Prosecutors use gangster's own words against him at mob trial
A federal prosecutor used mobster Nicodemo S. Scarfo's own
words today to describe the alleged
takeover and looting of a Texas-based mortgage company that is at the
heart of what authorities charge was a $12 million scam orchestrated by Scarfo
and his business partner Salvatore Pelullo.
"Layers upon layers, like an onion," Scarfo, 48,
said in a secretly recorded telephone conversation with Pelullo, 46, that was
picked up on an FBI wiretap back in 2007 as authorities contend the takeover of
FirstPlus Financial was unfolding.
For nearly three hours today, Assistant U.S. Attorney
Stephen D'Aguanno, the lead prosecutor, detailed the allegations in the
racketeering conspiracy case against Scarfo, Pelullo and five co-defendants.
D'Aguanno said underneath those layers of the onion -- false SEC filings, phony
stockholder reports, bogus consulting contracts and fraudulent business
purchases and expenses -- was the financial scam that poured millions into the
pockets of the two lead defendants.
"They're joined at the hip, from their criminal
activities to their alleged business activities," D'Aguanno said of Scarfo
and Pelullo, who frequently referred to each other as cousins even though there
was no blood relationship.
In a closing argument that signaled the beginning of the end
of the five-month long trial,
D'Aguanno called Pelullo the "de-facto" head of
FirstPlus Financial. He said Pelullo "controlled" the company and
that he "reported" to Scarfo. Both men had lucrative consulting
contracts once they secretly took control of the company's board of directors
in the summer of 2007, the prosecutor alleged.
Co-defendant William Maxwell, a lawyer on a retainer of
$100,000-a-month to FirstPlus, helped set up those consulting agreements with
Seven Hills Management, Pelullo's company, and Learned Associates, Scarfo's
front, according to the prosecution who spoke for nearly three hours to the
16-member (four are alternates) jury panel.
D'Aguanno is expected to complete his arguments tomorrow. He
will be followed by attorneys for the seven defendants. Jury deliberations are
likely to begin late next week or early on the following week.
The prosecutor, who spearheaded the FBI investigation that
began seven years ago, said Pelullo had a contract similar to Maxwell's that
paid him $100,000-a-month. Scarfo's contract called for $33,000-a-month. He
later had another contract with Maxwell for $150,000-a-year, the prosecutor
said.
None of those deals were ever disclosed in SEC filings or
reported to company shareholders, said D'Aguanno who then asked the jury a
question that he repeated again and again - "Why?"
The answer, he said, was because the deals were part of a
massive fraud set up by Scarfo and Pelullo, both of whom had criminal records
that would have had to have been disclosed had their names been listed on
company filings. Pelullo has two prior fraud convictions and was cited in the
past for lying to the SEC, D'Aguanno said. Scarfo has two prior convictions
linked to organized crime gambling and racketeering cases.
In their closings, defense attorneys, as they have
throughout the trial, are expected to argue that the failures of FirstPlus were
not caused by fraud, but by a poor economy. Defense attorneys have also argued
that the government has interjected the presence of organized crime in the case
to sensationalize what would otherwise be mundane financial charges that have
little basis in fact. They also have contended that any chance FirstPlus had of
succeeding ended when the FBI staged a series of raids in May 2008, seizing
company records and assets.
Michael Farrell, one of two court-appointed attorneys
representing Pelullo, is scheduled to offer the first defense closing after
D'Aguanno completes his address. Farrell, a high energy litigator with a loud
and aggressive courtroom style, is expected to take three or four hours. With
no court on Friday, Farrell's closing could roll into Monday. The closings from
the other lawyers could take the remainder of the week. The prosecution gets a
final rebuttal closing before the case goes to the jury.
Today was a clearly one-sided prosecution summation of
evidence and testimony that began back in January and finally concluded last
week.
D'Aguanno told the jury that the criminal enterprise at the
heart of the FirstPlus fraud was not the mob, but the Scarfo-Pelullo
organization. He said, however, that both men used the reputation of organized
crime to bolster the threats and extortion that allowed them to take over the
company in the summer of 2007.
Scarfo's father, jailed Philadelphia mob boss Nicodemo D.
"Little Nicky" Scarfo, and Vittorio "Vic" Amuso, the jailed
leader of the Luchese crime family, were named as unindicted co-conspirators in
the case. The elder Scarfo exercised "influence and control" over his
son and Pelullo, D'Aguanno said, adding that both mob leaders -- even though
they were in jail -- were to share in the financial benefits of the takeover.
Scarfo Sr. and Amuso were fellow inmates at a federal prison
in Atlanta in 2007. Pelullo and Scarfo Jr. visited the elder Scarfo several
times and discussed the FirstPlus takeover with him, D'Aguanno charged. Scarfo
Jr. has been identified as a made member of the Luchese organization.
D'Aguanno also said a prison phone conversation between the
two Scarfos in which they mentioned taking care of "Uncle Vic" was a
coded reference to Amuso and his potential share in the looting.
Scarfo Jr. was on probation at the time the fraud unfolded,
D'Aguanno said. He said that Pelullo, William Maxwell and Donald Manno, a
co-defendant and longtime criminal attorney for Scarfo, were part of a scheme
to lie to the probation department about Scarfo's associations and job
opportunities in an fraudulent attempt to have his probation restrictions
lifted.
If Scarfo had gainful, legitimate employment as a consultant
for FirstPlus, why not just tell that to the probation department, D'Aguanno
asked? The reason, he said, was that that disclosure might have led to
government inquiries into what he was doing and disclosed his relationship with
Pelullo.
Ironically, D'Aguanno said, authorities were already
investigating those connections while Scarfo and the others tried to hide them.
Other defendants in the case include William Maxwell's
brother, John, who was the CEO of FirstPlus after the alleged takeover and
attorneys David Adler and Gary McCarthy who handled business and SEC filings
for the company.
D'Aguanno opened his remarks by playing a tape for the jury
in which Scarfo and Pelullo laughed and joked about the untimely passing of
J.D. Draper, a FirstPlus insider who authorities said helped the two plan the
behind-the-scenes takeover.
Draper, who was named compliance officer of the company,
died unexpectedly of a heart attack in December 2007. On the tape, Scarfo and
Pelullo mockingly talk about how they are broken up by his passing.
D'Aguanno said Draper was one of the few insiders who knew
all the details of the scam and his passing eliminated any concerns on the part
of Pelullo or Scarfo that he might turn on them and go to authorities.
"I'm crushed, tears are coming to my eyes,"
Pelullo said on the tape which was played twice during the trial and a third
time today.
After more mock comments about sorrow and condolences,
Scarfo told Pelullo that Draper's death was "one thing I know you can't
take credit for."
But the government contends that Pelullo, in secretly
recorded conversations and in emails, took credit for nearly everything else
that brought him and Scarfo behind-the-scenes control of the company. And all
of it, D'Aguanno said today, was based on fraud.
http://www.bigtrial.net/2014/06/layers-of-onion-define-multi-million.html#1CFpZQv9yjJLbtIO.99
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