Nick Caramandi said it best.
“There’s nothing better than shark money,” the former South Philadelphia mobster-turned-government witness said while offering a tutorial on life in the underworld.
This was back in the 1980s. Caramandi was living in a safe house in Ocean City, Maryland, awaiting an appearance on the witness stand in a racketeering case in Philadelphia that would bring down mob boss Little Nicky Scarfo and the organization that Caramandi had once been a part of.
As he sat in a restaurant crowded with tourists and vacationers that summer, the one-time con man, street hustler and murderer known as “The Crow” discussed the business of loan sharking.
“Ten grand at three points a week,” he said. “That’s $,3000 in interest for a 10-week loan. And if the guy can’t pay back the principal, we extended the loan for another ten weeks. He’s always gonna pay because we’re the mob…If he doesn’t, he knows he’s gonna get hurt.”
At the end of a year, the guy who took the loan would have paid $15,600 in interest and still owed the original ten grand. And that $15,600—or at least a part of it—would have gone back on the streets at three points for ten weeks. That’s the economic engine around which the mob has done business for years.
But it pales in comparison to the numbers surfacing in an ongoing federal investigation into a “legitimate” lending company based in Philadelphia doing business as Par Funding.
Investigators have alleged the company is in the middle of a $500 million scam in which both investors and borrowers were bilked. The FBI, the IRS and the SEC are involved in the probe which focuses on financial transactions known as merchant cash-advance lending.
Critics call it loansharking on steroids.
Par Funding, with an office in the Old City section of Philadelphia, lent millions of dollars to businesses throughout the country. Most of that money came from well-heeled investors. Authorities now allege Par Funding was playing fast and loose at both ends of the deal.
Investors were promised a 10-14 percent return. Borrowers were charged interest that averaged around 50 percent but in some cases was more than 400 percent. (The interest in a mob loan at three points a week is 156 percent annually.)
Par Funding, according to a 58-page civil complaint filed by the SEC, hid behind “multiple veils of secrecy” while putting “opportunistic loans” on the street totaling more than a half billion dollars. One financial promoter, according to the SEC, told potential investors that Par Funding was so good it was “like the crack cocaine” of investments.
Now, it appears, everyone is coming down from their high.
The primary target of the investigation is Joseph LaForte, a 49-year-old businessman with a checkered past and mob-linked bloodlines. His grandfather and uncle were loan sharks for the Gambino crime family in New York, according to several news reports.
LaForte and his wife started Par Funding in 2011 shortly after he was released from prison where he had served sentences for fraud in New York and illegal gambling in New Jersey. In its civil suit, the SEC says that Par Funding never disclosed LaForte’s criminal past to investors. It also alleges that Par Funding failed to accurately report the default rate on company loans, making an investment in Par Funding more attractive.
In many ways, authorities allege, LaForte was running a multi-million dollar Ponzi scheme with new investors’ money being used to sustain the flow of cash to older investors. Along the way, investigators say, Par Funding was able to siphon off about $33 million in “consulting fees” that was used to prop up the lavish lifestyles of LaForte and others.
Through his lawyers, LaForte has denied all allegations of wrongdoing and has contended that many of the complaints filed with the SEC by businesses were from “disgruntled merchants” who had fallen behind in their payments and were trying to avoid their debts.
Federal prosecutors, on the other hand, said that LaForte frequently resorted to violence or threats of violence in order to do business. In court papers, they detailed several allegations based on information provided by merchants who had borrowed money from Par Funding and were harassed and threatened when they weren’t able to make their loan payments.
One merchant said LaForte threatened to “blow up” his house and another said LaForte asked her if she “had ever heard of cement shoes,” according to the government.
“Another merchant told the FBI that LaForte threatened to take all of the merchant’s assets for his failure to make a loan payment, and then said to the merchant, ‘Try to f***ing stop me. I’ll have you and your son killed.’
“Similarly, numerous witnesses have told the FBI that after entering into an agreement with LaForte, and missing a payment, a large muscular man appeared uninvited at their place of business, threatened them with physical harm, and demanded money for LaForte and his company.”
At the same time, LaForte was telling investors that Par Funding was “probably the most profitable cash advance company in the United States and maybe the world,” according to the SEC complaint.
The financial wheeling and dealing, authorities say, provided LaForte and his wife with an opulent lifestyle. There was a house in Lower Merion and vacation homes in the Poconos and Florida. There were expensive cars and a private jet.
During a series of raids in July on Par Funding’s Philadelphia office and LaForte’s properties, the feds seized company records and then froze all company assets.
On a personal level agents found seven guns and “several bundles’ of cash, totaling $592,847, in LaForte’s home, according to court records. There was another $1,275,865 in the house in the Poconos and $596, 733 in the house in Florida.
That’s a total of $2,532,885 in cash hanging around the house…or houses.
In addition, authorities said, there was $10 million in a bank account.
But LaForte’s biggest problem—in the short term at least—were the guns and ammo found in his Lower Merion home. These included four handguns, two shotguns and a rifle. As a convicted felon, he is prohibited by law from possessing a weapon.
In August he was indicted on weapons offenses and was denied bail. At this writing he continues to sit in the federal detention center in Philadelphia while his lawyers file motions to spring him, and the FBI, IRS and SEC continue to gather information for what could amount to a massive financial fraud case aimed at Par Funding and its principals.
Documents indicate that authorities have cooperating witnesses, some of whom posed as potential investors and secretly tape recorded conversations with LaForte and others.
Secretly recorded conversations are often game changers in federal prosecutions. Defense attorneys can attack the credibility of a cooperating witness, but they can’t cross-examine a tape.
In a motion to deny bail in the weapons case, federal prosecutors in Philadelphia argued that “for the past several years, while attempting to appear as an honest business person, the defendant was engaged in a variety of forms of conduct, many of which are now being revealed, that have drastically altered the analysis of who Joe LaForte is. The SEC filing thus far shows that LaForte uses aliases, lies to others, misrepresents who he is and what his business is engaged in, and alters and manipulates his business records as a means to fraudulently obtain monies.”
LaForte’s business was built around hundreds of millions of dollars in loans that generated tens of millions of dollars in interest.
In all his years as a loan shark, Nick Caramandi never came close to that kind of action.
