Philip Leonetti Testifies In Businessman's Trial He Is The Star Federal Witness In The Fraud Trial Of Leonard Pelullo.

Posted: October 12, 1994

Confessed Mafia hit man Philip Leonetti emerged from hiding yesterday to testify in the federal fraud and racketeering trial of Chester County businessman Leonard Pelullo.

Surrounded by federal agents, Leonetti told how he had pressured Pelullo in 1985 and 1986 to pay a $200,000 debt owed to reputed loan shark Anthony DiSalvo.

Leonetti, 41, former underboss of the Philadelphia-South Jersey crime family once headed by his uncle, Nicodemo "Little Nicky" Scarfo, is the star government witness in the trial, which began last week in U.S. District Court in Philadelphia.

He testified he traveled to Florida to meet with Pelullo, whose real estate firm, Royale Group Ltd., was converting old apartment buildings on Miami Beach into hotels. He gave this account of their conversation:

"I mentioned I (had) talked with Tony DiSalvo, and I told him (Pelullo) that Tony was upset. He wanted his money. He (Pelullo) said he was having problems coming up with the money. He asked for a couple of days to think about it.

"I told him, 'You're with us (the Mafia) like Tony is with us, and you'll have to pay Tony the money.' "

Pelullo is on trial for the third time, charged with diverting $2.2 million

from the now-defunct California-based American Savings & Loan, once the nation's largest, and Royale Group Ltd., a public company he ran.

He was convicted the first two times, but the convictions were thrown out by a federal appeals court - each time on the ground that evidence had been improperly admitted.

Through Royale Group, Pelullo borrowed millions of dollars from American Savings & Loan to renovate six Miami Beach hotels. According to prosecutors, Pelullo diverted $2.2 million to bankroll his Chester County horse farm, a restaurant in Philadelphia, and other investments.

In the current trial, prosecutors are again using accountants, bank officers and people who worked for Pelullo to reconstruct a paper trail of checks, phony invoices and payments to contractors for work not done.

The alleged mob connection centers on $114,000 Pelullo is accused of siphoning from Royale Group to help pay his debt to DiSalvo.

During almost two hours of testimony, Leonetti answered questions carefully, speaking softly. Appearing tanned and fit in a charcoal suit, he looked directly at the jurors, who seemed to hang on his every word.

Leonetti told of killing two people with revolvers because "the way I was raised we always used a gun," and conspiring to kill eight others.

He testified that he contacted Pelullo's brothers, Arthur and Peter, after Pelullo failed to pay his debt, but he said he never planned to kill Pelullo. ''If I'd have killed him, we wouldn't have gotten paid."

Leonetti has been called one of the most important mob turncoats in the country. His testimony in nearly a dozen trials has helped win convictions of several high-profile Mafia figures.

He was sentenced to 45 years in prison after his 1988 conviction for racketeering, but turned to the government less than a year later. After testifying at a series of mob trials up and down the East Coast, he had his sentence reduced, ultimately serving five years and five months.

He is now out of jail and in the federal Witness Protection Program, living in an undisclosed location under an assumed name.

His most provocative testimony yesterday came during cross-examination by Pelullo's lawyer, Walter M. Phillips Jr., during which U.S. District Judge Robert F. Kelly admonished Phillips several times for tossing out cynical asides.

"This Mafia family, is this the same thing we saw in the movie The Godfather? Did Hollywood get it right?" Phillips asked.

"They got it close," Leonetti responded.

Asked about how he had worked his way up to underboss - second in command of the mob - he responded calmly.

"I was born in Philadelphia. I grew up in La Cosa Nostra. My uncle elevated me to captain" and later to underboss, Leonetti said, adding that ''one of the reasons he put me there was because I was his nephew and wouldn't cross him to kill him."

Phillips asked whether his promotion to underboss had been advertised.

"Did you consider announcing it in the Wall Street Journal?" Phillips asked. "You're a business, even though you kill, maim and steal."

Phillips asked why Leonetti had allowed $30,000 of Pelullo's debt to linger for more than a year.

Leonetti answered: "He, they were so close to our family."

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