Desperate to stay afloat in a withering economy, some restaurant owners in northern New Jersey turned to loan sharks to help pay the bills. But when they couldn’t repay the loans, the restaurateurs defrauded their own customers, stealing credit card numbers and wracking up close to $1 million in illegal charges, authorities said Friday.
The Italianissimo Restaurant in Caldwell, Baloco Restaurant in Clifton, and Plaza Diner in Fort Lee were among the "numerous" eateries involved in what Essex County Prosecutor Paula Dow called "a significant loan-sharking and credit card scam."
Caldwell police opened the investigation when a Bergen County resident reported that a charge for several thousand dollars — which he said he did not make — appeared on his credit card bill soon after dining in an unnamed Essex County restaurant.
Caldwell police, along with the prosecutor’s offices in Essex and Bergen counties and the U.S. Secret Service launched a four-month investigation, "Operation Cash Flow," that revealed a widespread scam which has led to charges against seven people and nearly $1 million in phony charges so far.
"We believe that this credit card scam has been ongoing for awhile," Dow said at an afternoon press conference from her office in Newark. "We believe that there are hundreds of unsuspecting victims in Essex, Passaic and Bergen counties who are impacted."
The restaurant owners and employees, as well as outside merchants such as suppliers, allegedly duplicated the credit card numbers, charged customers for phony invoices, then distributed the money to the loan sharkers, Dow said.
Six people were arrested in pre-dawn raids Friday: John Paladino 44, Darlene Priester, 37, and Ramzi Musleh, 49, all of Clifton; Dean Ulan, 35, of Bloomfield; Robert Giaconia, 32, of Passaic; and Katherine Paladino, 48, of Hasbrouck Heights. A seventh, Guy Madmon, 32, of Fair Lawn, has also been charged but remains at large, authorities said.
Prosecutors would not say whether those arrested had ties to larger organized crime operations, though Paladino has been on probation for a previous federal racketeering conviction, Dow said. Deputy Assistant Essex County Prosecutor Thomas Fennelly said the "large scale" investigation was ongoing and that restaurant owners may also face charges.
Authorities refused to say how many restaurants were involved.
The restaurant owners did not enter into the high-interest loans knowing they would be required to defraud their customers, Fennelly said. That happened later, when the business owners were unable to repay the loans. "There were certain practices of intimidation," Fennelly said.
Dow and Fennelly said most of the customers whose credit cards were duplicated can recoup their losses but, "often times it’s the credit card companies that are out," Fennelly said.
Those arrested were taken to the Essex County Jail. Bail has been set between $10,000 and $250,000 depending upon the charges which ranged from criminal usury to conspiracy. Some of the suspects were charged with narcotics violations after drugs were found in their homes, police said.
Dow praised the local and federal agencies for their efforts as well as American Express for its cooperation. She also gave a stern warning to credit card users.
"It shows you one thing — you’d better read your bill," Dow said. "You’d better read your statement every month. Be forewarned."
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