Organized Crime: A 'Hostile Takeover' Hits Business Hard

Shoplifters will steal your products, and armed robbers will steal your money, but organized crime will steal your entire business.

Organized crime has long targeted businesses for extortion. Only last week a man who claimed to be a "strong arm" for organized crime pleaded guilty to charges that he attempted to extort $10,000 from a Massachusetts vending machine business.

But in one alarming case, organized crime stole an entire company.

A Public Company Falls Prey to the Mob

Last month, federal authorities charged 13 individuals, including an alleged member and an associate of the Lucchese organized crime family, with racketeering and related offenses stemming from an alleged extortionate takeover of FirstPlus Financial Group Inc. (FPFG), a publicly held company in Texas. Racketeers allegedly looted FPFG through a series of fraudulent consulting agreements and acquisitions involving companies controlled by Nicodemo S. Scarfo and Salvatore Pelullo.

Scarfo, a member of the Lucchese La Cosa Nostra organized crime family and Pelullo, an associate of the Lucchese and Philadelphia organized crime families, were arrested by the FBI and charged with racketeering conspiracy and conduct including securities fraud, wire fraud, mail fraud, extortion and a host of other related crimes.

The indictment also names Scarfo's father. Nicodemo D. Scarfo, the imprisoned former boss of the Philadelphia organized crime family and Vittorio Amuso, the imprisoned boss of the Lucchese organized crime family, as unindicted co-conspirators.

Nine other defendants, which include attorneys, a certified public accountant and  Scarfo's wife, were also arrested and charged.

A New Meaning for 'Hostile Takeover'

"The indictment alleges that Mr. Scarfo and Mr. Pelullo used economic extortion and threats of violence to seize and maintain control of a publicly traded company, successfully removing its entire existing board of directors and management," said Lanny A. Breuer, U.S. Assistant Attorney General.

"Once in control, they allegedly used their criminal enterprise to extract millions of dollars from the company to fund their lavish lifestyles. This prosecution demonstrates the Justice Department's resolve to root out the influence of La Cosa Nostra wherever it exists."

"The defendants gave new meaning to 'corporate takeover' by looting a publicly traded company to benefit their criminal enterprise," said Paul J. Fishman, U.S. Attorney of the District of New Jersy.

Through threats of physical and economic harm, the alleged schemers took over the company in order to plunder its assets. The takeover was accomplished by replacing FPFG's board of directors with new figurehead members who served at the direction of Scarfo and the others.

"The demise of Organized Crime has been greatly exaggerated," said Michael B. Ward, Special Agent in Charge of the FBI's Newark Field Office. "Criminal activities have evolved from the back alleys to the board rooms, but the same use of physical threats and intimidation to gain leverage and loot lucrative businesses for personal gain continues to this day.

"In response, the charges being brought against Nicky Scarfo Jr., Sal Pelullo and others represent law enforcement's commitment to aggressively target the illegal activity of Organized Crime in any commercial business or venue."

What to Do

If approached by organized crime members, you should follow the example of the late Willard Rouse, a Philadelphia developer.

For $1 million, Rouse was told, his waterfront development proposal would sail through the City Council.

Rouse went straight to the FBI -- and Scarfo went straight to prison.