Charges against Massad, Mallegni similar to '07 ones; Bankruptcy trustees allege racketeering, conspiracy.
The following correction was published in the Telegram & Gazette on April 27, 2012:
WORCESTER - Trustees in U.S. Bankruptcy Court are pursuing assets on behalf of creditors of Nicholas J. Fiorillo and Tracy L. Krowel. Because of an editing error, the trustees' relationship with the couple was incorrect in one instance in an April 17 Telegram & Gazette story.
WORCESTER - Trustees in U.S. Bankruptcy Court have filed an adversary proceeding on behalf of a local couple alleging that two area businessmen engaged in racketeering and conspiracy. Meantime, lawyers for the businessmen have denied the charges, calling them recycled.
Trustees representing the interests of creditors of the bankruptcy estate of husband and wife, Nicholas J. Fiorillo and Tracey L. Krowel, are suing David G. "Duddie" Massad and Marcello Mallegni. The case was filed Jan. 18; however, lawyers for the defendants this month filed a motion asking that the case be transferred to U.S. District Court.
The trustees are Jonathan R. Goldsmith, a Springfield lawyer appointed in Mr. Fiorillo's bankruptcy, and Joseph H. Baldiga, a Westboro lawyer, appointed in Ms. Krowel's case. Their adversary proceeding alleges extortion and loan-sharking, usurious interest rates, falsifying debt figures and bait-and-switch tactics to try to wrest income properties from the couple and their trusts and real estate company, and their personal residences.
Mr. Massad is chairman and majority stockholder in Commerce Bank and Trust Co. and Mr. Mallegni is manager and an owner of LBM Financial LLC in Marlboro. Also named as defendants in the suit are Commerce Bank and LBM which, along with Mr. Massad and Mr. Mallegni, are alleged to have committed breach of contract and breach of covenant of good faith and of fair dealing.
The income properties mentioned in the suit are 157 Shrewsbury St., 249 Lincoln St., 88 Shrewsbury St., all in Worcester, and ABCD North Quinsigamond Ave. in Shrewsbury. The personal residences are 425B Salisbury St., Worcester, and 49 Olde Colony Drive, Shrewsbury.
The trustees allege that the businessmen used threats of violence and loan sharking on loans at up to 75 percent interest in a scheme over the past 13 years to take over properties. The trustees are asking a jury to award $6 million.
Lawyers for the defendants predicted the plaintiffs would be as unsuccessful in proving the allegations as they were in 2007. Mr. Fiorillo and Ms. Krowel brought a civil Racketeer Influenced and Corrupt Organization Act charge against them in U.S. District Court at that time and did not prevail. Judge F. Dennis Saylor IV allowed the plaintiff's motion to dismiss their own case despite his concern it "may be intended by plaintiffs, at least in part, as an effort to evade their discovery obligations and/or imposition of sanctions."
The suit alleges that when Mr. Fiorillo refused to turn over the deed to a building at 267 Shrewsbury St. (the Airline Lewis building) at a meeting in February 2006, Mr. Massad threatened Mr. Fiorillo with physical harm.
Later that year, following reports about Mr. Massad's business practices, the suit says, he called Mr. Fiorillo and threatened him again with physical harm. Both Commerce Bank and LBM had mortgages on Mr. Fiorillo's home at 425B Salisbury St.
"The allegations are outrageous and false," said David Rich, Mr. Massad's lawyer. "These are the same series of allegations that Mr. Fiorillo has been making for six years now and has yet to succeed in providing any evidence to support these allegations."
LBM in-house counsel Philip F. Coppinger said, "LBM and Mr. Mallegni already settled all these claims by Mr. Fiorillo and his wife several years ago. He tried to raise them again in a federal court action he filed in April 2007 against Mr. Mallegni, LBM, Mr. Massad and Commerce Bank, and were dismissed when Mr. Fiorillo was actually called upon to prove his claims."
James D. O'Brien Jr., representing Commerce Bank, said, "We certainly deny the allegations. They've already been addressed in federal district court - and resolved in favor of the defendants."
In court filings last month, Mr. Rich labeled the accusations "inaccurate" yet "persistent" and asked the court to dismiss the complaint.
Mr. Baldiga said, "The trustees believe there has not been a determination of these claims on the merits."
Mr. Coppinger said he thinks the case will fail because "the trustees are going to have to rely on the testimony of Mr. Fiorillo."
He referred to a Worcester Superior Court case in which the judge ruled against Mr. Fiorillo in 2009, saying that he had presented "a fabricated counterfeit document" and that his testimony was untruthful.
In that case, Mr. Fiorillo sought to have his bankruptcy case dismissed - begun with his own petition for Chapter 11 to avoid foreclosure, but involuntarily converted to Chapter 7 liquidation. In upholding the bankruptcy court judge's refusal to allow Mr. Fiorillo's motion to dismiss, U.S. District Judge Douglas P. Woodlock said in June that Mr. Fiorillo's action "suggests bad faith."
However, the current case is brought not by Mr. Fiorillo, but by the trustees, lawyers appointed by the bankruptcy court.
Matthew A. Galin, a lawyer with a Chicago firm hired by the trustees, said, "We know people will question Fiorillo, but we've looked at these allegations for at least six months, and we think they're accurate."
CUTLINE: Mr. Massad