Par Funding salesman Dean Vagnozzi sues, accusing feds of ruining his business

Dean J. Vagnozzi, whose King of Prussia insurance and investment business was taken over by a court-ordered receiver in the federal investigation of the Par Funding Ponzi scheme, has sued the U.S. government, accusing federal officials of abuse of process, negligence, and unconstitutional search and seizure.

In the lawsuit, Vagnozzi says he was a Par victim, his business wrongfully destroyed amid the investigation that led to criminal charges that have sent eight former Par Funding officials, debt collectors and accountants to prison after they pleaded guilty to ripping off 1,600 people. Those clients included hundreds of Vagnozzi’s customers and members of his family and the scheme ended up owing them $240 million.

Vagnozzi attracted customers with radio ads urging investors to consider alternatives to the stock market. He paid civil settlements totaling $5.7 million to the U.S. Securities and Exchange Commission (SEC) and smaller amounts to state securities agencies to settle complaints for selling unregistered securities, including those of Par Funding, a cash-advance lender to businesses that had trouble qualifying for bank loans and others. Vagnozzi blamed the failure to register on bad advice from his longtime lawyer, whose insurers agreed to pay investors, Vagnozzi, and others $47 million to settle their claims.

In contrast with the Par Funding operators, Vagnozzi has not been charged with crimes.

Vagnozzi’s lawyer, George Bochetto, argued in the complaint filed Dec. 8 in federal court in Philadelphia that it was “egregious government overreach” for the SEC to allege illegal acts in a petition that convinced federal Judge Rodolfo Ruiz to include Vagnozzi’s former business, A Better Financial Plan, alongside Par-related assets seized in a 2020 court order,

The complaint contends that the SEC should have known the investment funds it initially accused Vagnozzi of setting up for Par founder Joseph LaForte to evade Pennsylvania investigators were actually started by Vagnozzi on his then-lawyer’s advice when Vagnozzi was unaware of the state’s investigation.

The suit adds that Vagnozzi could have shown this, if the SEC had asked before acting, by citing correspondence and records, including the SEC’s own documents, which he submitted as case exhibits.

The court issued a sweeping order based on the SEC petition. So “on Tuesday, July 28, 2020, a court-appointed receiver arrived unannounced at Vagnozzi’s office, ordered him, his son, his sister, his father-in-law, and the rest of his staff into the conference room, and told them to leave immediately. Vagnozzi’s business, ABetterFinancialPlan.com LLC, which he had carefully built over 17 years, was effectively shut down and placed out of business,” according to the lawsuit.

The seizure of his company and accounts left more than a dozen employees out of a job and Vagnozzi unable to earn a living. His reputation was “irreparably harmed and his assets and businesses ruined,” the suit contends.

When the company was seized, Vagnozzi’s businesses unrelated to Par Funding were collecting revenues at the rate of $4 million a year and growing, according to Bochetto.

At that rate, Bochetto estimates Vagnozzi’s lifetime losses as a result of the SEC’s actions at more than $50 million.

The SEC declined to comment on the litigation.

Vagnozzi’s suit accuses Amie Berlin, an SEC lawyer who led the case for the agency’s Florida office, and other, unnamed federal agents of “malicious” infringement on Vagnozzi’s constitutional right against unreasonable searches or seizure. Berlin didn’t respond to a request for comment.

After losing his company, Vagnozzi ran a Federal Express route for 2½ years and worked in sales for a home-improvement company. He has applied for reinstatement of his Pennsylvania insurance license, which was suspended in 2022 after his company’s seizure.

According to the lawsuit, the SEC wrongly “assumed without legitimate basis” that Vagnozzi had been a “coconspirator” and a “criminal.” The suit also alleges that the SEC failed to give Vagnozzi “prior notice of the investigation and an opportunity to respond” before his business was shut down and his accounts frozen.

The suit depicts Vagnozzi as a victim of Par, a firm whose associates included some that “turned out to be members of the Gambino crime family.”

One of the eight people sentenced in the Par case, former collections head James LaForte, was identified in a separate New York indictment as a member of a Gambino mob crew. James LaForte has denied that allegation. A collector working for James Laforte was also named as a Gambino associate.

“Vagnozzi, apart from having an Italian surname, had nothing in common with the criminals that ran Par Funding,” who “lied to, manipulated, and duped Dean into raising funds for Par Funding’s criminal enterprise, which he genuinely thought was a legitimate business,“ according to the complaint. He ”was not a fraudster nor [a Par] insider" but “an innocent victim of government overreach,” of his lawyer, and “of Par Funding’s fraud and deceit.”

Vagnozzi earlier accused his longtime lawyer, John Pauciulo, of giving him bad advice contributing to Vagnozzi’s failure to ensure clients’ Par investments were registered with the SEC.

Pauciulo has denied wrongdoing. He is the subject of a disciplinary board procedure based on his representation of Vagnozzi that could affect his law license.

Some 1,600 investors, including hundreds of Vagnozzi’s former clients, have so far received about half their investment principal back from the court-appointed receiver that collected Par assets to repay them. Judge Ruiz last week agreed to release another 40%, bringing total payback to around $210 million. A third, smaller payout is expected as additional money is collected.

“This case is truly about runaway regulators that well exceed the boundaries of due process and constitutional fairness,” Bochetto said in an interview Tuesday. He said there have not been a lot of successful complaints against the federal government for overreach but was confident the facts in the Vagnozzi case justified a court review.