Joseph D. Steward, 43, a lawyer and longtime political ally of the Philadelphia legislator's, was appointed to the board of FirstPlus Financial Group in November, about six months after a new team of executives assumed control of the company and began investing in businesses here and in other parts of the country.
That expansion -- how it was financed and who benefited from the buying and selling -- is the focus of the federal probe, which is being run through the U.S. Attorney's Office in Camden.
Search warrants issued last week targeted several people and companies, including Nicodemo S. Scarfo, son of jailed mob boss Nicodemo "Little Nicky" Scarfo, and Salvatore Pelullo, an Elkins Park businessman with a previous fraud conviction.
Gavin Lentz, a local attorney for FirstPlus, said yesterday that "the company had done nothing wrong."
Lentz, who responded to a phone call placed to Steward, said that "the government went way overboard" in its investigation.
Lentz said "these [newspaper] articles that this company is somehow controlled by organized crime" are absolutely untrue. He angrily used a barnyard expletive to punctuate his comment.
When the investigation is completed, Lentz said, "the government will have egg on its face."
Assistant U.S. Attorneys James Lynch and Steven D'Aguanno, who are coordinating the investigation, have declined to comment about the case.
In a statement Wednesday, John Maxwell, chairman and chief executive officer of FirstPlus, said federal officials seized records last week from the company's offices in Irving, Texas, and from several of its subsidiaries.
"FirstPlus Financial Group Inc. denies any wrongdoing, and if any charges are ever brought, it will vigorously defend them," the statement said.
Maxwell did not respond to phone calls yesterday.
Stock worth pennies
FirstPlus Financial, once a high flier in the subprime mortgage-lending business, collapsed after the economic downturn of the late 1990s.
Its stock, which once traded at nearly $50 a share, now sells for pennies.
Lentz said Maxwell and his group had rejuvenated the company in the last year.
"This company has $19 million in assets," he said. "It had nothing."
Lentz said Maxwell had appointed Steward to the board. He said FirstPlus had been looking for someone from the Philadelphia region because it had bought companies in the area.
"He's a lawyer. He's a well-known guy," Lentz said of Steward.
Asked specifically how Maxwell knew Steward, Lentz said: "I don't know. . . . It's none of your business."
He also said he did not know whether Steward knew Pelullo. But he said Pelullo "has no ownership interest" in FirstPlus or any of its subsidiaries.
Lentz's law partner, George Bochetto, has represented Pelullo in the past but is not representing him now, Lentz said.
Pelullo has not responded to numerous calls and a visit to his home seeking comment.
Sources familiar with the investigation have described Pelullo as a behind-the-scenes decision maker who is a consultant for FirstPlus and many of its subsidiaries.
One of those subsidiaries, FirstPlus Development, is in the same South Philadelphia building on Bainbridge Street where Pelullo has his consulting business and where his brother Arthur runs his boxing-promotion business.
Training academy
Two other subsidiaries, FirstPlus Restoration and FirstPlus Facility Services, opened a training academy this month in a South Philadelphia warehouse complex owned in part by a Pelullo family trust, according to real estate records.
The school was set up to offer certification training courses in restoration work, according to a FirstPlus announcement touting the May 8 opening of the facility at 2501 Wharton St. The announcement described the academy as a facility that would also offer training to "insurance adjusters, public adjusters [and] home inspectors."
Salvatore Pelullo, 41, is the youngest of four brothers. Federal and state organized-crime investigators have long described his siblings as associates of the local mob.
The brothers have denied those allegations.
Lentz said "casting aspersions" about organized-crime connections to FirstPlus, its board members, or its subsidiaries "is totally out of line."
Stack, whose district includes Northeast Philadelphia, Port Richmond, Bridesburg and Kensington, did not return phone calls seeking comment.
Steward has served as general counsel and chief of staff for Stack, according to reports he filed with the Pennsylvania Board of Ethics. He has also been a member of the state Board of Motor Vehicles and the Industrial Board, according to those filings.
He listed his position as a member of the board of directors of FirstPlus Financial Group in his latest filing.
The federal investigation, according to a copy of a search warrant executed May 8, focuses on 43 companies and individuals, including FirstPlus Financial Group and 12 of its subsidiaries.
FBI agents raided more than a dozen locations last week, including offices and homes here, in Texas and in Florida.
Scarfo's sprawling, newly built house in the Wellington Estates section of Egg Harbor Township, N.J., and Pelullo's stately, Tudor-style house in Elkins Park were among the places the FBI searched.
In addition to records, authorities seized a yacht and a Bentley automobile in Florida, an airplane in Texas, and several weapons, according to people familiar with the probe.
Two guns were seized at Scarfo's house. Because he has two criminal convictions, Scarfo could be charged with possession of a weapon by a felon, an offense that carries a minimum five-year prison sentence.
Weapons were also found in at least one other house and on the yacht, according to those familiar with the probe.
No charges have been filed. Prosecutors are reportedly presenting evidence to a federal grand jury.
The search warrants, which sought documents and records from August 2006 to the present, indicate that the investigation involves allegations of mail fraud, bank fraud, wire fraud, the interstate transportation of stolen property, money-laundering, and conspiracy.
Contact staff writer George Anastasia at 856-779-3846 or ganastasia@phillynews.com.
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