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Advisor Known for Unconventional Advice Hit With RICO Suit

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An advisor well-known in the Philadelphia area for encouraging investors to spurn 401(k)s and IRAs and embrace niche investments faces a new class-action suit on behalf of more than 50 investors claiming he defrauded them out of more than $15 million.

The latest complaint, filed Nov. 6 in U.S. District Court for the Eastern District of Pennsylvania in Philadelphia with 55 named plaintiffs and then corrected Monday to include 57 plaintiffs, accuses Dean J. Vagnozzi, founder and CEO of the King of Prussia-based investment firm A Better Financial Plan (ABFP), of negligent misrepresentation, breach of fiduciary duties, conspiracy, fraud, unjust enrichment, aiding and abetting fraud, and aiding and abetting breach of fiduciary duties.

The complaint brings its claims under the federal Racketeer Influenced and Corrupt Organizations Act and alleges Vagnozzi and others named in the suit conspired to advertise, market and sell ABFP merchant cash advance investments, which are unregistered securities, as a purportedly safer and more profitable alternative to registered securities like stocks and bonds.

The defendants’ “scheme began to unravel in March 2020, when thousands of small businesses defaulted on the merchant cash loans underlying the investments sold by ABFP,” Edelson Lechtzin, one of the law firms representing the plaintiffs, says on its website.

“Panic among ABFP investors ensued when the interest payments stopped in March 2020,” the law firm alleged, adding: “In late March 2020, Vagnozzi admitted that the merchant cash lender, Par Funding, was insolvent. By the end of April 2020, Vagnozzi had fraudulently induced hundreds of investors to enter into a so-called Exchange Notes Offering, which will pay ABFP investors 4% interest, instead of the promised 10% interest, and the repayment of principal will be delayed from the promised 1-year term to 7 years.”

The law firm called the deal an “unmitigated disaster for ABFP investors, who include elderly persons and others on fixed incomes.”

The complaint says that “Vagnozzi is well known in the Greater Philadelphia region for his ubiquitous AM radio advertisements promoting ABFP and its four types of investments — merchant cash advance funds, life settlement funds, litigation funding, and real estate funds.

“However, Vagnozzi’s radio advertisements never mentioned that in May 2019, he agreed to pay a state-record $490,000 to settle charges by the Pennsylvania Department of Banking and Securities that he was selling securities without a license,” the complaint points out.

The ABFP website proclaims: “Vagnozzi is not your typical Financial Advisor. He’ll suggest you avoid your company’s 401k. He’ll tell you not to pay off your mortgage. He’ll advise you to forego an IRA. He’ll hit you with numerous ideas, none of which you’ve ever heard your current money manager utter.”

Also named as defendants in the suit are: John W. Pauciulo, Vagnozzi’s longtime attorney; members or former members of Vagnozzi’s staff at ABFP; Christa Vagnozzi, Dean’s wife; Alec Vagnozzi, their son; Pauciulo’s law firm, Eckert Seamans Cherin & Mellott; and various business organizations that either have done business with the other defendants or have been associated with them. This group includes Coventry First, a Fort Washington, Pennsylvania life settlement fund specialist that the plaintiffs say “became Dean Vagnozzi’s primary source of life insurance policies for his life settlement funds” following the “collapse” of the firm Life Partners in 2015.

ABFP and Coventry First did not immediately respond to requests for comment on Friday.

Edelson Lechtzin and Chimicles Schwartz Kriner & Donaldson-Smith, another of the three law firms representing the plaintiffs, previously filed a class-action complaint against Vagnozzi, Pauciulo and ABFP Aug. 5 in U.S. District Court for the District of Delaware on behalf of other investors who were allegedly defrauded, making similar claims under the RICO Act.

A third RICO lawsuit seeking class-action status was also filed Sept. 9 in U.S. District Court for the Southern District of Florida, making similar claims against Vagnozzi, Pauciulo and Eckert Seamans Cherin & Mellott.

The Delaware suit echoed allegations made by the Securities and Exchange Commission in July against the owners of Old City, Pennsylvania-based small-business lender Par Funding, Dean Vagnozzi, and others who sold investors funds backed by Par’s loans. That complaint was filed July 24 in U.S. District Court for the Southern District of Florida.

Earlier that month, the SEC filed settled charges against Vagnozzi and ABFP for selling more than $32 million in securities to retail investors in unregistered offerings and for together acting as an unregistered broker in connection with a separate offering.

Vagnozzi was suspended by the SEC and is not currently registered as a broker, according to his report on the Financial Industry Regulatory Authority’s BrokerCheck website.

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