If you were a victim of PAR Funding, please contact us to see if we can help.
- You can also reference the PAR Funding Receivership website here: https://parfundingreceivership.com/
Sep 5, 2022
It’s costly to fight a federal government lawsuit.
So it helped that the brother of the man accused of orchestrating the alleged Par Funding fraud says he had a lot of generous friends willing to bankroll the defense in a battle with the U.S. Securities and Exchange Commission.
In July, a court-appointed receiver accused Joseph LaForte and his wife, Lisa McElhone, founders of the shuttered Philadelphia lender, of having “diverted” and “laundered” cash that ought to have gone to their investors. The receiver, who is now in charge of Par Funding’s finances, said that couple used the scheme to hire lawyers to take on the SEC.
Now James LaForte Jr., Joseph LaForte’s younger brother, is saying the receiver got it all wrong. The younger LaForte — owner of hipster bars in Brooklyn and a man with a criminal record, like his brother — swore in a court filing that he tapped a network of Staten Island business associates and friends to pay for legal help versus the SEC and to keep his big brother out of prison on separate gun charges.
“I did what I could to help Joe make bail,” James LaForte, 45, says in his affidavit. “I did all of this because I love my brother and sister-in-law and want to help them.”
LaForte wrote that he arranged for a series of loans, hoping Par Funding’s legal troubles would be swiftly resolved and it would “go back to being a very profitable business.” He added: “Neither Joe nor Lisa were involved in my efforts to borrow and raise money” for the defense.
His statement was attached to a legal filing by Joseph LaForte and McElhone that also attacked the receiver’s allegation that the couple had schemed to have a variety of firms to step in and collect from Par Funding debtors in order to pass money through to them — money that should have gone to the receiver to pay back investors.
The couple said the receiver’s accusations and related bid to hold them in contempt were based on nothing more than “salacious hearsay and unproven allegations.”
The contest between the SEC and Par Funding is in its final rounds after LaForte, McElone and several other defendants dropped most of their legal opposition to the agency’s charge that their business defrauded 1,200 investors while raising $540 million since 2011. The SEC says that Par Funding hid Joseph LaForte’s criminal record from investors, even as insiders paid themselves $200 million in commissions, consulting fees and the like.
The firm’s business model was to raise investor money to make high-interest loans to cash-strapped merchants. The SEC says it made very little profit and had to pay older investors with money from newer ones. Par Funding disputes that.
A federal judge, Rodolfo Ruiz II, is expected to rule soon in Florida, on how much the defendants must pay back investors. While the case has been unfolding, the receiver appointed by the judge has seized control of $150 million in assets, including cash, cars, boats, paintings and LaForte and McElhone’s homes on the Main Line and in the Poconos and Florida.
Adding to Joseph LaForte’s woes, the FBI searched his houses days after the SEC filed its lawsuit in 2020 and found seven guns and $250,000 in cash. He was charged with illegal possession of firearms by a felon.
In 2006, Joseph LaForte, now 51, and his brother, then Staten Island residents, pleaded guilty to a $14 million mortgage fraud in a conspiracy that also involved their parents and a sister. Both brothers went to prison.
Joseph LaForte also served time for helping operate an illegal offshore gambling operation. He is now awaiting trial in Philadelphia on the gun charges.
As for James LaForte, after his arrest in the family’s mortgage scam, he had more convictions for gambling, loan-sharking, and arson attacks on borrowers. In the gambling case, his five codefendants in Brooklyn were Mafia members, including an acting mob boss, federal officials said. According to court filings, he sometimes has used the names James McElhone and Jimmy Schillaci.
James LaForte, owner of two bars five miles apart in Brooklyn, could not be reached for comment. Lawyers for his brother and sister-in-law did not return calls.
In his July filing, the receiver, Florida lawyer Ryan Stumphauzer, focused on what had happened to money owed Par Funding by the hundreds of merchants to whom it made loans. Many of those borrowers have kept making loan payments ever after the SEC filed its lawsuit. The receiver contends that LaForte and McElhone, in concert with various associates and firms, found a way to reach in and steer some of those payments back to themselves, rather than into the receiver’s hands.
In James LaForte’s statement, he said his network of friends had merely responded positively to his request for help for his brother. For instance, he said that he had lined up two “good friends” and a cousin to put up their houses in Staten Island and the Poconos as security on Joseph LaForte’s $2.5 million bail on the gun charges.
One of those who did this was Staten Island businessman Vincent Bardong. In the contempt motion, the receiver had said Bardong ran a firm, Platinum Rapid Funding Group, that collected loan payments from Par debtors and also paid money to another firm, Financial Mutual. And, the receiver said, Financial Mutual paid $2 million to the defense lawyers fighting the SEC.
However, Bardong, 50, in a separate affidavit in the case, said he had met Joseph LaForte once and had never met Lisa McElhone. “I am a close friend of James LaForte and put my house up for his brother Joseph’s bail as a favor to James,” he said. He could not be reached or comment.
James LaForte also said he had borrowed the money to pay the lawyers. He said a $3 million line of credit was given him by Financial Mutual, whose owner, LaForte said, was another “very good friend of mine.” He said the payments to the lawyers showed up on Financial Mutual’s books because he had directed the firm to pay the lawyers on his behalf.
He also said he borrowed money to pay $94,000 in property taxes this year on his brother’s $5.8 million home in Jupiter, Fla., another payment questioned by the receiver.
LaForte said the money was lent him by another Staten Island “friend and business associate,” Joseph Talamini. LaForte said he had quickly paid back the loan. In an interview, Talamini, 48, said James LaForte was a solid person whom he had known for 25 years.
“I know his history,” Talamini said Saturday. “But that doesn’t make him a bad person.”
James LaForte also offers explanations for other financial transactions questioned by the receiver and the receiver’s team, lawyers Timothy Kolaya and Gaetan Alfano. They had taken note of $1.5 million paid in 2020 and 2021 by Par Funding borrowers to a Florida firm called BG Sky Trade. In a loop, they said, BG Sky had paid nearly $500,000 to the lawyers for Joseph LaForte and his wife.
A big share of the original payments was made by Par Funding’s largest single borrower, an office supply firm called B&T Supplies Inc..
However, the younger LaForte said that he worked for BG Sky and that the payment was money legitimately owed him. He said it was paid because he provided B&T with anti-coronavirus masks.
As The Inquirer has previously reported, B&T’s owner, businessman Stephen Odzer, has claimed through lawyers that those masks were “worthless” junk and that James LaForte had “effectively stolen” the payments from him.
Last year, receiver Stumphauzer claimed in a court filing that Odzer, while borrowing $93 million from Par Funding, had paid $9 million in cash “kickbacks or commissions” to Joseph LaForte. Odzer’s lawyer said he was victimized by Joseph LaForte. Joseph LaForte’s lawyers has said the payments were proper. (Last year, President Donald Trump pardoned Odzer for his 2004 conviction in a $16 million bank fraud.)
In sum, the brothers argued, this was not a case of a siphoning off of money but just a brother coming through for a brother and sister-in-law in a crisis.
The receiver’s lawyers are expected to file a rebuttal on Tuesday. After that, Judge Ruiz will decide whether to hold Joseph LaForte and McElhone in contempt and rule on how much the couple will have to pay back investors.
Sept. 5, 2022
I write about people and money in our community and beyond.
I report and edit investigative projects, covering political corruption, charitable abuses, police misconduct, and business scandals. Call me with tips.