Convicted fraudster and alleged mafia associate Salvatore Pelullo, whose history as a client of Eizen, FIneburg & McCarthy indirectly ushered in the firm's demise.
Convicted fraudster and alleged mafia associate Salvatore Pelullo, whose history as a client of Eizen, FIneburg & McCarthy indirectly ushered in the firm’s demise. ()

First there was the raid.

It was 2008, and the FBI was seeking files from Eizen Fineburg & McCarthy on Salvatore Pelullo, a client of partner Gary McCarthy.

Herb Fineburg, McCarthy’s friend and partner at the time, noticed the name “Scarfo” on the investigators’ list, he said, signaling that the case could be connected with the notorious Philadelphia crime family of Nicodemo “Little Nicky” Scarfo.

Then came the 2011 indictment. McCarthy was charged—along with Little Nicky’s son, Nicodemo Scarfo Jr., Pelullo and 11 others—and accused of swindling $12 million in the takeover of a Texas-based mortgage company called First Plus Financial.

More than five years later, McCarthy has been acquitted and is still practicing law. Scarfo Jr. and Pelullo are still settling into 30-year sentences for racketeering and conspiracy in the First Plus scheme. Eizen Fineburg & McCarthy is long gone.

The criminal case sparked years of civil litigation between McCarthy and his former partners, culminating with an arbitrator’s refusal in January to endorse either side’s version of the dispute. And while McCarthy was cleared of criminal wrongdoing, his acquittal couldn’t undo the events that ripped the partnership apart.

A Longtime Client

Fineburg and McCarthy formed Eizen Fineburg & McCarthy in 1993, along with partner Bernard “Buz” Eizen. All three joined from Pelino & Lentz, and they were equal partners, McCarthy said.

Pelullo had been a client at Pelino & Lentz, McCarthy said, and he remained one with the new firm. “There was a laundry list of businesses he was involved in,” McCarthy said.

Though Pelullo had pleaded guilty to bank fraud in 1999 and wire fraud in 2002 in a pair of financial fraud cases, the firm took him back as a client a few years later, McCarthy said, representing him in the sale of a business. McCarthy handled Pelullo’s file, he said.

Later, McCarthy began working with Pelullo in connection with First Plus, he said. According to this year’s arbitration opinion, he met with both Pelullo and Scarfo Jr. at the firm in April 2007, though McCarthy would later claim he was not aware of Scarfo’s involvement.

The Breakup

Business continued as usual after the FBI raid, Fineburg and McCarthy both said. And when he was charged in 2011, McCarthy said, his firm stood behind him.

“Herb was pretty much with me all the time. He was a good friend, and I needed that at the time,” McCarthy said.

It continued that way until the spring of 2012, when Eizen chose to leave the firm for Flaster Greenberg. Eizen, who declined to comment for this article, said publicly that he was seeking a larger platform for his practice. But the criminal case and ­associated reputational concerns were also factors in the move, McCarthy and Fineburg both said.

“That was sort of the start of the breakup,” McCarthy said.

In an April 2012 email, McCarthy offered to leave the firm before his trial began. In November 2012, McCarthy said, Fineburg told him that he wanted to separate.

On Jan. 23, 2013, McCarthy was locked out of the firm, just over a year after the indictment and one year before trial.

“We were probably loyal to a fault,” said Fineburg, now a principal in Offit Kurman’s Philadelphia office.

Fineburg joined Offit Kurman later that year, in October 2012. Unlike other firms, Offit Kurman offered him an opportunity to bring his staff as well, which was important to him.

“I wanted to make sure everyone had a job,” Fineburg said.

Fineburg said he thought there might be some difficulty finding a new firm because of the ongoing criminal case. But Offit Kurman was “non-judgmental,” 
he said.

Right after his termination, McCarthy set on a course to start his own firm, he said. Soon after, he founded McCarthy Weidler, bringing on shareholder Rachel Weidler and returning to practice even as the trial loomed.

The Criminal Trial

The trial lasted six months. Fineburg went to court to observe some days.

“Because it changed my life, I was interested in it,” Fineburg said.

When the verdict came down in July 2014, McCarthy waited as the foreperson read out the ruling on each defendant for each count.

McCarthy said he knew he did nothing wrong, but still felt relief when he heard the jury’s verdict—not guilty on all 
counts.

“The only way out of there would have been full vindication,” McCarthy said.

“We were pleased he didn’t have to spend time in prison,” Fineburg said. “We were glad it was over… or so we thought.”

What followed was a string of civil disputes over the firm breakup, keeping Fineburg and McCarthy focused on the split for another two-and-a-half years.

The Arbitration

Fineburg brought the arbitration before the American Arbitration Association in 2013, seeking a declaration that McCarthy’s departure was either a resignation or a termination for cause. He also sought reimbursement of $1.3 million in legal fees the firm paid on McCarthy’s behalf.

McCarthy filed a counterclaim, seeking indemnification for more than $1.5 million used for his defense following his termination. He also sought damages resulting from Fineburg, alleging “shareholder oppression and squeeze-out,” the arbitrator’s opinion said.

After 24 days of hearings and sifting through thousands of pages of records, Bennett Picker of Stradley Ronon Stevens and Young, the arbitrator, finally issued his ruling on Jan. 30. “Many years of a harmonious relationship as friends and a profitable relationship as law partners” had “turned to anger and discord” between the men, he noted.

“Given the frustration and anger on all sides both before and after McCarthy’s departure, it is not surprising that I am presented with a ‘Tale of Two Cities’—two world views on what transpired during a course of events that occurred over several years,” Picker wrote.

Both Fineburg and McCarthy had agreed that McCarthy’s legal reputation of Pelullo was at the root of their disagreement. But Fineburg argued that McCarthy was the only person from Eizen Fineburg & McCarthy who truly knew about Pelullo’s activities and relationship with Scarfo. He contended that McCarthy concealed information from Fineburg about Scarfo.

McCarthy, however, has said he had no reason to know the full extent of the First Plus activities. He said Fineburg knew as much as he did about his work with Pelullo.

In the end, neither side could fully persuade the arbitrator. Picker agreed with McCarthy that he had been terminated and had not resigned from the firm, but he found that McCarthy was terminated for cause. And while he concluded that McCarthy did not know he was facilitating a conspiracy to defraud First Plus, he found that McCarthy concealed the full extent of his work from Fineburg.

Picker said McCarthy—but not Fineburg—was aware that Scarfo was present at the April 2007 meeting. And, the arbitrator wrote, McCarthy did not make Fineburg fully aware of the subject of the meeting, which concerned the takeover of First Plus.

Picker said that if Fineburg had full information, the firm would have ended its representation of Pelullo in connection with First Plus. He said McCarthy placed a “blind trust” in Pelullo, and would have known about Scarfo’s role of if he asked more questions of his client. Picker also noted that Pelullo’s earlier felony ­conviction should have been a warning sign.

So Fineburg prevailed on the issues of termination for cause and McCarthy’s claim, Picker wrote, but Picker also “agreed with a number of McCarthy’s arguments in defense.” Neither of the former partners’ fee shifting claims survived.

Moving On

McCarthy had also sued Offit Kurman lawyers Joseph Hayes, Joseph Armstrong and Ted Greenberg alleging malpractice and defamation. Offit Kurman was also a defendant in the defamation suit. Greenberg is now at another firm, but was represented by Offit Kurman throughout the action.

Don Foster of Offit Kurman, who represented his firm and the other defendants in those lawsuits, said they were filed “to drive a wedge between Herb and his group and his new firm.”

“I felt badly that Joe, Joe and Ted were being victimized,” Fineburg said. “We felt he was on a mission to take aggressive action.”

But McCarthy said he only filed the complaints “wanting to right what was wrong.” He alleged that the Offit Kurman lawyers defamed him to his clients and referral sources during a time when he was “trying to get over being terminated.”

Still, McCarthy recently dropped the defamation case.

“I had enough,” he said, after dealing with the facts of the case for more than eight years.

The malpractice case went to arbitration, where the defendants prevailed.

McCarthy said, “In retrospect, I just wish it could have been resolved differently.”

Fineburg said that after all the acrimony and litigation, Picker’s arbitration ruling provides closure. McCarthy, while he said he disagrees with portions of the arbitrator’s opinion, said his acquittal was a “full vindication,” and he’s how looking forward, not back.

He continues to practice at McCarthy Weidler, and he said he has keep most of his clients from before his indictment.

His experience with Pelullo could affect his future decisions on taking new clients, he said. “Some firms have clear-cut policies that you can’t represent anyone who had a criminal conviction,” McCarthy said. “I don’t know if that’s the answer… a blanket statement.”

But, he said, if he encountered another potential client with a felony conviction, “I would think twice about it because of what I’ve been through.”

Fineburg continues to work at Offit Kurman, and Eizen is still at Flaster Greenberg.

Fineburg said there are no easy answers when a lawyer conceals aspects of his practice from his partners, as the arbitrator found McCarthy had done.

But there is at least one clear lesson from the case, he said.

“When you take on a file,” he said, “you better know who it is you’re representing.”

Lizzy McLellan can be contacted at ­215-557-2493 or lmclellan@alm.com. Follow her on Twitter @LizzyMcLellTLI.

First there was the raid.

It was 2008, and the FBI was seeking files from Eizen Fineburg & McCarthy on Salvatore Pelullo, a client of partner Gary McCarthy.

Herb Fineburg, McCarthy’s friend and partner at the time, noticed the name “Scarfo” on the investigators’ list, he said, signaling that the case could be connected with the notorious Philadelphia crime family of Nicodemo “Little Nicky” Scarfo.

Then came the 2011 indictment. McCarthy was charged—along with Little Nicky’s son, Nicodemo Scarfo Jr., Pelullo and 11 others—and accused of swindling $12 million in the takeover of a Texas-based mortgage company called First Plus Financial.

More than five years later, McCarthy has been acquitted and is still practicing law. Scarfo Jr. and Pelullo are still settling into 30-year sentences for racketeering and conspiracy in the First Plus scheme. Eizen Fineburg & McCarthy is long gone.

The criminal case sparked years of civil litigation between McCarthy and his former partners, culminating with an arbitrator’s refusal in January to endorse either side’s version of the dispute. And while McCarthy was cleared of criminal wrongdoing, his acquittal couldn’t undo the events that ripped the partnership apart.

A Longtime Client

Fineburg and McCarthy formed Eizen Fineburg & McCarthy in 1993, along with partner Bernard “Buz” Eizen. All three joined from Pelino & Lentz, and they were equal partners, McCarthy said.

Pelullo had been a client at Pelino & Lentz, McCarthy said, and he remained one with the new firm. “There was a laundry list of businesses he was involved in,” McCarthy said.

Though Pelullo had pleaded guilty to bank fraud in 1999 and wire fraud in 2002 in a pair of financial fraud cases, the firm took him back as a client a few years later, McCarthy said, representing him in the sale of a business. McCarthy handled Pelullo’s file, he said.

Later, McCarthy began working with Pelullo in connection with First Plus, he said. According to this year’s arbitration opinion, he met with both Pelullo and Scarfo Jr. at the firm in April 2007, though McCarthy would later claim he was not aware of Scarfo’s involvement.

The Breakup

Business continued as usual after the FBI raid, Fineburg and McCarthy both said. And when he was charged in 2011, McCarthy said, his firm stood behind him.

“Herb was pretty much with me all the time. He was a good friend, and I needed that at the time,” McCarthy said.

It continued that way until the spring of 2012, when Eizen chose to leave the firm for Flaster Greenberg . Eizen, who declined to comment for this article, said publicly that he was seeking a larger platform for his practice. But the criminal case and ­associated reputational concerns were also factors in the move, McCarthy and Fineburg both said.

“That was sort of the start of the breakup,” McCarthy said.

In an April 2012 email, McCarthy offered to leave the firm before his trial began. In November 2012, McCarthy said, Fineburg told him that he wanted to separate.

On Jan. 23, 2013, McCarthy was locked out of the firm, just over a year after the indictment and one year before trial.

“We were probably loyal to a fault,” said Fineburg, now a principal in Offit Kurman ‘s Philadelphia office.

Fineburg joined Offit Kurman later that year, in October 2012. Unlike other firms, Offit Kurman offered him an opportunity to bring his staff as well, which was important to him.

“I wanted to make sure everyone had a job,” Fineburg said.

Fineburg said he thought there might be some difficulty finding a new firm because of the ongoing criminal case. But Offit Kurman was “non-judgmental,” 
he said.

Right after his termination, McCarthy set on a course to start his own firm, he said. Soon after, he founded McCarthy Weidler, bringing on shareholder Rachel Weidler and returning to practice even as the trial loomed.

The Criminal Trial

The trial lasted six months. Fineburg went to court to observe some days.

“Because it changed my life, I was interested in it,” Fineburg said.

When the verdict came down in July 2014, McCarthy waited as the foreperson read out the ruling on each defendant for each count.

McCarthy said he knew he did nothing wrong, but still felt relief when he heard the jury’s verdict—not guilty on all 
counts.

“The only way out of there would have been full vindication,” McCarthy said.

“We were pleased he didn’t have to spend time in prison,” Fineburg said. “We were glad it was over… or so we thought.”

What followed was a string of civil disputes over the firm breakup, keeping Fineburg and McCarthy focused on the split for another two-and-a-half years.

The Arbitration

Fineburg brought the arbitration before the American Arbitration Association in 2013, seeking a declaration that McCarthy’s departure was either a resignation or a termination for cause. He also sought reimbursement of $1.3 million in legal fees the firm paid on McCarthy’s behalf.

McCarthy filed a counterclaim, seeking indemnification for more than $1.5 million used for his defense following his termination. He also sought damages resulting from Fineburg, alleging “shareholder oppression and squeeze-out,” the arbitrator’s opinion said.

After 24 days of hearings and sifting through thousands of pages of records, Bennett Picker of Stradley Ronon Stevens and Young, the arbitrator, finally issued his ruling on Jan. 30. “Many years of a harmonious relationship as friends and a profitable relationship as law partners” had “turned to anger and discord” between the men, he noted.

“Given the frustration and anger on all sides both before and after McCarthy’s departure, it is not surprising that I am presented with a ‘Tale of Two Cities’—two world views on what transpired during a course of events that occurred over several years,” Picker wrote.

Both Fineburg and McCarthy had agreed that McCarthy’s legal reputation of Pelullo was at the root of their disagreement. But Fineburg argued that McCarthy was the only person from Eizen Fineburg & McCarthy who truly knew about Pelullo’s activities and relationship with Scarfo. He contended that McCarthy concealed information from Fineburg about Scarfo.

McCarthy, however, has said he had no reason to know the full extent of the First Plus activities. He said Fineburg knew as much as he did about his work with Pelullo.

In the end, neither side could fully persuade the arbitrator. Picker agreed with McCarthy that he had been terminated and had not resigned from the firm, but he found that McCarthy was terminated for cause. And while he concluded that McCarthy did not know he was facilitating a conspiracy to defraud First Plus, he found that McCarthy concealed the full extent of his work from Fineburg.

Picker said McCarthy—but not Fineburg—was aware that Scarfo was present at the April 2007 meeting. And, the arbitrator wrote, McCarthy did not make Fineburg fully aware of the subject of the meeting, which concerned the takeover of First Plus.

Picker said that if Fineburg had full information, the firm would have ended its representation of Pelullo in connection with First Plus. He said McCarthy placed a “blind trust” in Pelullo, and would have known about Scarfo’s role of if he asked more questions of his client. Picker also noted that Pelullo’s earlier felony ­conviction should have been a warning sign.

So Fineburg prevailed on the issues of termination for cause and McCarthy’s claim, Picker wrote, but Picker also “agreed with a number of McCarthy’s arguments in defense.” Neither of the former partners’ fee shifting claims survived.

Moving On

McCarthy had also sued Offit Kurman lawyers Joseph Hayes, Joseph Armstrong and Ted Greenberg alleging malpractice and defamation. Offit Kurman was also a defendant in the defamation suit. Greenberg is now at another firm, but was represented by Offit Kurman throughout the action.

Don Foster of Offit Kurman , who represented his firm and the other defendants in those lawsuits, said they were filed “to drive a wedge between Herb and his group and his new firm.”

“I felt badly that Joe, Joe and Ted were being victimized,” Fineburg said. “We felt he was on a mission to take aggressive action.”

But McCarthy said he only filed the complaints “wanting to right what was wrong.” He alleged that the Offit Kurman lawyers defamed him to his clients and referral sources during a time when he was “trying to get over being terminated.”

Still, McCarthy recently dropped the defamation case.

“I had enough,” he said, after dealing with the facts of the case for more than eight years.

The malpractice case went to arbitration, where the defendants prevailed.

McCarthy said, “In retrospect, I just wish it could have been resolved differently.”

Fineburg said that after all the acrimony and litigation, Picker’s arbitration ruling provides closure. McCarthy, while he said he disagrees with portions of the arbitrator’s opinion, said his acquittal was a “full vindication,” and he’s how looking forward, not back.

He continues to practice at McCarthy Weidler, and he said he has keep most of his clients from before his indictment.

His experience with Pelullo could affect his future decisions on taking new clients, he said. “Some firms have clear-cut policies that you can’t represent anyone who had a criminal conviction,” McCarthy said. “I don’t know if that’s the answer… a blanket statement.”

But, he said, if he encountered another potential client with a felony conviction, “I would think twice about it because of what I’ve been through.”

Fineburg continues to work at Offit Kurman , and Eizen is still at Flaster Greenberg .

Fineburg said there are no easy answers when a lawyer conceals aspects of his practice from his partners, as the arbitrator found McCarthy had done.

But there is at least one clear lesson from the case, he said.

“When you take on a file,” he said, “you better know who it is you’re representing.”

Lizzy McLellan can be contacted at ­215-557-2493 or lmclellan@alm.com. Follow her on Twitter @LizzyMcLellTLI.