A court-appointed receiver in charge of Philadelphia lender Par Funding and King of Prussia-based A Better Financial Plan has given the first accounting of the millions of dollars at stake in the case for hundreds of investors and thousands of small-business borrowers.

On paper, Par Funding’s assets of $450 million — mostly money tied up in loans — amply cover its $365 million in liabilities, mostly money put up by investors, according to the first report by receiver Ryan K. Stumphauzer.

If that were all, the report would buttress a key claim by Par Funding and ABFP, which are facing civil fraud charges: Enough money exists to cover investors, while the government’s takeover could cripple the company’s ability to make good on its promises.

But Par’s assets will be reduced by “bad debt,” uncollectable loans whose size has not yet been estimated, warned Bradley D. Sharp, president of Development Specialists Inc., a consultant hired by the receiver. Sharp’s memo accompanied the receiver’s report.

For example: Owners of the Sit ’n Chat Diner in Franklin, N.J., who borrowed $100,000 from Par in 2016, paid back $70,000 over the next 3½ years, but still owed $94,000 when it closed last year.

“This was certainly predatory lending,” Dan Marchese, the owners’ lawyer, said in an interview Monday. Par had agreed to accept just $27,500 more, but never actually dismissed the larger debt until the receiver went to court at the owners’ request to get the case dropped last week — for a writedown of 70% off what Par had said it was owed.

Should other Par loan paybacks similarly evaporate, there won’t be enough to pay investors, potentially putting pressure on the receiver to go after other assets. His targets might include the multimillion-dollar payments Par made to co-founder Joseph W. LaForte and other insiders. Much of that money went to buy property in Philadelphia and other places, according to court filings.

Receiver Stumphauzer, a Miami lawyer, was put in charge of Par Funding and its assets on July 28 by U.S. District Judge Rodolfo Ruiz, sitting in Florida, after the U.S. Securities and Exchange Commission filed civil fraud charges against LaForte and his wife, Lisa McElhone; Dean Vagnozzi, the owner of A Better Financial Plan; and others.

In its sweeping civil suit, the SEC says that Par Funding, as well Vagnozzi and other boosters of the company, had failed to warn investors of the risks before the firm earlier this year halted paying investors their principal plus interest. Those payments were resumed but were stopped again last month.

Par’s borrowers, meanwhile, say that for years they have been subjected to aggressive collection efforts, including embarrassing letters sent to their customers, sudden withdrawals from their bank accounts, and visits from threatening collection agents.

The receiver’s report, released late Monday, found that small businesses owe Par $420 million. But total assets top $450 million, he found, once the tally included $22 million in company cash frozen by court order, a nine-seat, 2008 Cessna Citation Sovereign jet worth $6.8 million, and $1.6 million held by Par’s former law firm.

This 2008 Cessna 680 jet, which seats nine, is among the assets of Par Funding that was put under a court-ordered receiver after the SEC filed civil fraud charges against the company's owners in July.
Flight
This 2008 Cessna 680 jet, which seats nine, is among the assets of Par Funding that was put under a court-ordered receiver after the SEC filed civil fraud charges against the company's owners in July.

Investors are owed $365 million, according to financial estimates accompanying the receiver’s report.

Among major investments were the $113 million put in by clients of Vagnozzi’s funds; $57 million from funds tied to a Long Island firm, A.G. Morgan Financial Advisors; $47 million from the Chehebar family, owners of the Rainbow Shops national clothing chain; and $18 million from a fund of Media-based firm PTK Investments.

Investment adviser Albert Vagnozzi, of PTK, declined to comment. He is Dean Vagnozzi’s brother and vice chair of the township supervisors for Upper Providence in Montgomery County.

Isaac Chehebar, who invested $15 million of his family total, also declined comment. He referred questions to a lawyer who did not immediately call back.

Along with steering customers to Par Funding, Vagnozzi’s business includes marketing funds in which investors bought shares in life insurance policies from the elderly at a discount, collecting the full amount when the sellers die.

In court pleadings, Vagnozzi has urged speedy payment of the premiums on those policies to keep that business going. But the report said that Vagnozzi and two law firms that represent his operation have still not provided court-ordered records the receiver says he must review before he spends cash that Vagnozzi has designated to pay for the policies.

Vagnozzi’s lawyer, Brian Paul Miller, disputes that criticism and has told Judge Ruiz that his client has cooperated.

The receiver also shed light on what happened to investors who declined an offer from Vagnozzi in April to move their Par Funding investment into longer-term, lower-yielding investments after Par stopped monthly payments.

Many agreed to the switch. But Par gave Vagnozzi “several millions of dollars” to pay investors who simply wanted their money back, even if they were paid less than the full amount, the receiver said.

Although those who demanded a return of their money received some of it, other investors who agreed to the switch now have to wait for the receiver to sort out various fund accounts. In his report, Stumphauzer said he was considering whether to ask those who were paid to return the money so that it can be divided more evenly.

The case has generated wide interest. More than 8,000 visitors have logged on to the receiver’s informational website, www.parfundingreceivership.com, in the last two weeks of August, Stumphauzer reported.