Sign Here to Lose Everything

Part 5

Fall Behind on These Loans?

You Might Get a Visit From Gino

Gino Gioe enters the Los Angeles office of Radiant Images on Feb. 15, 2018, captured by a surveillance camera. SOURCE: COMPLAINT FILED IN U.S. DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK.

The unregulated cash-advance industry is reviving collection tactics of a bygone era.

One afternoon in February, a tanned man in a dark suit strolled into a Los Angeles office without an appointment. He was about 5-foot-7, with a bodybuilder’s physique and huge, gnarled hands. He identified himself as “Joe’s cousin” and asked for the owner.

An employee at the front desk, his face turning pale, took the man to meet the boss, Michael Mansouri. The visitor demanded to know why Mansouri, whose company rents high-tech cameras to Hollywood filmmakers, had stopped making payments on a loan. Then, according to a court complaint Mansouri’s company filed, he mentioned another delinquent borrower who’d been mangled in a car crash and remarked: “These are the kind of things which strongly affect wives and children.”

Mansouri says he was so shaken that he called the police. He also bought a gun and learned how to use it. “That, to me, is a threat,” he says.

Image of Gino Gioe in 2012.
Gino Gioe in 2012.
SOURCE: COURTESY OF NEW YORK DAILY NEWS.

For the visitor, a convicted felon named Renato “Gino” Gioe, it was just business. For six years, he traveled the country collecting debts for a Philadelphia company called Par Funding, also known as Complete Business Solutions Group Inc. The company says on its website that it has advanced $600 million to more than 2,500 businesses. The effective annualized interest rates on its advances can top 250 percent.

Par is one of a growing number of merchant cash-advance companies that offer fast money to small-business owners like truckers or restaurateurs at high rates. They get around lending regulations by saying they’re not making loans—they’re buying the money businesses will make in the future at a discount. Judges have upheld this loophole.

The new industry is in some ways a reincarnation of the loan-sharking rackets of a bygone era. Cash-advance companies use a legal document called a confession of judgment to stack the deck against borrowers, just as payday lenders did a century ago. Small-business lending was once infiltrated by the mob. Today it’s again a magnet for crooks, including some with alleged ties to organized crime. Gioe’s travels around the U.S. show how the regulatory vacuum is enabling intimidation tactics that seem like relics of a lawless past.

Ten of Gioe’s unannounced visits to borrowers, from Chicago to small-town Alabama, were described in court papers and interviews with Bloomberg News. He made “threats of violence and physical harm” to employees of a California rehab center, according to one court complaint. A tire-shop owner near Boston said in another court filing he “felt that physical harm would come to me and my family” when Gioe walked into his shop in 2016 demanding immediate payment.

A third borrower, recounting Gioe’s visit to his Maryland trucking company last year, described him in an affidavit as resembling “an aging but still formidable character ripped from the World Wrestling Federation” who had been sent not to negotiate but to “intimidate me into making a lump-sum payment.”

Gioe was friendlier last month in an interview at the Wall Street office of another cash-advance firm where he now works. Over the six years he worked for Par as an independent contractor, he said, he made more than 700 surprise visits to deadbeat business owners. But don’t get the wrong idea, he said. He never tried to intimidate anyone. He considers Mansouri a friend. His goal was always to work out a reasonable deal. “I don’t curse,” Gioe said. “I don’t tell them I’m going to f--- ‘em up, I’m going to beat the living s--- out of you. It doesn’t make any sense.”

Wearing a skintight sweater that accentuated his biceps, Gioe held forth for an hour, his mood veering from affable to bored to indignant. He spun an elaborate metaphor about an ambitious stripper and showed off a chest scar from a near-fatal motorcycle wreck.

He didn’t deny his criminal past, which includes convictions for assaulting a woman, smashing a car with a baseball bat and violating a protective order. But he said he’s a different man since leaving prison in 2011, settling down and focusing on his family.

“I found myself,” he said. “Like, universally, organic and the whole bohemian s--- with the Tony Robbins thing. You know what I mean?”

The boss at Par goes by the name of Joe Mack, though his real name is Joseph LaForte and he’s not Gioe’s cousin. LaForte founded Par with his wife in 2011, after serving more than two years in prison for stealing $14 million in a real estate scam and running an illegal gambling operation. LaForte says he uses the alias to conceal his criminal record, which he says has dogged him even though the charges are a decade old and his loan company follows the rules.

“It’s unfair that this stuff stays around forever,” LaForte says. “Google my name. Look what comes up: mugshots.”

LaForte has a point: The most unpleasant Google results are actually about his grandfather and uncle, both also named Joseph LaForte.

His grandfather, nicknamed “Joe the Cat,” and his uncle, “Buddy,” were made men in the Gambino crime family under boss John Gotti, according to George Gabriel, the lead FBI agent on the Gotti investigation. Both were loan sharks, Gabriel says.

LaForte has never been accused by prosecutors of having mob ties. Asked about the mafia, he says: “I don’t believe there’s any such thing.”

Gioe, 51, is vague about how he connected with LaForte. “Everybody knows everybody, right?” He had an unconventional resume for a finance job. A native of Queens, New York, he spent most of the 1990s in prison after convictions for felony assault, criminal mischief, drug dealing and stealing a Jeep.

Released in 2000, Gioe turned his past into an asset: He marketed himself as a high-end personal trainer with a “jailhouse workout” honed in the joint. Men’s Fitness magazine featured him as “The World’s Toughest Man” in a recurring advice column. After more drug arrests and another four-year prison stretch, he mugged for a New York Daily News profile promoting his training methods.

A planned workout book never materialized, and instead Gioe joined the cash-advance business. In-person debt collection is rare in the industry, even though borrowers often fail to repay their loans. Many companies legally seize assets from delinquent borrowers by using confessions of judgment—documents in which debtors agree in advance to lose any dispute over the transactions—to short-circuit the court process.

A Confessions Boom

Judgments by confession in favor of merchant cash-advance companies in New York state

Cases

3.5K

3.0

2.5

2.0

1.5

14 cases

before 2014

1.0

0.5

0.0

2016

2017

2018

2013

2014

2015

Cases

3.5K

3.0

2.5

2.0

1.5

14 cases

before 2014

1.0

0.5

0.0

2016

2017

2018

2013

2014

2015

Cases

3.5K

3.0

2.5

2.0

1.5

1.0

14 cases

before 2014

0.5

0.0

2016

2017

2018

2013

2014

2015

Note: Totals by quarter
Source: Bloomberg News analysis of New York State Unified Court System documents

Par uses confessions too, but LaForte says he sent Gioe to help customers work out payment plans as an alternative to going to court. A lawyer for Par, Justin White, later said in a letter to Bloomberg News that neither LaForte nor anyone else at Par supervised Gioe’s work.

“He sits down like a gentleman,” LaForte says. “He would never ever do anything wrong to anybody.”

Gioe said he has saved many businesses from bankruptcy. People who claim to be intimidated might be prejudiced against Italians, he said. While his newspaper and magazine profiles mentioned mob ties, he said that’s not accurate.

“Ninety-nine point nine percent of the merchants are receptive to the one-on-one,” Gioe said. “When I finally talk to them, they realize there is a solution.”

Gioe’s visits followed a pattern. He would show up unannounced, demand to speak to the owner and say he wasn’t leaving until he got paid, according to the people who described the visits in court records and interviews. All of the people say Gioe seemed to be trying to intimidate them. Four say they called the police, though no charges were filed.

Mansouri, the co-founder of the movie-camera company, says Gioe chose his words carefully to scare without making explicit threats of violence. His business, Radiant Images, brought the lawsuit describing Gioe’s visit as part of a dispute with Par over $2 million in debt. The case was later settled.

Gioe could be persistent. When he showed up at a beauty-supply warehouse in Chicago last year, its new owner, George Souri, told him a bankruptcy judge had ordered creditors to back off. “We don’t deal with courts, we have our own ways to collect,” Gioe responded, according to an affidavit Souri filed in the bankruptcy case. When Souri forbade him from speaking to the warehouse’s former proprietor, Gioe remarked, “We’ll go to her house and deal with her there,” the affidavit states.

Gioe said the former owner had borrowed $1 million from Par with no intention of paying it back, and that he was the one who felt physically threatened by Souri, a younger man with martial-arts training. Reminded that Souri was the one who called the police on him, he said, “Yeah, can you believe it?”

Tonmoy Sharma, who runs the California rehab center, said in his court complaint that he received threatening texts from someone else connected to Par: LaForte’s brother James.

James warned Sharma he was on his way to Sharma’s house, according to the complaint. “You guys didn’t think I was going away did you?” he texted.

Image of LaForte’s texts.
Texts sent by James LaForte to Tonmoy Sharma and two of his employees at a California rehab center.
SOURCE: COMPLAINT FILED IN NEW YORK COUNTY SUPREME COURT.

Federal prosecutors in New York described James LaForte in a 2012 court memo as an associate of the Gambino crime family. He has served time for loan sharking and having someone’s car torched, and he was convicted for the same real estate scam that landed his brother in jail. White, the lawyer for Par, said that James LaForte denies having any ties to organized crime. James LaForte didn’t respond to questions about the text messages.

Joseph LaForte says his brother is an outside broker for Par who sometimes helps him collect debts but isn’t an employee. He says Par had a right to pursue Sharma for reneging on millions of dollars of debt.

Images of Joseph and James LaForte.
Joseph (left) and James LaForte.

James isn’t the only alleged mobster to turn to the cash-advance business. One of his co-defendants in a 2012 racketeering case, identified by the FBI as a member of the Bonanno crime family, now brokers loans on Staten Island. And another man the FBI once called a Gambino associate works for a similar firm in lower Manhattan.

Joseph LaForte says that even though Gioe was helping borrowers, a few did complain about getting a visit. To avoid any more trouble, he says he replaced Gioe earlier this year with two women who call ahead and make appointments. He also told Bloomberg News that a story about Gioe would be inappropriate since he recently died.

For his part, Gioe says he’s not dead and that he parted ways with Par because “the money wasn’t right” and he was getting sick of the travel. He now works as a salesman for another cash-advance company and says he still does fitness coaching for a few wealthy professional women. “There’s no limits,” he says he tells them. “You never say ‘I can’t.’”

—With assistance from Bob Van Voris

This is the fifth in a series of articles about the merchant cash-advance industry. Read more about how local, state and federal officials are trying to crack down on it as a result of the Bloomberg News investigation.