The attorney who delivered the authorized green-light to decades of commercials hawking unregistered Par Funding investments has agreed to spend $125,000 to settle Securities and Trade Fee accusations that he knowingly or recklessly provided erroneous information and facts to traders who set millions into the organization, the SEC explained Thursday.
John W. Pauciulo, of Malvern in Chester County, was also barred from arguing prior to the SEC for at the very least 5 yrs. He “made material misstatements and omissions” in paperwork and videos for buyers, notably failing to disclose that a person of Par Funding’s founders, Joseph LaForte, had been imprisoned two times for fiscal crimes.
Pauciulo sat upcoming to King of Prussia money pitchman Dean Vagnozzi as the pair talked up LaForte’s Par Funding, a loan provider established in Philadelphia. Previous yr, LaForte and other Par executives agreed to drop their opposition to an SEC lawsuit labeling their organization a fraud. The SEC is trying to find $360 million from four Par principals. Vagnozzi has agreed to spend $5 million to take care of SEC issues versus him.
The SEC suggests much more than $500 million of Par’s “unregistered, fraudulent” securities have been bought to investors from 2012 until 2020, when the agency received an injunction from a federal decide, shutting down Par, and filed civil fraud costs versus its proprietors and a group of salespeople.
“Among other issues, Pauciulo claimed that the investments did not want to be registered with the SEC, and that they complied with the securities law and gave entire disclosure” to traders, the SEC added. “However, Pauciulo understood or was reckless in not knowing” that the funds really should have been registered, since they were being pitched to the general public.
Pauciulo did not react to calls looking for comment. The SEC said the attorney settled “without admitting or denying” the agency’s results.
Pauciulo, 56, was a associate for 12 years at Eckert Seamans Cherin & Mellott in Philadelphia, exactly where he chaired the firm’s Money Transactions group. The company said later on Thursday: “It is unfortunate that John Pauciulo, who is no for a longer period affiliated with the company, was included in a make a difference that resulted in his settling an SEC enforcement action in opposition to him.”
Eckert also pointed out in its statement that the company by itself was not billed by the SEC.
In advance of signing up for Eckert, Pauciulo was a partner at a different Philadelphia corporate law company, White & Williams LLP. A graduate of Temple Regulation College and Villanova College, he labored from 1990 until eventually 1992 as an SEC lawyer. Pauciulo remaining Eckert in May well and established up his have follow.
In its 2020 lawsuit, the SEC submitted civil fraud fees against LaForte his spouse, Lisa McElhone and other individuals, including Vagnozzi.
LaForte and his companions are nevertheless preventing in court about how a lot they will have to pay back. The SEC states it has seized dollars and house — which includes a corporate jet, art, and dozens of houses, mainly in Philadelphia — purchased by Par’s executives but states they are well worth significantly less than what is wanted to make investors whole.
The SEC is also making an attempt to accumulate up to $400 million in debt from the modest retailers who were Par debtors but notes that a lot of are bankrupt or out of small business and unlikely to shell out.
Pauciulo’s customer, Vagnozzi, elevated much more than $100 million from investors through the product sales of Par notes in a series of at minimum seven private money, for which Pauciulo delivered authorized illustration, according to the SEC. Pauciulo also encouraged the administrators of at the very least 25 other expenditure funds, lots of operate by agents Vagnozzi recruited.
To attract potential buyers, Vagnozzi advertised “alternatives” to the inventory market place on KYW-1060, the Philadelphia information radio station, and WPHT-1210, a conservative discuss-radio station, and at seminars and totally free dinners, in accordance to other SEC filings.
Par compensated Vagnozzi and other salespeople 20% desire on the investments they brought in. The salespeople, in switch, paid out investors about 10% curiosity and saved the distinction, in accordance to the SEC settlement in Pauciulo’s situation.
The SEC cited occasions when Pauciulo told traders the funds have been exempt from SEC registration — at a meal, in telephone phone calls with opportunity buyers, on a radio show, and in videos that also featured Vagnozzi’s gross sales pitches.
But “Pauciulo realized or was reckless in not knowing” that these “general solicitation” pitches to the public demanded that the Par investments be registered with the SEC, according to the agency’s assertion.
Just after Par stopped shelling out investors in April 2020, Pauciulo joined Vagnozzi in movie calls to Par traders in which he “failed to disclose” troubles impacting Par belongings and regulatory actions against Par and Vagnozzi.
Vagnozzi’s arrangement previously this 12 months to pay the $5 million was the third time due to the fact 2019 that he has agreed to pay big sums to resolve problems from regulators. In two preceding instances, he paid out a complete of extra than $1 million to settle cases introduced by Pennsylvania and federal officers.
Vagnozzi, who has no broker’s license to offer securities, made a specialty of promoting money products and solutions not readily available on the stock sector. Vagnozzi has given that stated he blames these govt inquiries on Pauciulo’s suggestions.
Vagnozzi as soon as used seriously on promoting in the Philadelphia market, up to $20,000 a 7 days. His spots on KYW and WPHT would pop up several instances a day, 7 times a week, voiced by Vagnozzi himself. He also marketed on CNN, Fox News, CBS, and CNBC tv.
Nevertheless they labored collectively carefully for yrs — and have been jointly sued by buyers demanding their revenue back again — in 2021, Vagnozzi sued Pauciulo and Eckert Seamans, accusing his lawyer of providing him negative information that price him, his staff and his purchasers when Vagnozzi followed counsel’s assurances.
In court papers filed in reaction to Vagnozzi’s lawsuit, Pauciulo denied deceptive Vagnozzi, and explained the expense salesman experienced made his individual business enterprise conclusions.
On Thursday, Vagnozzi’s law firm in the Pauciulo suit, George Bochetto, mentioned the SEC settlement supported Vagnozzi’s arguments in opposition to his former lawyer.
Moreover paying $125,000 to the court-purchased receivership accumulating money for Par buyers, Pauciulo faces the 5-year bar against appearing just before the SEC in lawful scenarios. Soon after that, he could reapply if he can demonstrate he has averted disbarment, felony convictions, or supplemental violations of the securities guidelines the SEC claims he broke.