In Racketeering Case, Sharply Contrasting Profiles Leonard Pelullo's Lawyer Talked About Urban Renewal. The Prosecutor's Topic Was Diversion Of Money.

Posted: October 20, 1994

Two conflicting profiles of Chester County businessman Leonard Pelullo emerged yesterday during closing arguments in his third federal fraud and racketeering trial.

Defense lawyer W. Neil Eggleston depicted Pelullo as a caring man whose

dream was to revitalize South Miami Beach by restoring six run-down hotels.

Assistant U.S. Attorney Ronald G. Cole, of the government's Organized Crime Strike Force, portrayed him as a man who attained a position of power, then exploited it for his own personal gain.

Pelullo is charged with 49 counts of fraud and racketeering for allegedly diverting more than $2 million from the Miami Beach hotel project to pay for a horse farm in Chester County, a restaurant in Philadelphia, and other personal

investments, and to repay a debt to a reputed Mafia loan shark.

Pelullo has repeatedly denied the charges and maintained his innocence. A 12-member jury will begin deliberating the case this morning.

Pelullo, 44, is on trial for the third time since he was indicted by a federal grand jury in 1991. His two previous trials - in 1991 and 1993 - ended in convictions, but were overturned on appeal.

The alleged crimes occurred in 1984 and 1985, when Pelullo was chief executive of Royale Group Ltd., a real estate development company in Florida. Royale borrowed more than $6 million from American Savings & Loan of Stockton, Calif., for the restoration of the hotels. The government contends that Pelullo diverted about $2.2 million to subsidize his investments in Philadelphia and elsewhere and to repay a debt to reputed loan shark Anthony DiSalvo.

During closing arguments, Eggleston argued that Royale had purchased the six hotels in late 1983 but did not get a loan from American until the summer of 1984. He said that in the interim, Pelullo lent the corporation more than $1 million with the approval of Royale's board of directors to pay for the hotels and begin renovations.

"He was entitled to get some money back," Eggleston said. "He put in $1,162,000."

Cole, however, dismissed that argument as "absurd," saying that Pelullo could not have lent that kind of money to Royale, particularly since he was borrowing money from a loan shark during the same general period. The federal prosecutor said that Pelullo diverted the money from the hotel restoration project to subsidize a lifestyle that he could not afford and to pay for expenses on his horse farm, restaurant and other investments.

"Leonard Pelullo might not have been a millionaire, but that didn't stop him from living like one," Cole said. He said that federal investigators had traced the S&L money through checks and wire transfers directly to Pelullo's personal accounts.

"This was American Savings and Loan's money and Royale's money, not Leonard Pelullo's," Cole said.

Testimony in the trial, now in its third week, ended Tuesday without Pelullo taking the stand, as he had done twice before. Most of the trial has involved testimony from accountants, bank officers and people who worked for Pelullo as the government attempted to reconstruct a paper trail of checks,

phony invoices and payments to contractors for work not done.

One highlight was the testimony of confessed Mafia triggerman Philip Leonetti, the former underboss of the Philadelphia-South Jersey crime family.

Leonetti testified that he traveled to Florida in December 1985 to pressure Pelullo to repay a $200,000 debt to DiSalvo. The government alleges that Pelullo used funds from a Royale subsidiary to repay the debt.

Earlier this week, Pelullo's father, Peter Pelullo, testified that it was he who helped his son repay the loan to DiSalvo with a portion of a bank loan he had taken out. He testified that he had lied on the loan application and said the money was to be used to buy and renovate a restaurant on South Street.

Eggleston, a Washington, D.C., lawyer who helped win Pelullo's two appeals, said the elder Pelullo lied to protect his son.

"I'd lie to the bank to keep my son from being killed," Eggleston said. ''(Peter Pelullo) took out a loan to pay DiSalvo to keep his son from being killed."

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