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DFJ Founder DiFonzo, Target of FBI Inquiry, Is Found Dead

Probe: His Irvine firm, closed in March, is accused of bilking investors nationwide.

August 16, 2000|MARC BALLON | TIMES STAFF WRITER

The controversial founder of Irvine investment firm DFJ Italia, which closed its doors in March and left about 700 investors with losses of more than $35 million, was found dead in his home Monday night from an apparent overdose of prescription medication, police said.

Paramedics responded to a call from Luigi DiFonzo's Laguna Niguel home at 5:22 p.m. and found the body, police said. DiFonzo was 53.

The coroner's office will investigate the cause of death, but there were no apparent signs of foul play, said Jim Amormino, a spokesman for the Orange County Sheriff's Department.

DiFonzo was the target of federal probes stemming from allegations that his company bilked hundreds of investors nationwide, including high-profile athletes such as former Los Angeles Rams star running back Eric Dickerson, who invested $100,000.

Investors were told their money would be used to buy precious metals and to profit from European currency trading. But attorneys for investors say that DFJ executives used the money to buy mansions, cars and jewelry, among other things.

"It was a Ponzi scheme," said Steven Katzman, a Costa Mesa attorney for the court-appointed trustee in the DFJ Italia bankruptcy case. "It was fraud."

Katzman said DFJ Italia employees described DiFonzo as living lavishly off investors' money, going on $15,000 shopping sprees and taking a $1-million trip to Hawaii in 1998, during which he had a personal jet at his disposal. Court papers show DiFonzo collected about $40,000 per week.

Earlier this year, a group of five investors filed claims to force DFJ Italia into bankruptcy liquidation. A bankruptcy judge approved the emergency request to appoint a trustee to take control of the company.

DiFonzo has personally been sued for $10 million, Katzman said. On July 20, the trustee was awarded title to DiFonzo's $5-million Laguna Niguel home as well as possession of his personal property. DiFonzo was arrested in July for failing to appear at a bankruptcy deposition.

No criminal charges had been filed against DiFonzo or the company.

The FBI has a "pending investigation" against DFJ Italia, an agency representative said. The Securities and Exchange Commission would neither confirm nor deny an investigation.

In late March, FBI agents raided DiFonzo's home, seizing records and evidence. The FBI was looking for evidence of money-laundering and mail fraud, supervising Special Agent Gary Morley said at the time.

DiFonzo and DFJ co-founder Angelo Ales were convicted felons.

In 1978, DiFonzo pleaded guilty to submitting false financial documents to the SEC in an attempt to make his Chicago investment company appear more solvent, records show.

Ales was convicted of filing false tax returns for the years 1993 to 1997, illegally receiving Social Security benefits and giving false testimony at a government hearing, court records show. In January, a federal appeals court upheld Ales' 4 1/2-month prison sentence. He was released about two weeks ago, Katzman said.

Michael Binning, a civil attorney representing DiFonzo, said he was stunned by DiFonzo's death.

"I have no reason to believe it's a suicide and would be very surprised to learn that it was," he said. "Mr. DiFonzo was a strong person who cared very much about his wife and children."

John Barnett, DiFonzo's criminal lawyer, said he had spoken to DiFonzo late last week and that his client's mood was "up."

Katzman, the trustee's attorney, said investigations will continue.

"We're still trying to find out where the money went and will sue to recover it wherever possible," he said. "We're still moving forward."

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