania.
According to the second superseding indictment, codefendants Joseph LaForte, Joe Cole, and James LaForte, and others, were part of an association-in-fact RICO enterprise that conspired to commit a number of predicate crimes, including crimes related to the fleecing of Par Funding’s many investors and the extortionate collection of credit from Par Funding’s many merchant-customers. The indictment alleges that when the defendants were sued civilly by the SEC in July 2020, which resulted in a receivership taking over control of Par Funding, the enterprise took various illegal steps to attempt to regain control of Par Funding and to “defeat” the government, including through acts of obstruction of justice, witness tampering, and retaliation. The enterprise was structured with Joe LaForte as its leader and final decisionmaker, and it operated through various family members and close associates.
The indictment alleges that the principal purposes of the LaForte Enterprise were as follows:
to generate money for its leadership, members, and associates through the commission of various criminal acts, such as securities fraud, wire fraud, the extortionate collection of debt, obstruction of justice, and retaliation;
to conceal from investors, auditors, the government, and law enforcement that its members were self-dealing and enriching themselves to the detriment of Par Funding’s investors;
to conceal Joseph LaForte’s identity, criminal history, and role as the leader of the enterprise and the functional Chief Executive Officer of Par Funding from Par Funding’s investors, customers, and auditors, and from the government and law enforcement, including through misrepresentations, false statements, and other means;
to use extortionate means, including threats of violence, to collect money owed to Par Funding by its merchant-customers;
to maintain control over Par Funding after Par Funding was put under the control of a court-appointed receiver, including by acts of obstruction and retaliation intended to frustrate and interfere with the receiver’s efforts to control Par Funding; and
to protect the enterprise and its members from detection, apprehension, and prosecution by law enforcement.
It is alleged that as part of their fundraising efforts, these defendants and their conspirators caused false and misleading information to be conveyed to investors regarding various issues, including:
Joseph LaForte’s true name, his role at Par Funding, and his criminal history;
Par Funding’s underwriting process;
the diversity of the company’s MCA portfolio;
Par Funding’s default rate;
Par Funding’s financial success and profitability;
the company’s insurance; and
the defendants’ self-dealing.
For instance, the indictment alleges that although Joseph LaForte operated Par Funding and referred to it as his business, he concealed this ownership and control by using his wife, Lisa McElhone, as his nominee. Joseph LaForte also used several aliases, such as “Joe Mack,” while working at the company. It is alleged that Joseph LaForte, Joe Cole, James LaForte, and their conspirators engaged in this deception to conceal Joseph LaForte’s true role as the person operating the company and his significant criminal history from investors.
The indictment also alleges that Joseph LaForte and James LaForte conspired with an individual named Renato “Gino” Gioe to participate in the extortionate collection of credit. It is alleged that during the course of Par Funding’s operations, these individuals made hostile, threatening, and intimidating communications to Par Funding’s customers in person and over the telephone in order to collect on delinquent MCAs.
For example, the indictment alleges that Joseph LaForte threatened to “blow up” a delinquent customer’s home in May 2019 and asked another delinquent customer in August 2019 whether the customer had heard of “cement shoes.” In addition, the indictment alleges that in May 2018, James LaForte told one customer that he was a “soldier for the family” who had torched people’s cars and kicked people’s teeth in.
Furthermore, the indictment alleges that Joseph LaForte committed a variety of tax crimes. It is alleged that Joseph LaForte committed tax crimes by failing to report millions of dollars in cash kickbacks that he personally received from a Par Funding customer, and by regularly paying cash wages to Par Funding employees but not withholding taxes from these wages or reporting them to the IRS.
It is further alleged that Joseph LaForte and Joe Cole each committed perjury twice during depositions in federal lawsuits against Par Funding, making misrepresentations regarding various matters. For instance, the indictment alleges that Joseph LaForte lied under oath about his knowledge of his wife’s role at Par Funding, Joe Cole’s role at the company, and the company’s default rate. The indictment alleges that Joe Cole lied under oath about who was on Par Funding’s credit committee (which Joseph LaForte ran) and who ran Par Funding.
Finally, the indictment alleges that Joseph LaForte and James LaForte engaged in obstruction of justice, witness tampering, and retaliation. Specifically, it is alleged that in late February 2023, on the streets of Center City Philadelphia, James LaForte, with the assistance of and in coordination with Joseph LaForte, physically assaulted counsel for the receiver for Par Funding in a lawsuit brought by the U.S. Securities and Exchange Commission in the Southern District of Florida. Moreover, in connection with the same lawsuit, the indictment alleges that Joseph LaForte threatened to cause serious bodily injury to another individual in November 2022. Lastly, it is alleged that James LaForte made threats of violence to multiple parties in early 2023, in an effort to interfere with the SEC lawsuit, a federal grand jury investigation, and an anticipated federal prosecution, as well as to retaliate against these parties.
If convicted of all counts charged against them, the defendants are facing decades or more of imprisonment, and they also face full restitution, a fine, and a period of supervised release and/or probation.
In a separate indictment, it is alleged that Joseph LaForte and Lisa McElhone committed several tax crimes. For instance, it is alleged that the married couple defrauded the Commonwealth of Pennsylvania out of more than approximately $1.6 million of state taxes by falsely claiming to be residents of Florida, even though they worked, lived, and spent more than 300 days per year in Pennsylvania. Furthermore, the indictment alleges that Joseph LaForte and Lisa McElhone worked together to evade the payment of over half a million dollars of employment taxes that had been imposed on Joseph LaForte in connection with companies that he had operated in the mid-2000s.
An indictment charging Complete Business Solutions Group, Inc., doing business as Par Funding, with wire fraud, securities fraud, and conspiracy, was also filed.
The case was investigated by the Federal Bureau of Investigation, Internal Revenue Service-Criminal Investigation, the Federal Deposit Insurance Corporation-Office of Inspector General, and Pennsylvania State Police and is being prosecuted by Assistant United States Attorneys Patrick J. Murray, Alexandra Lastowski, and Matthew Newcomer. The SEC in Florida investigated and litigated the civil securities fraud charges, which formed the basis of a portion of the criminal prosecution.
An indictment is an accusation. A defendant is presumed innocent unless and until proven guilty.
For the full text of the press release, go to https://www.justice.gov/usao-edpa/pr/par-funding-principals-charged-rico-indictment-addition-pending-charges-securities
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