The last remaining executive charged in a wide-ranging investigation into now-defunct Philadelphia business lender Par Funding pleaded guilty Wednesday, avoiding a trial that threatened to reveal how the company defrauded investors and defrauded customers for years to reap millions.
As part of a deal reached with prosecutors, the company’s former chief financial officer, Joseph Cole Barleta, pleaded guilty to one count of racketeering.
In return, government lawyers agreed to drop the 29 remaining charges of conspiracy, fraud, perjury and tax evasion brought against him and recommend that he spend no more than eight years in prison at sentencing next year.
Barleta’s guilty plea – along with prior agreements reached with Par Funding founder Joseph LaForte and his brother James – resolves a number of charges facing the company’s executives in the days before their case was scheduled for a jury trial.
Prosecutors allege that Par Funding – once a leader in the multibillion-dollar merchant cash advance industry that offered fast, high-interest loans to businesses deemed too risky to borrow from traditional banks – operated as a criminal enterprise that defrauded sponsors of more than half of billions of dollars , while using threats of intimidation and violence to extract benefits from their clients.
Joseph LaForte started his business in 2011 after being released from prison on previous convictions for running a $14 million real estate Ponzi scheme in New York and running an illegal offshore gambling operation.
Barleta quickly emerged as a central figure.
Despite having no higher education and only limited experience working as an accountant in a specialist construction company, in 2012 he was appointed financial director of Par Funding. Previously, he was better known as a competitive eater who, under the nickname “Johnnie Excel”, according to promotional materials from the 2013 Wing Bowl, in which he also participated, devoured 20 grilled cheese sandwiches and a liter of tomato soup in 12 minutes.
Still, over the next eight years, he, LaForte and others managed to raise more than $550 million in investment for their venture.
They did so, Barleta admitted Wednesday, largely by spreading lies.
Chief among them: Par executives routinely misled potential investors about LaForte’s involvement in the business. As a criminal, he was legally prohibited from trading in securities. His wife, Lisa McElhone, was named as the company’s CEO, although she admitted that she had little to do with the company’s day-to-day operations.
They also lied to investors about Par Funding’s profitability and loan default rate. Prosecutors say that even as they boasted about the company’s extraordinary success, the company was running an annual deficit of as much as $70 million.
LaForte routinely falsified the company’s accounting records to conceal how many of Par Funding’s customers were delinquent and how much of the loan book was written off as irrecoverable. Barleta admitted Wednesday that he was willfully blind to these frauds.
When the FBI raided Par Funding’s Old Town offices in 2020, investigators found $21,200 in cash kept in Barleta’s desk – prosecutors say the money was given to him by LaForte to make false payments on some of his clients’ debts to create the impression that the outstanding accounts are at the date level.
(Barleta then told agents that he had saved the money to order a Grubhub lunch delivery.)
Other defendants in the case – including James LaForte and Renato “Gino” Gioe, whom prosecutors linked to New York’s Gambino crime family – pleaded guilty to threatening violence and even death to customers who failed to keep up with payments.
Meanwhile, Barleta worked behind the scenes to conceal details about Par Funding’s management and financial condition from lawyers, auditors and financial regulators, working with accountants on a complex payment structure that concealed his and LaForte’s earnings.
Prosecutors say he took more than $5 million from the company as part of a consulting agreement that fixed his compensation based on the amount borrowed by the company.
LaForte and McElhone earned approximately $95 million through similar arrangements.
In May, the three were indicted in a separate case, accusing them of concealing their income from state and federal tax authorities with the help of two Colorado accountants.
One of those men, Kenneth Bacon, pleaded guilty earlier this month to charges including conspiracy, tax evasion and wire fraud. Another, Rodney Ermel, is scheduled to go to trial in the case in December.
Prosecutors said Wednesday they agreed to drop Barleta’s tax charges as part of a plea deal in the racketeering case. LaForte and McElhone pleaded guilty to charges in the case earlier this year.
Meanwhile, efforts to repay more than 1,000 Par Funding investors with reported losses of approximately $226 million continue under the supervision of a federal court in Florida.
The court-appointed monitor unveiled a tentative distribution plan in August under which it would pay them $110 million – nearly half the amount they are seeking to recover – with the hope that they could collect more through restitution from LaFortes, Barlet and other defendants in case, as well as from insurers for lawyers who helped package Par Funding’s investments. Separately, the government has other assets confiscated from the LaFortes family, including a private jet, but has not made clear its plans for those assets.
The judge overseeing the case has not yet signed off on the preliminary distribution plan.
Staff writer Joseph N. DiStefano contributed to this article.