Dean Vagnozzi and John Pauciulo have been genius partners in a growing financial company for 16 years. Their relationship seemed to hold even after the federal government moved in.
Not anymore. Now, it is opponents who are heading to court.
In happier times, Vagnozzi, a financial salesman to the King of Prussia well known for his once ubiquitous radio ads, raised over $ 200 million from investors looking for alternatives to the stock market.
Pauciulo, a partner at a large law firm, prepared unconventional investments for Vagnozzi’s clients, reviewed his radio ads, attended his sales pitches and literally sat to his right to assure investors that everything was healthy and legal. Vagnozzi says he paid Pauciulo over a million dollars in fees.
“We’ve been working together since 2004,” Vagnozzi said in one of the friendly videos the couple made for potential clients. “I need a person like John,” he told viewers, to show “we’re not a bunch of gunslingers.”
In another video, Pauciulo boasted, “Together Dean and I created a model” where small investors could participate in the type of “alternative asset” action generally limited to wealthy investors.
Last summer, the US Securities and Exchange Commission was less enthusiastic. He filed a large civil fraud case against Vagnozzi and others on one of the most popular investments of Vagnozzi, a Philadelphia lender to a small business known as Par Funding. The lawsuit alleges that the owners of Par Funding, Vagnozzi and the other defendants defrauded 1,200 investors, hiding Par’s precarious finances, reckless loans and the criminal past of a founder of Par.
Vagnozzi hit back against the SEC, dismissing his complaint as unfounded. But in April, he turned his fire in a new direction – pursuing his former ally, Pauciulo, past Common Pleas Court in Philadelphia. Pauciulo’s “lazy”, “amateur” and “incompetent” lawyers have led Vagnozzi and his investors astray, according to the lawsuit.
“He never took me aside and told me what I was saying was wrong or was a violation of securities law,” Vagnozzi said in an email to The Inquirer. “He never told me to change my message. Never.”
Vagnozzi put it this way: he was the hobbyist who relied on the professional, “just as I’m at the mercy of my auto mechanic when it comes to fixing my car”.
Vagnozzi, 52, may not know much about cars – he loves them however, driving a Porsche and an Aston Martin in his video spots which showcased his success. But he’s no stranger to business. After graduating in accounting from college, he spent a time working as a licensed stockbroker. His required disclosures in the SEC lawsuit show that in just the last two years before the SEC cut the hold, he made $ 8 million in profit on $ 17 million in revenue. His book on investing is available on its website for $ 19.95.
Pauciulo, 55, is a Temple law graduate who has been with the Pittsburgh-based Cabinet Eckert Seamans for over a decade, leading his financial transactions group from his office in Philadelphia.
Pauciulo and his lawyer did not respond to calls for comment. In a court response this month to Vagnozzi’s lawsuit, Pauciulo hit back at his former client. He said Vagnozzi ignored legal advice, dismissed warnings that Par refused to answer questions and was now significantly exaggerating Pauciulo’s role.
Until Vagnozzi and Pauciulo turned on each other, they had been able to face increasingly rocky weather together. Since 2019, Vagnozzi has agreed to pay more than $ 1 million to settle civil actions brought by securities regulators over three separate investments on which Vagnozzi said Pauciulo advised him.
The SEC did not name Pauciulo as a defendant in his lawsuit. But investors have. Over the past 10 months, investors have sued Pauciulo and his company in Delaware, Florida and Philadelphia. Two lawsuits named both Pauciulo and Vagnozzi as defendants. A third, filed by Philadelphia attorney Clifford Haines on behalf of 17 people who set up pools that injected nearly $ 50 million into Par, only names Pauciulo and his firm.
Now, Vagnozzi has filed a lawsuit against Pauciulo and his company. Vagnozzi’s brother, Albert, also a financial agent and commune supervisor in Montgomery County, Pauciulo also sued.
The main event – the federal civil fraud lawsuit led by SEC lawyer Amie Riggle Berlin – is scheduled for December. Gaetan Alfano, the Philadelphia lawyer for the judicial sequestration in this case, wants all other prosecutions to be terminated or delayed until then.
But already in court, Vagnozzi and his former lawyer traded blows over a crucial issue in the SEC case: Vagnozzi’s choice not to tell investors that Joseph LaForte, one of the founders of Par Funding, was a twice convicted financial criminal.
Unlike the owners of Par, the SEC does not accuse Vagnozzi of taking clients’ money. Instead, he says he failed to record the investments as securities and warned buyers of the risks – risks that became evident when Par stopped paying investors last year. On the other hand, the receiver in the financing file Par dit LaForte; his wife, Lisa McElhone; and other Par insiders kept more than $ 140 million for themselves out of the nearly $ 500 million total invested by investors.
Vagnozzi began recommending Par Funding to investors in 2016. Par’s “merchant cash advance” loans were another type of unconventional investment that Vagnozzi sought to complement previous arguments, especially for investments in insurance policies. -life sold at a discount by the elderly.
He claims he ordered Pauciulo to do a “thorough and due diligence background check” on Par Funding, and the attorney replied: “There are no red flags.” Pauciulo denies saying this and says the requested dive was not deep, but little more than an emailed quiz.
What is undisputed is that neither of the two men informed investors that LaForte was using pseudonyms and started the business shortly after serving prison terms for two convictions, for a real estate scam of $ 14 million and the management of an illegal offshore gambling operation.
Most recently, LaForte was arrested last year after the FBI seized seven guns from his $ 2.4 million home in Lower Merion. His trial is ongoing. As a criminal, he is prohibited from owning firearms. (Agents also found $ 5 million in cash there and at his other homes, in Poconos and Jupiter, Fla.)
In his lawsuit, Vagnozzi says Pauciulo told him about LaForte’s criminal record around 2017, but that the lawyer also said that “everyone deserves a second chance” and that Vagnozzi doesn’t have to tell investors about it.
Vagnozzi’s account is different from what he said in a Florida court. There he filed legal documents saying he learned of LaForte’s case in late 2018 – not from Pauciulo but from a Bloomberg investigative report noting that Par Funding used enforcement agents to collect threatened loans.
A spokesperson for Vagnozzi’s attorney said: “Dean was going from memory and just got the wrong year.”
In those earlier documents, Vagnozzi also argued that there was no legal obligation for investors to be made aware of LaForte’s convictions. This tusk is not mentioned in the Philadelphia costume.
Pauciulo, in his rebuttal argument this year, firmly maintains that argument, saying, “LaForte’s criminal conviction for mortgage fraud did not need to be disclosed as it was over 10 years old.
Indeed, LaForte pleaded guilty to mortgage fraud on October 4, 2006. However, Pauciulo’s plea does not mention that LaForte pleaded guilty again, December 30, 2009, to a new crime, its role in illegal internet gambling. This later date means the 10-year disclosure window only closed in 2019, long after Vagnozzi raised millions for Par from investors who haven’t heard from LaForte.
In his recent email exchange with The Inquirer, Vagnozzi said he did what he had reason to believe was right for investors. If they are victims, he says, so is he.
“All my assets have been frozen. I literally only had the money in my pocket, ”he wrote, referring to the period after the SEC filed a complaint. “My impeccable credit score has been destroyed. His annual income of over a million dollars has fallen to “zero.”
His lawyer, George Bochetto, says large companies like Eckert carry a lot of malpractice insurance. According to Bochetto, this type of cover could be enough not only to pay Vagnozzi but also investors.
Eric Lechtzin, a Bucks County attorney who initiated one of the first investor lawsuits against Vagnozzi and Pauciulo, said Vagnozzi was trying to escape responsibility for his own role.
“Vagnozzi is not at all off the hook here,” Lechtzin said. “The SEC considers the issuer selling the securities to have primary responsibility.”
In Lechtzin’s analysis, any Vagnozzi winning over his former lawyer and his law firm will not restore his fortune.
“If he gets a meaningful judgment from Eckert, we’ll go after that,” Lechtzin said.