Oct. 8--Even for a hardworking nail salon operator, Lisa McElhone is doing well. At least on paper.
She's worth almost $800 million, or so she reported in a financial statement made public Wednesday.
As McElhone herself wrote in an email attached to the 2020 statement: "This is impressive!!!"
Her statement listed her $8 million jet, as well as a Porsche, a Bentley, a Mercedes, and a Chevy Tahoe, worth a total of $790,000. There were dozens of properties worth $59 million.
Mostly, she reported owning a raft of businesses -- most notably Par Funding, the small-business lender based in Old City that is the subject of a sweeping SEC fraud case. She says it's worth $250 million. She also says she has stakes worth more than $300 million in Colorado marijuana growing and processing operations, Wyoming coal mines, and other private companies that Par funded.
McElhone, 41, was previously known about town as the owner of Lacquer Lounge, a hip nail salon that was the subject of local magazine profiles. But lately, she's been getting less welcome attention as an owner of Par.
In a civil lawsuit filed in July, the U.S. Securities and Exchange Commission accused McElhone; her husband, Joseph LaForte; and financial salesmen in Pennsylvania and Florida of fraud. The agency says they raised nearly $500 million from hundreds of investors but failed to warn them how risky the investments were before Par cut expected payments to them in April.
Ryan Stumphauzer, the court-appointed receiver now running Par, says the couple and other insiders paid themselves hundreds of millions even as the business had trouble collecting on its loans or paying investors. Stumphauzer, who made McElhone's financial statement public, said Par had saddled its borrowers with heavy debts at high rates of interest.
"Many of these merchants had constantly escalating balances they would never pay off," Stumphauzer told U.S. District Judge Rodolfo Ruiz in a Wednesday conference call among lawyers preparing for a trial that is expected to be held next year if the case isn't settled first.
When some of the largest borrowers got in trouble -- the 10 largest accounted for more than half of Par's business -- Stumphauzer said Par would "pivot," and McElhone and other insiders would lend them even more money in return for "an ownership stake."
That stake was in other companies they controlled, setting up a potential conflict of interest with Par's other investors.
The SEC lawsuit also named, among others, Dean Vagnozzi, the Montgomery County financial adviser who had urged people to invest in Par Funding.
In another development Wednesday, Stumphauzer indicated that he was willing to give Vagnozzi back control of several other investment funds he ran that are unrelated to Par Funding. These include funds that invest in life insurance policies, litigation, and medical settlements.
In reference to McElhone, the judge complained that she had "a million accounts and a million entities," making it tough to track investors' and borrowers' money. He said it made sense for Stumphauzer to find and "pursue" McElhone's assets and those of other defendants if they were paid for with investors' money.
Lawyers for the couple say the payments were legal.
A decade ago, McElhone and her husband, LaForte, 49, then a twice-convicted financial trickster just out of prison, founded Par Funding to lend cash to small businesses. The SEC says investors were misled about her husband's criminal past, and the defendants falsely claimed that the investments were insured and based on loans that were carefully underwritten.
McElhone and LaForte have denied wrongdoing. FBI agents, investigating their businesses, in July searched their homes in Lower Merion, Florida, and the Poconos. The government seized the jet and seven loaded handguns and rifles. LaForte was sent to federal prison, awaiting trial on charges of illegal possession of guns by a felon. His defense: The guns were Lisa's.
On Twitter, McElhone describes herself as "a serial entrepreneur, adviser, and investor, current pet project Lacquer Lounge in Philadelphia." She's a Philadelphia native who studied dance at a creative arts high school and later went to St. Joseph's University, earning a degree in management information systems.
She opened Lacquer Lounge in 2012 at Fifth and Fitzwater Streets in South Philadelphia, later moving to North Third Street in Old City. It is still operating. In an interview with Swagger magazine earlier this year, McElhone attributed her success to an old-school approach.
"I have been involved in a few start-ups which had great exit opportunities in the past," she said. "After I opened my first business, I put my savings into my business' which was a big risk at the time but ultimately paid off. So, I'd say my approach to money was a bit old-fashioned but it worked for me."
In his report, Stumphauzer said he had "grave concern" about McElhone's claim in her financial statement to own "substantial" investments in some of Par Funding's largest debtors, noting that several of these were in financial trouble. He pledged to continue investigating her holdings and others he expects were paid for with Par money, adding that he would pursue those assets to "the ends of the earth."
McElhone invoked her Fifth Amendment right not to testify when asked to respond to questions under oath as part of the SEC case, according to Philadelphia lawyer Gaetan J. Alfano, a co-counsel to the receiver.
In a court filing Tuesday, McElhone's lawyers had complained that Stumphauzer had not paid $30,000 due on her company's American Express bill. In the Wednesday call, Stumphauzer said those charges included $9,000 in charges for a golf outing that took place on the day in July that the SEC brought its complaint and thousands of dollars more in spending on "luxury goods" in New York City.
"According to Ms. McElhone, she's got north of $500 million to pay that AmEx bill while we sort that out," the receiver said.
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