Mystery Outlives ‘Sicilian Gatsby’

On the last night of 1998, Luigi DiFonzo descended the spiral staircase of his mansion in Laguna Niguel and beheld the wealth and power before him.

Millions of dollars had poured into his investment firm, DFJ Italia Ltd., and they flowed through every inch of his 14,000-square-foot hilltop castle. Italian marble covered the floors. The cabinets contained crystal glasses etched with his initials. The pool table was mounted on carved wooden lions.

As DiFonzo descended the staircase, DFJ associates leaped forward and, in an exaggerated gesture of fealty, kissed the heavy, rectangular ruby-and-diamond ring on his left hand. Tall, with deep eyes, a full beard and a massive chest, DiFonzo carried himself regally as he moved through the guests.

It was a defining moment for DiFonzo, son of a gas station attendant, whose colorfully incongruous life--accused conspirator in the infamous Purolator vault heist, twice-jailed felon turned man of letters, FBI informant--brought him, finally and fittingly, to Orange County, where he would play out his most grandiose caper.

From a white skyscraper atop the Irvine Art Museum, DiFonzo and a former prison cellmate raked in $45 million from hundreds of investors nationwide, among them football star Eric Dickerson and fashion model Kim Alexis, according to authorities. DFJ’s pitch was nothing special--the promise of high returns on investments in foreign currencies was as old as fraud itself in Southern California.

But even in a hotbed of white-collar scams, few had seen the likes of someone as beguiling as DiFonzo. The man depicted in dozens of interviews, court records and personal letters seemed to have lived five or six lives, a lawless Zelig who adopted a more fantastic persona in each incarnation. Atop DFJ, he occupied the most out-sized fantasy of all--one he had been constructing all his life.

“He was the don, the prince,� said Thomas Casey, the U.S. bankruptcy trustee who is sorting through the wreckage of DFJ Italia.

Since DFJ’s collapse in March, investors have become obsessed with unraveling the mysteries of its alleged mastermind.

Lisa Valle, whose family lost $75,000, knew she’d been had the moment she finished DiFonzo’s biographical work, “St. Peter’s Banker.� But the revelation that the same man behind the book and DFJ also had worked with the FBI to investigate organized crime left her angry and grimly determined.

“I don’t expect to get my money back, but I need to know the truth,� she said. “Were they [the FBI] protecting him instead of the people he was ripping off?�

DiFonzo’s sudden death in August has only provoked more questions. He was found in bed, lying in the shape of a cross, his reading glasses folded neatly on a pillow above his head. Four prescription drug bottles stood on a night stand.

Sheriff’s deputies collected two notes to his fourth wife, Brenda: one a despairing ramble scrawled in purple crayon; the other a short, tender letter that begins “Cara mia� and confesses eternal love.

A coroner’s report concluded that DiFonzo, 52, committed suicide. But his wife and others who knew him say nothing could dim his driving belief that he would always reinvent himself.

“He had a demented lust for success, a hunger that distorted everything,� said Jesse Kornbluth, a New York writer who worked with DiFonzo on his first book. “Luigi was a fantasist from the word go, a Sicilian Gatsby.�

Rough Childhood in Massachusetts

His beginnings were anything but opulent. The eldest in a family of three boys and a girl, he had a bruising childhood in Fall River, Mass. His parents fought constantly and his father beat him.

“Tiny, tiny lips, they bleed and bleed and bleed/You say it can’t be you, it’s because of me/Broken arms, broken knees, tell me why this must be/Am I too little for you to see?� DiFonzo wrote in “Too Little to See,� a poem he drafted as a 10-year-old and revised years later.

The beatings left DiFonzo with a rage so intense that, as a grown man, he was repeatedly accused of lashing out with his fists and other weapons. They also left pain so deep that a visit to a home for abused kids made him weep, tears rolling out from under his black wraparound sunglasses.

Bright and facile, DiFonzo could have succeeded legitimately, even his enemies say. But what took over was the Luigi who ached to erase the boy in the poem who cowered in a closet--the Luigi who idolized tough guys and scam artists, then became one himself.

By 26, DiFonzo had been run out of Chicago after bilking 2,000 investors in a commodities-trading scam. Later that same year, 1974, he was charged with taking part in what was then the biggest cash crime in U.S. history: a $4.3-million heist from Purolator Security, a Chicago armored-car company.

Authorities arrested DiFonzo on Grand Cayman Island while he was traveling with 800 pounds of cash in suitcases--more than $1 million. DiFonzo claimed he didn’t know it was stolen. His attorney, Joe Oteri, looked at his client’s wide-lapeled suits and tight pants and wondered if a jury possibly could believe him.

“He looked like a pimp,� Oteri recalled. “I wouldn’t have bought a damn Coca-Cola from him.�

But the Boston lawyer soon discovered that his client was a world-class pitchman. In Chicago, DiFonzo had persuaded investors he was a financial prodigy who held master’s degrees and made his first million by age 21. He devised a creed for his crew to memorize. “I do not seek to be a common man,� it began. At least that part was true.

“He had the integrity to be true to his friends, but he had a predator mentality when it came to everybody else,� said Oteri, known for handling high-profile drug, mob and murder cases.

About 100 people testified against the accused burglars in the Purolator case, including one witness who linked DiFonzo directly to the crime. But he was acquitted of all charges--the only one of the six Purolator defendants set free. “Unaccountable,� the mystified judge said of the verdict.

In a delicious irony, DiFonzo came away with a six-figure reward for helping Purolator’s insurer recover much of the loot.

“He gave me a Silver Shadow Rolls-Royce as a gift,� Oteri said, laughing.

Time Out for a Writing Career

After his narrow escape, DiFonzo resolved to go straight--mostly straight, anyway--and make a career of writing, his childhood salve.

His first professional project, pitched as a cross between “The Sting� and “The Godfather,� was a thinly veiled account of the Purolator heist. DiFonzo wasn’t above using his criminal credentials to impress literary types:

“I am to tell you about a Luigi M. DiFonzo that I murdered,� he wrote to an agent. “The Luigi that was--according to the FBI--a young and well-connected Mafioso.�

The book project was interrupted in 1980, when DiFonzo was imprisoned for filing false documents with securities regulators. He passed the three-month term by teaching creative writing to fellow inmates.

He completed the book after his release, with the help of Kornbluth, an up-and-coming magazine writer. Kornbluth recalled the months he spent with DiFonzo as surreal, like being held hostage inside a dinner-theater version of “GoodFellas.�

DiFonzo drank Mouton Cadet wine in homage to Frank Sinatra, drove a burgundy Lincoln and told Kornbluth, half-playfully, that he should dive to the floor if he barked, “Hit it!� signaling, Mob-style, to watch out for machine-gun fire. “He was like a character in his book,� Kornbluth said.

Their collaboration was published by Avon in 1981 under the title “Bucks.� Sales were negligible, but DiFonzo was undeterred.

He turned to nonfiction and sold New York magazine a story about disgraced Vatican financier Michele Sindona that formed the kernel of his next book. Sindona, the pope’s investment banker, defrauded banks in New York and Italy out of $3 billion.

“St. Peter’s Banker,� DiFonzo’s 1983 narrative tracing the links between Sindona, the Catholic Church, the Mafia and banks, was called “an enthralling work of investigative reporting� in a New York Times review. It sold more than 20,000 copies and became favored source material among right-wing conspiracy theorists.

Inspired by that modest success, DiFonzo churned out an array of hard-boiled titles such as “Dreamers and Betrayers,� his saga of a Mafia money-launderer, and “Mouth of the Lion,� a script about a family embroiled in Colombian drug wars. Despite never attending college, he also became an instructor at Harvard’s summer school, teaching courses on beginning fiction writing and advanced film writing, school records show.

But he never regained the level of “St. Peter’s Banker.� And he ended his literary decade the way he began it: in prison.

DiFonzo had become obsessed with a 1983 true crime in which a Minnesota man and his teenage son lured two bankers who had foreclosed on their family dairy to a vacant farmhouse, then killed them in a bloody ambush. The father committed suicide. The son went on trial. DiFonzo traveled to St. Paul to observe the court action, paying $17,000 for the rights to publish a story.

DiFonzo’s manuscript never reached print, but he befriended the teenager’s defense attorney, Allan Swen Anderson. Years later, when Anderson died, DiFonzo was charged with bilking Anderson’s widow out of her $120,000 inheritance. He pleaded guilty in April 1989 to fraud, receiving a three-year sentence.

Fateful Meeting in a Prison Cell

In his second stint in prison, DiFonzo bunked next to Angelo Ales, who was serving a 3 1/2-year sentence for a check-kiting scheme. Dark and stocky, with a heavy Long Island accent, Ales shared DiFonzo’s taste for finery. On the outside, he favored silk suits with pocket handkerchiefs and shirts unbuttoned to mid-chest, accented with heavy gold jewelry.

The pair founded DFJ Italia in November 1996.

Top salesman Guy Scarpelli helped build DFJ’s client base using networks established at John Hancock Financial Services, investors said. Scarpelli, with his GQ looks, mined his parents’ community in central New Jersey, spinning the DFJ spiel in investors’ kitchens and ferrying satchels of cash back East to pay interest to earlier customers. Scarpelli, through his attorney, declined to comment.

To juice up the pitch, DFJ executives often told customers that the firm’s owner was Italian or Sicilian royalty. They recruited former pro football player Duval Love as a salesman and he unknowingly reeled in other athletes, including Eric Dickerson.

“I was a big Rams’ fan,� said Bill Liotta, a professor at Tulane University. “When I ran into Duval Love at their office, I figured it must be OK if he’s involved.� Liotta put $72,000 into DFJ.

DiFonzo and Ales took extraordinary measures to make themselves invisible in DFJ. Officially, they owned nothing. Chief Financial Officer John Loy said in court documents that he was instructed by DiFonzo to put his own name on company bank accounts, car titles and property deeds. Underlings even purchased DiFonzo’s size-54 jackets for him.

DiFonzo rarely appeared at DFJ’s grand, black-marbled offices--indeed, the suite was often locked during business hours. He held court at 7 a.m. staff meetings at his home, where, after downing his usual breakfast of protein drinks and Met-Rx bars, he would give the crew marching orders. Then he would watch world financial markets into the wee hours on the wall of television sets in his den.

Loy claimed the 250-pound DiFonzo, a former boxer and weightlifter, ruled the firm through physical intimidation. DFJ adopted a Mob-style hierarchy: Its vice president identified himself as capo di asta, or chief of staff.

“When [DiFonzo] told you to do something, you did it,� said Casey, the bankruptcy trustee.

Casey has found scant evidence that DFJ made any legitimate investments. Instead, bank and court records show that much of the money taken in went to pay for the extravagances of DFJ’s executives. For the five-carat diamond earrings Ales gave his girlfriend. The $1-million Hawaiian junket DiFonzo organized for a dozen friends. And for multimillion-dollar homes and riotous parties at Las Vegas’ MGM Grand Hotel.

The looting was systematic: DFJ money disappeared into DiFonzo’s film-production company, Ales’ Mexican sex-toy business, and a web of other shell corporations formed by executives, documents filed in U.S. Bankruptcy Court say.

Loy said he gave $7.5 million in cash to DiFonzo in weekly installments of $40,000. Ales said he and his entourage converted chips into cash at the MGM Grand at 12-hour intervals, avoiding nasty paperwork.

“They used DFJ as their personal piggy bank,� Casey said.

Then they broke the bank.

Tensions Mount Between Ex-Pals

Both DiFonzo and Ales claimed to have discovered in May 1999 that vast sums of company funds were missing. Ales’ attorney said his client went to Orange County authorities after a confrontation with DiFonzo turned violent.

As tension mounted between the former pals, DiFonzo suddenly disappeared for three weeks. Ales and other DFJ executives said he was in drug rehabilitation. DiFonzo alleged that Ales and an associate removed him forcibly from his home, reporting the abduction to the FBI and the Orange County district attorney’s office. No charges were filed, however. Instead, the FBI said it opened an investigation into DFJ that summer after an unnamed Orange County businessman supplied details of the firm’s business that “sounded fishy.�

But the FBI’s relationship with DiFonzo went back much further. Last month, the FBI acknowledged that, for a three-month period in 1996, DiFonzo acted as an informant. The extraordinary disclosure was made in response to rumors that the agency countenanced DFJ’s criminal activities because of its ties to DiFonzo.

“That is patently not true,� said Special Agent Matthew McLaughlin, insisting that the agency severed its relationship with DiFonzo before DFJ took root.

DiFonzo’s widow, however, says her husband spoke to the FBI several times after the alleged end of their cooperation and kept two agents’ cards in his pocket right up until his death.

Ales, too, repeatedly told friends and even casual acquaintances that he was a paid FBI informant throughout DFJ’s existence. In a letter last April to his girlfriend, decorated with smiley faces and hearts, Ales said the agency’s probe into DFJ dated back to early 1999 and that he was a collaborator, not a target.

The FBI would not comment on its relationship with Ales, but said the agency did all it could to pursue DFJ. That assurance has not assuaged investors.

“They knew Ales and DiFonzo had done this before. Why weren’t they watched more closely?� said Eileen Goodrich of Bridgewater, N.J., whose family lost $140,000.

Scheme Begins to Unravel

In his final months, DiFonzo became increasingly frail and embittered, rattling around like a deposed monarch in the shell of the grand life he had presided over at that 1998 New Year’s Eve party.

He negotiated his exit from DFJ in November 1999, keeping only the mansion. He had no income, borrowing from friends and family to cover expenses.

Scarpelli and the DFJ crew tried to keep the firm afloat, but it ended like most Ponzi schemes: When the incoming cash couldn’t cover the interest payments, the ruse was stripped bare. Led by Duval Love, whose parents lost a bundle in the scheme, investors forced DFJ into involuntary bankruptcy. Prosecutors seized contents of DiFonzo’s home in April, and its cavernous spaces became a daily reminder of all he had lost.

“My whole life has been ripped away from me. Everything is gone. My house. My money. My assets. My wedding ring. Even my dignity,� he wrote in one of the two letters described as suicide notes. “I am nothing more than an annoying, inconvenient, middle-aged failure. A great tree turned to kindling. A whisper on the lips of a dead man.�

DiFonzo’s health was failing as well. He was prescribed medication to combat heart problems, depression and anxiety. He took morphine to battle persistent back pain. All of the drugs were present in his system when he died. The autopsy also uncovered that he had kidney cancer--a diagnosis Brenda says was not known to her husband.

The worst blow to his pride may have come one July evening when marshals knocked on his giant glass front door. For months, DiFonzo had been embroiled in a cat-and-mouse game with Casey, delaying his deposition in the DFJ bankruptcy. Casey finally won a court order to have him arrested and compelled to appear. As his wife watched, the marshals shackled DiFonzo and took him away.

Still, to the end, DiFonzo vigorously maintained his innocence, telling Brenda that he was being framed. When finally deposed in late July, DiFonzo vowed he would be vindicated.

“It’s going to be a long time before you get to the truth,� he told the creditors’ attorney. “You’re going to feel like the biggest ass in the world.�

His wife found him dead less than three weeks later. That morning, Casey had won a court order evicting DiFonzo from the house.

DiFonzo lay in a spare bedroom, the patio doors thrown open to let in the summer breeze. As Brenda DiFonzo walked into the room, Herman’s Hermits’ “Something Tells Me I’m Into Something Good� sang sunnily from a radio. But then she saw his arms--flung out, purplish and cold. The afternoon ended with her on her knees, sobbing in anguish, as paramedics tried futilely to revive him.

Later, his wife found the second note on a sink countertop. “Cara mia,� it began. “Tell the children I was ill. Let them know the depths of my love for them and the depths of my failures as a man.�

It read like a farewell, but Brenda DiFonzo refuses to accept the coroner’s conclusion of suicide, insisting her husband died of an accidental overdose or natural causes.

Casey has told DFJ investors they can expect only a fraction of their money back, but a hard-core group continues to pester the authorities for answers and has even considered suing the FBI.

To their frustration, no criminal charges have been filed despite sworn admissions by Ales and others in the bankruptcy case.

After completing his latest prison stint in August on an unrelated charge, Ales resumed his free-wheeling lifestyle, according to a witness’ statement in bankruptcy court. He frequently dines at an upscale Italian restaurant in Mission Viejo, arriving in a chauffeured pink limousine.

A month after DiFonzo’s death, strangers milled through his once-resplendent living room, preparing to auction off the detritus of his life. Outside, the tiled hut that once housed his pet wolf sat empty. The pool had turned a viscous blue-green.

Orange County’s self-invented don was gone, beyond justice, beyond explanations.

His ashes will be scattered in the hills of Palermo.