Ex-State House lobbyist faces sentencing in 'Ponzi scheme'



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In August 2006, Joseph Zizzo lent longtime New Hampshire State House lobbyist Joan LaPlante some $120,000 of his mother's money at 24 percent interest. "She swore on a stack of Bibles that the money would be safe and sound -- she would do nothing to harm my mother," testified the retired Massachusetts jeweler at LaPlante's trial this past February.But when he needed that money in 2007 to put his mother in an assisted living facility to avoid a nursing home, he couldn't reach LaPlante. He finally knocked at the door of her Pembroke home at 5 a.m. one winter's morning in March, and waited more than a half-hour before she answered."I said, 'Joan, what's going on here? Why aren't you calling me? Why are you avoiding me? Where's my money? What's going on with this business?' And she said, 'Everything is going fine.'"But everything wasn't going fine. LaPlante's business closed two months later, and three years after that a jury - following a five-day trial - convicted LaPlante of using the mail to run what prosecutors call a "Ponzi scheme" that lured dozens of lenders like Zizzo into investing in a factoring business that no longer existed.LaPlante is scheduled to be sentenced in October.Not 'an ogre'LaPlante, former state director of the National Federation of Independent Business, was still telling investors in monthly statements up to March 2008 that they would still be getting high interest rates on their loans. That was when Dick Tracy, an investigator with the state Attorney General's office, confronted her in a tape-recorded interview.At that point, LaPlante told Tracy, she owed more than twice the principal on $600,000 in receivables -- not to mention the interest she had promised those lending her money -- but she was afraid to tell them the truth because "the last thing I needed was everybody to do a bank run."LaPlante said she intended to pay people back - at least the principal -- with "her own money," but by that point she had lost her home to foreclosure and had "nothing much" in her bank account, according to the interview."I don't know what to do, to be honest," she told Tracy. "I'm in over my head. I'm at a dead end. I don't know what is right and wrong at this point."Shortly after that interview, she told investors the business involved -- JRL Business Resources LLC -- was closed, but she never declared bankruptcy, which she termed the easy way out. She also said she was still depositing money into people's bank accounts."I'm keeping my word," she testified at trial. "One of the things I've always held was my integrity and my honesty, and I'll tell you something -- it really hurt me to see these people up here thinking I'm an ogre.""Joan never uttered a statement that wasn't in good faith," said her former attorney Darrin Brown at the trial. "She had a sincere belief and an improving financial picture from JRL Business Resources."Attributing base motives to someone whose business failed and who lost her home and all money is "fraud by hindsight," he added.But many lenders dismissed these repayment efforts as dribs and drabs -- small compared to what they lost. To prosecutor Robert Kinsella, they were simply irrelevant."The case is not about whether or not she made efforts to pay people after she stole the money in an effort to keep her Ponzi scheme going. It is all about what she told them and how she convinced them to give control of their money," he said at trial.LaPlante's current attorney, Mark Howard, did not return phone calls to discuss the trial. Kinsella referred all questions to the U.S. Attorney's public relations spokesperson, who also did not return phone calls in time for deadline.Factoring businessJoan LaPlante had been a well-known lobbyist for more than two decades, best known for representing the NFIB in Concord from 1985 to 2005. Indeed, she obtained clients and investments for her factoring business through NFIB members, some of whom testified at her trial.Factoring involves a business selling its accounts receivable to a third party -- a factor -- at a discount in exchange for immediate money to finance the business.LaPlante's business -- JRL Business Resources LLC -- would advance companies about 70 percent up front, thereby providing the working capital needed. Then - if everything went according to plan - the client's customers would pay the receivables to JRL. When LaPlante was paid back each month, she would send 95 percent back to the client, keeping about 5 percent for herself -- all of which worked out to a return of more than 60 percent a year.Perhaps the most important witness against LaPlante was Linda Jordan, NFIB legislative chair for several years.Jordan and LaPlante were close friends, but after Jordan's half million-dollar loan went sour, their friendship ended in acrimony.Another witness was Gerald Thibodeau, the owner of Manchester-based Thibo Inc., which did the millwork for the very federal courthouse in Concord where LaPlante's trial took place.Thibodeau, former chair of the Manchester Republican Committee, had met LaPlante through NFIB and trusted her with $50,000 of his money. At trial, he described her as a "very pleasant person who seemed to know what she was doing," but he too was banging at her door in Pembroke and was reassured that he would get her money, which he never did.The NFIB -- "a good institution that protects small-business people," -- was "just an avenue that was open to her and she used it," Thibodeau told NHBR. "You don't expect someone like her to use and abuse your money. However she is dealt with by the judge, I'm sure it will be appropriate. There are more prominent people who did what she did that went to jail. Why not her?"Altogether, 13 victims testified at the trial, nearly all saying that they thought their money was being used to buy or back receivables for LaPlante's factoring business. But there were no receivables after January of 2003, and instead, prosecutors charged, the money was being used to pay off old loans.LaPlante testified that she told lenders - and spelled it out in written contracts - that factoring was only one aspect of the business and she also had a liquidation business, a marketing and consulting business and a lobbying business that were all doing well, and that those loans were for her entire business, not just for the factoring aspect.But that's not how most of those who testified at LaPlante's trial saw it. They were all under the impression the money was going just for the factoring business.LaPlante first discovered factoring in 1995, when she attended a seminar before heading off to Orlando for a one-week intensive course on the subject."I have had contact with small businesses most of my career, and one of the biggest problems has been cash flow," testified LaPlante. "I said this could really help a lot of businesses get over that hump."To get the cash, LaPlante got lenders to advance her money at 18 percent annually. Although the money contractually was supposed to go to the business - at first the receivables business before shifting to her entire business - lenders testified that LaPlante would only take their money when she had an opportunity to make it work.LaPlante told lenders that she made money in good times and bad, because in bad times clients needed the money badly."I'm not very business-savvy, so I'm not trying to pull a dumb blonde, but it sounded like the best thing since sliced bread, factoring, because she explained it as we could never, ever, lose money," said Mary Harper, who was introduced to LaPlante by Jordan, whom she worked for.LaPlante eventually discovered the downside of factoring. Not every client always told their customers to send the receivables to JRL, and then LaPlante had to get the clients to sign over the check, or send the money, and that could take time. Several major clients didn't pay up at all, including New England Site Work, which went bankrupt and stiffed LaPlante for $600,000. Another defaulted on about $1 million of accounts.After 2003, LaPlante had not been able to find any factoring clients. She began to rely on the other part of her business - her consulting business, which had a different bank account, but - stressed her attorney Brown - the business had never been separate: "One business. One entity. One tax return," he said."Because of the lost revenue from factoring we were shifting to make more profit so we can pay our lenders," LaPlante testified. "You know, you shift gears if there is one segment that seems to be pulling in more money than the other, you work it, and we found that sales marketing was doing very, very well, as was the legislative consulting."LaPlante changed the agreements to reflect that, but she still spent much of her time talking about factoring."When I told them what the business did, nearly every time someone would say, 'Explain factoring.' They wouldn't say, 'Explain consulting, explain sales, explain marketing.' Most people know what these things are."While people might think she was just selling the factoring business, "It's their mindset. People kept that factoring in mind, and they don't even remember the other aspects of the business."In making his defense, Brown emphasized that LaPlante had a reason to believe that all of her enterprises were doing well. It had more than $500,000 in annual gross income since 2000, growing steadily until it peaked at $609,000 in 2005. The business took a dive in 2006, with a gross income of $263,000. She took her last loan in February 2007.Mail fraud convictionProsecutor Kinsella painted a different picture: frequent transfers between accounts, including LaPlante's personal account, cash withdrawals from her accounts, and her credit card and bounced checks. The factoring business was a falsehood, used to get loans from "Peter to pay Paul," he said.LaPlante denied ever taking out a loan to pay another loan, except in the case of Linda Jordan, who eventually reported her to the AG's office.But Jordan wasn't the only one who did so. Others had gone to the FBI, which launched its own investigation. The probes eventually merged, trying to make sense out of waterlogged records kept in a warehouse in Berlin.As LaPlante described it at the trial, the investigations, her reluctance to accept any more loans and the downturn in the economy hurt her business. At the same time, problems with a contractor put her home at risk, but while her home was being foreclosed on, she was at the American Beverage Association convention in Texas on behalf of her client, the New Hampshire Soft Drink Association.When her home was gone, her utilities were shut down, which included her email and her phone. That was why she was so hard to reach during a crucial three-month period in 2007, and that's when the idea of fraud spread, Brown said at trial."What is the average person to do when they've got money somewhere and can't get a hold of the person who's got control of it? Panic. That's a bank run. When she told investigators, 'This is what I'm trying to avoid,' that's what she is describing," Brown said.LaPlante was indicted at the end of March 2010, and after a five-day trial she was convicted by a jury of mail fraud. She is due to be sentenced on Oct. 3.It is unclear what kind of sentence LaPlante faces. The sentencing guidelines are advisory, and a sentence is determined by final size of the loss determined by the court -- whether it would be limited to the $1.2 million in principal, or whether it would include the promised interest that was never delivered as well.Nicole Ward, a Pittsfield resident who lent money to LaPlante because she was a friend of the family, said she thinks that the interest should count. She gave LaPlante the death benefit from her son's biological father -- some $87,000 -- and wanted some of that back for her son to go to college. She never got it, and her son had to delay college for three years in order to come up with the tuition."There should be jail time," she said. "She ruined people's lives. It wasn't that the business went bad. It was after the business went bad that she started a Ponzi scheme." Edit ModuleShow Tags