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IN THE UNITED STATES DISTRICT COURT

FOR THE SOUTHERN DISTRICT OF FLORIDA

CASE NO. 20-CV-81205-RAR

SECURITIES AND EXCHANGE

COMMISSION,

Plaintiff,

v.

COMPLETE BUSINESS SOLUTIONS

GROUP, INC. d/b/a PAR FUNDING, et al.,

Defendants.

______________________________________/

RECEIVER’S REPLY TO DEFENDANTS JOSEPH LAFORTE AND LISA MCELHONE’S

OPPOSITION TO MOTION FOR AN ORDER TO SHOW CAUSE WHY DEFENDANTS

JOSEPH LAFORTE AND LISA MCELHONE SHOULD NOT BE HELD IN CONTEMPT

Ryan K. Stumphauzer, Esq., Court-Appointed Receiver (“Receiver”) of the Receivership 

Entities, by and through his undersigned counsel, hereby files his Reply to Defendants Joseph 

LaForte (“LaForte”) and Lisa McElhone’s (“McElhone”) (collectively, the “Defendants”)

Response [ECF No. 1385] (the “Response”) in opposition to the Receiver’s Motion for an Order

to Show Cause Why Defendants Joseph LaForte and Lisa McElhone Should Not Be Held in 

Contempt [ECF No. 1328] (the “Motion”) and states:

INTRODUCTION

In their Response, LaForte and McElhone argue that the Receiver’s Motion is nothing more 

than an “unsubstantiated narrative” that is not supported by any evidence “in admissible form.”

(Response at 1). Rather, they suggest, the Receiver has merely identified a “handful of 

transactions” that do not “actually show that any funds were diverted from the Receivership or that 

either of the Defendants were involved in the transactions.” (Id.). In an effort to support their 

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position, the Defendants have submitted a declaration of LaForte’s brother, James “Jimmy” 

LaForte (“Jimmy LaForte”), as well as declarations from two of Jimmy LaForte’s close friends.

Denying that any improper diversion took place, the Defendants suggest that the millions 

of dollars the Receiver identified in the Motion “came from a $3 Million loan” that one of Jimmy 

LaForte’s friends, Francis Scarpati, through his company Financial Mutual, provided to Jimmy

LaForte. (Id. at 2). They even attach a copy of a purported loan agreement that Mr. Scarpati and 

Jimmy LaForte executed. Criticizing the Receiver for “not properly investigat[ing]” this matter 

and “not actually understand[ing]” these transactions, the Defendants emphatically proclaim that 

“[n]one of these funds represent diverted receivables owned by CBSG or CFS in any way.” (Id.)

As the Receiver will demonstrate at the upcoming hearing on the Motion, however, the 

opposite is true. There is overwhelming evidence of this diversion scheme. Notwithstanding what 

is contained in his sworn declaration, Mr. Scarpati, the longtime friend of Jimmy LaForte, will 

testify at the hearing that funds he “loaned” for the payment of LaForte and McElhone’s legal fees 

in this case, in fact, came from contract balances he collected from CFS merchants. Using an alias 

and misrepresenting to merchants that their balances had been “transferred” to another MCA 

company, Scarpati collected at least $950,000 in diverted CFS receivables and used those funds to 

pay LaForte and McElhone’s professional fees. The Receiver is prepared to present this and other 

evidence that clearly and convincingly establishes this diversion scheme and that LaForte and 

McElhone violated this Court’s orders.

ARGUMENT

A. The Defendants misunderstand the procedures governing contempt proceedings.

In the Opposition, the Defendants criticize the Receiver for failing to support the 

allegations in the Motion with clear and convincing evidence. (Opposition at 5). To that end, they 

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suggest that there is a “complete absence of proof” in the Motion. Although “clear and 

convincing” is the correct standard of proof for finding a party in contempt, the time for the 

Receiver to provide such proof is at the evidentiary hearing on the Motion, and not in the Motion 

itself. The Receiver previously explained this in the Motion:

“If the court finds that the conduct as alleged would violate the prior order, it enters 

an order requiring the defendant to show cause why [the party] should not be held 

in contempt and conducts a hearing on the matter.” Mercer v. Mitchell, 908 F.2d 

763, 768 (11th Cir. 1990) (emphasis added); Wyatt ex rel. Rawlings v. Rogers, 92 

F.3d 1074, 1078 (11th Cir.1996) (stating that the moving party need only allege

facts, which if true, would support a contempt finding).

(Motion at 16). 

The Receiver alleged sufficient facts in the Motion to justify the Court entering a show 

cause order and scheduling a hearing during which the Receiver will present his evidence. Indeed, 

as alleged in the Motion, the Receiver identified an extensive diversion scheme, which constitutes 

a violation of the Court’s various orders appointing the Receiver, placing the Receiver in charge 

of the Receivership Entities, and imposing an asset freeze over “Receivership Assets” and 

“Recoverable Assets.” The Receiver is prepared to present admissible evidence that clearly and 

convincingly proves these allegations at the hearing on September 12, 2022.

The Defendants further criticize the Receiver for relying on “hearsay and unproven 

collateral allegations” in support of the Motion.1

 Much of what the Defendants are referring to—

such as the accounting report detailing cash payments from the owner of B&T Supplies to Joseph 

LaForte and Jimmy LaForte, and the Receiver’s prior show cause motion relating to the 

Defendants’ data breach—were simply included in this Motion to put these additional violations

1 Ironically, the only “evidence” the Defendants provide in their Opposition are three declarations, 

none of which the Defendants will be permitted to introduce at the evidentiary hearing to prove 

the truth of the statements contained therein. See Fed. R. Evid. 1101(b) (“These rules apply in . . . 

civil cases and proceedings” and “contempt proceedings.”).

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in context, but are not necessary to prove the diversion scheme. In any event, the Receiver will 

reduce his proof of this diversion scheme to admissible evidence at the upcoming hearing.2 

B. The Receiver provided the Defendants with extensive evidence of the scheme.

In the Motion, the Receiver identified millions of dollars of diverted payments to 

“nominee-controlled or shell corporations,” which were then used to pay LaForte and McElhone’s 

legal fees in this case. The Defendants state in their Opposition that “the Receiver has presented 

no evidence that these monies were actually paid,” going so far as suggesting that “[t]here no bank 

records or other records attached to the Motion to evidence the payments.” (Opposition at 7). 

What the Defendants fail to mention is that on August 19, 2022, ten (10) days before they filed 

their Opposition, the Receiver sent these very bank records to the Defendants. 

The Receiver could have filed these bank records on the public docket, but chose not to for 

several reasons. First, with the docket in this case now approaching 1,400 entries, the Receiver 

did not see a need to flood the docket with every bank record evidencing every single payment the 

Receiver has identified as part of the diversion scheme. Rather, the Receiver included in his 

Motion summary tables of the total amounts that various entities and individuals paid or received 

as part of this diversion scheme, along with samples of the checks and bank statements reflecting 

these transactions. The Receiver will present this evidence to the Court at the contempt hearing.

Second, the bank records contain numerous references to account numbers and other 

financial information that the Receiver would have needed to redact prior to filing. Given the 

2 The Receiver does not anticipate that LaForte or McElhone will testify at the hearing. Rather, 

their counsel indicated that LaForte and McElhone would assert their Fifth Amendment rights in 

response to the Receiver’s questions about the diversion scheme. As a result, counsel for the 

Receiver is working with counsel for LaForte and McElhone on finalizing a stipulation confirming 

that LaForte and McElhone would assert their Fifth Amendment rights if asked certain questions 

at the hearing regarding the diversion scheme, in lieu of requiring them to appear and assert their 

Fifth Amendment right in response to each of those questions

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voluminous nature of these records, the Receiver decided it was not an appropriate use of the 

Receivership Estate’s resources to redact all potentially sensitive information from these records.

Third, as discussed above, the time for the Receiver to prove his allegations is at the 

evidentiary hearing on September 12, 2022. On the other hand, his obligation in filing the Motion 

was simply to include sufficient facts that, as alleged, reflected a violation of this Court’s orders. 

The Receiver more than satisfied this standard in providing summaries and totals of the diverted 

funds, and is prepared to provide the Court with detailed evidence at the upcoming evidentiary 

hearing to warrant a finding of contempt against LaForte and McElhone.

C. The main witness LaForte and McElhone identify in their Opposition—Francis

Scarpati—will testify at the upcoming hearing, contradict much of what was 

contained in his declaration that the Defendants presented to this Court, and admit 

to participating in the diversion scheme.

The Receiver’s Motion describes, as part of this diversion scheme, that dozens of CFS 

merchants were tricked into paying funds to other companies, including Platinum Rapid Funding 

and Financial Mutual, and that these funds were then used to pay the fees for LaForte and 

McElhone’s lawyers and forensic accountant in this case. The Defendants scoff at these 

allegations, suggesting that there is not “a shred of evidence to prove that any CFS merchants were 

tricked in these ways.” (Opposition at 11). The Defendants further deny that Francis Scarpati, the 

owner of Financial Mutual, was in the middle of executing this diversion scheme. In fact, they go 

so far as attaching a declaration from Mr. Scarpati, explaining that Mr. Scarpati “flatly den[ies] 

these allegations.” (Id.) Rather, they suggest, the Receiver has “jumped to conclusions,” and does 

not appreciate that Mr. Scarpati was simply paying these professional fees as a favor to his 

childhood friend, Jimmy LaForte, under a $3 million loan agreement. 

The Receiver issued a subpoena to Mr. Scarpati commanding him to testify at the upcoming 

evidentiary hearing on September 12, 2022. Mr. Scarpati’s counsel indicated that Mr. Scarpati 

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was not available to attend the hearing—either in person or over Zoom—due to other pre-planned 

travel arrangements. As a result, the Receiver’s counsel took the videotaped deposition of Mr. 

Scarpati on September 7, 2022. The Receiver has ordered the transcript of this deposition on an 

expedited basis and will present Mr. Scarpati’s deposition testimony to the Court at the hearing.

To put it mildly, Mr. Scarpati’s deposition testimony is devastating to LaForte and 

McElhone’s efforts to oppose the Motion. Mr. Scarpati admitted several critical facts during the 

deposition, including the following:

• Mr. Scarpati described himself as a longtime friend of Jimmy LaForte. 

• Immediately before the appointment of the Receiver, Mr. Scarpati worked for CBSG 

and, prior to that, he worked for its affiliate Fast Advance Funding LLC. 

• For the majority of the approximately four (4) years he worked for CBSG and its related 

entities, Mr. Scarpati worked directly under the supervision of Jimmy LaForte.

• After the appointment of the Receiver and imposition of the asset freeze, Mr. Scarpati 

used an alias, “Terry Lane,” and sent emails from a CFS email address to CFS 

merchants, urging them to pay off their CFS balances to Platinum Rapid Funding.

• Mr. Scarpati estimated that approximately 75 CFS merchants agreed to make these 

payments, which totaled at least $900,000.00.

• Platinum Rapid Funding then wired these funds to one of Mr. Scarpati’s companies, 

Financial Mutual.

• Scarpati, through Financial Mutual, then “loaned” these funds to Jimmy LaForte under 

the terms of a written loan agreement. Contrary to what he represented in his 

declaration, however, the loan agreement was not for a loan of $3 million. Rather, the 

loan amount was “open-ended” under which Mr. Scarpati, at Jimmy LaForte’s 

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direction, would send out as much money as Jimmy LaForte requested and Mr. Scarpati 

could provide from his account at Financial Mutual. These payments totaled more than 

$3.2 million, including more than $2 million that Financial Mutual paid directly to 

LaForte and McElhone’s lawyers and forensic accountant in this case. 

• Mr. Scarpati testified that the loan agreement, which is dated as of August 1, 2020, did 

not include the $3 million figure when Mr. Scarpati and Jimmy LaForte allegedly 

executed the agreement on that date. [ECF No. 1385-2 at pp. 24-26]. Rather, Mr. 

Scarpati confirmed that this figure was filled in within the last 30 to 60 days (i.e., after 

the Receiver filed the Motion).

• Despite the statement in his declaration that Mr. Scarpati had no business dealings with 

LaForte following the establishment of the Receivership, Mr. Scarpati confirmed the 

authenticity of a text message thread from October 2020, in which he asked another 

former Par Funding employee, John “Jack” Mulvihill, who is the owner of BG Sky 

Trade LLC, to send him commissions that were owed to “Jimmy and Joe.” Mr. Scarpati 

confirmed that “Jimmy and Joe” was a reference to Jimmy LaForte and Joseph LaForte. 

He further testified, however, that he could not recall why he would have been 

requesting the payment of any commissions owed to Joseph LaForte after the 

establishment of the receivership.

Mr. Scarpati also testified about a number of other topics relating to the diversion scheme. 

Thus, despite the Defendants’ suggestion that there is not “a shred of evidence to prove 

that any CFS merchants were tricked in these ways,” Mr. Scarpati flatly admitted that he 

participated in this diversion scheme, in the precise manner the Receiver described in the Motion. 

The Receiver will present this and other evidence to the Court at the upcoming evidentiary hearing, 

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conclusively establishing this diversion scheme and LaForte and McElhone’s violations of this 

Court’s orders.

CONCLUSION

For the foregoing reasons and those further explained in the Motion, the Receiver submits 

that he will prove this diversion scheme with clear and convincing evidence, and requests that the 

Court enter an Order finding LaForte and McElhone in contempt of court and granting such other 

and further relief as is just and proper.

Dated: September 8, 2022 Respectfully Submitted, 

STUMPHAUZER FOSLID 

SLOMAN ROSS & KOLAYA, PLLC 

Two South Biscayne Blvd., Suite 1600 

Miami, FL 33131 

Telephone: (305) 614-1400 

Facsimile: (305) 614-1425 

By: /s/ Timothy A. Kolaya

TIMOTHY A. KOLAYA 

Florida Bar No. 056140 

tkolaya@sfslaw.com

Co-Counsel for Receiver 

PIETRAGALLO GORDON ALFANO 

BOSICK & RASPANTI, LLP 

1818 Market Street, Suite 3402 

Philadelphia, PA 19103 

Telephone: (215) 320-6200 

Facsimile: (215) 981-0082 

By: /s/ Gaetan J. Alfano 

GAETAN J. ALFANO 

Pennsylvania Bar No. 32971 

(Admitted Pro Hac Vice) 

GJA@Pietragallo.com

Co-Counsel for Receiver

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CERTIFICATE OF SERVICE

I HEREBY CERTIFY that on September 8, 2022, I electronically filed the foregoing 

document with the clerk of the Court using CM/ECF. I also certify that the foregoing document is 

being served this day on counsel of record via transmission of Notices of Electronic Filing 

generated by CM/ECF. 

/s/ Timothy A. Kolaya 

TIMOTHY A. KOLAYA

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