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Dunmore-based FNCB alleged to have used firm with conflict of interest.

Last updated: April 05. 2013 9:14AM - 3960 Views
By TERRIE MORGAN-BESECKER



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SCRANTON — Seeking to conceal widespread financial mismanagement, First National Community Bancorp falsely reported its books had been been audited by a New Jersey company when in reality the review had been handled by a firm with close ties to members of the bank’s board of directors, one of the bank’s shareholders alleges in a new lawsuit.


Joseph Solfanelli, attorney for Lori Gray, says he has uncovered new information that will prove the audit, which failed to detect serious financial irregularities, was performed by Robert Rossi & Co. of Olyphant, despite a significant conflict of interest that existed based on business relationships Robert Rossi had with the bank’s chairman, Louis DeNaples, and DeNaples’ brother, Dominick.


The allegations are contained in an amended complaint Gray filed Thursday in Lackawanna County Court that seeks to add Rossi as a defendant in the lawsuit she originally filed against FNCB in April 2012.


That suit alleged FNCB board members granted millions of dollars in questionable loans to friends, including former Luzerne County Judge Michael Conahan. Many of the loans defaulted, causing the bank to lose tens of millions of dollars. That led its stock to plummet, costing investors millions of dollars.


FNCB, based in Dunmore, has several locations in Luzerne County, including Wilkes-Barre, Hanover Township and Plains Township.


The amended complaint lays part of the blame for the losses on the Rossi firm, which Solfanelli contends abdicated its responsibility by failing to uncover irregularities and by “knowingly or recklessly” allowing FNCB to falsify financial statements. A judge must approve the filing of the amendment. A hearing on that matter is scheduled for Wednesday.


Rossi was not originally named as a defendant in the case because information regarding its alleged role in the audits was only recently discovered, Solfanelli said in an interview Thursday. Solfanelli declined to say how he discovered the new information, other than it was provided by people with “direct knowledge” of the situation.


The amended suit alleges FNCB falsely reported its books for 2009 and 2010 had been audited by Demetrius & Co. LLC of Wayne, N.J. Demetrius was nothing more than a “shill” for Rossi — a firm with “substantial and troubling conflicts” with FNCB board members, the suit says.


The suit notes several businesses owned by Louis DeNaples or his family members have the same address as Rossi & Co. Moreover, in 2004 Robert Rossi and Louis DeNaples organized Mount Airy No. 1 LLC, the company that purchased the Mount Airy Lodge and turned it into the Mount Airy Casino.


The suit claims officials with FNCB were aware Rossi had performed the audit and hid information from shareholders and the Securities and Exchange Commission.


“Due to RRC’s longstanding history with the board, the individual defendants had a motive to conceal RRC’s critical role in the wrongdoing as RRC would never be considered an ‘independent’ auditor, as required under SEC regulations,” the suit says.


Robert Rossi did not return a phone message left as his office Thursday. John Demetrius, president of Demetrius & Co., declined to comment on the allegations, as did Joseph Earyes, a first senior vice president for FNCB.


Solfanelli said the new allegations are a significant development in the case, which remains pending, because it supports Gray’s position that FNCB knowingly issued false financial statements.


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