In the latest effort to pay back investors of the cash-advance company Par Funding, a federal judge has written an order to force company owners Joseph LaForte and Lisa McElhone to vacate their Haverford home by April so it can be sold, along with their vacation homes in Jupiter, Fla., and the Poconos, and 21 Philadelphia investment properties.
The order, as initially posted by Judge Rodolfo Ruiz early Wednesday, would let LaForte and McElhone stay in the house until it is sold, if they pay $61,000 in overdue rent and fees.
But Ruiz later agreed to hold off on the order after James M. Kaplan, a lawyer for McElhone, threatened to appeal during a late-morning video conference to review plans to pay investors. Ruiz gave the couple 10 days to detail their objections.
The homes, plus more than 100 apartments and office units in Philadelphia that were seized and set aside for future sale, are worth at least $55 million in all, according to court documents.
David Ferguson, a lawyer for LaForte, told Ruiz the Florida house alone was worth $14 million or more. “That neighborhood’s on fire” with rich buyers paying cash for properties along that part of the coast, he said.
The LaFortes owe the $61,000 under a 2½-year-old agreement that kept them in their house while the receiver collected cash from company, the couple’s personal assets, and Par’s borrowers. That includes $25,000 in back rent, plus fees for maintaining that house and the two vacation homes.
Philadelphia-based Par Funding was placed under court-ordered receivership in July 2020 after it cut payments to investors, and the Securities and Exchange Commission filed civil fraud charges against the LaFortes and several associations. Hundreds of investors — perhaps over 1,000, lawyers have said in court — have until March 22 to file claims against $250 million the receiver hopes to collect from Par owners, officers and sales agents.
Ruiz last fall ordered LaForte and McElhone to pay $191 million (adjusted from an earlier $219 million) toward making investors whole.
Several associates have been ordered to pay smaller amounts. Like the LaFortes, they faced complaints by the SEC that they failed to register the securities they sold investors, failed to warn that LaForte had spent time in federal prison after criminal fraud convictions, and wrongly maintained that Par investments were insured against borrower defaults.
The receiver so far has collected at least $116 million in cash and hopes to raise millions more from borrowers and by selling the assets it seized from the LaFortes and their associates, starting in 2020.
The U.S. Attorney’s office in Philadelphia also holds a Cessna jet registered to a McElhone-controlled entity, which LaForte’s lawyer says is worth up to $8 million, and a stock account worth over $12 million. Prosecutors are considers whether to file, or possibly settle, potential criminal charges in the case.
“The faster we can do this, the more we can do for investors,” Judge Ruiz told the lawyers during Wednesday’s remote meeting. The conference call was watched by at least 180 investors, lawyers and other onlookers.
After more than an hour of arguments by the couple’s lawyers over how they should pay the settlements and any additional money the receiver may collect — demands that were protested by SEC attorney Amie Riggle Berlin, who says such haggling is inappropriate in a case that is already settled — Ruiz said he would stay his order for now and hold another conference in late February to review progress on raising funds for investors.
Ruiz credited himself with “the patience of Job” in overseeing the case over the last 2½ years but added that he believed defendants’ arguments deserved consideration.
The property sales, even if approved by the judge, will take some time to organize, Gaetan Alfano, a lawyer for the receiver, said during the conference call. Some properties have title issues to be resolved, while others need maintenance. The properties are being managed for the receiver by OCF Realty of Point Breeze.
Kaplan, a lawyer for McElhone, said he hopes he can get the court to compel another attempt at mediation. But SEC lawyer Riggle Berlin said, “There’s nothing to mediate. This case is done. It’s in the collections unit.”
Timothy Kolaya, a lawyer in receiver Ryan Stumphauzer’s office, said claims processing is already proceeding “smoothly,” with 50 online claims arriving even before a planned mass mailing to investors whom the receiver has identified.