Under Trump MSLP, Convicted Felon with Alleged Mob Ties Allowed to Funnel $50M to His Family’s Casino and Resort

WASHINGTON, D.C. – As reported by the Philadelphia Inquirer, one of the first and largest loans to date under the Trump administration’s $600 billion Main Street Lending Program (MSLP) was made between family members, including one with a checkered past: “The Scranton-area bank directed by landfill magnate Louis A. DeNaples has handed out the biggest loan yet. … The recipient: the Mount Airy Casino Resort, owned by trusts for DeNaples’ children and grandchildren. DeNaples had to relinquish his own ownership to resolve charges that he’d concealed his ties to organized crime.” 

The U.S. Treasury-approved MSLP — designed to “support lending to small and medium-sized businesses and nonprofit organizations that were in sound financial condition before the onset of the COVID-19 pandemic.” — allowed the DeNaples family to essentially funnel a low-interest $50 million loan to the family casino and leave taxpayers on the hook for most of the risk.

“The Trump administration’s pandemic response efforts always seem to miss the mark,” said Kyle Herrig, president of government watchdog Accountable.US that has been tracking MSLP spending as part of its www.COVIDBailoutTracker.com project. “This money was meant to help Main Street businesses, not casinos owned by families with alleged mafia connections. It’s time for the president and his allies in Congress to get serious about helping those who need it most by extending enhanced unemployment benefits for workers and actually helping struggling small businesses.”

Excerpts from the Philadelphia Inquirer story, ‘Family ties bind bank behind $50M taxpayer-backed coronavirus loan to Poconos casino’ by Jacob Adelman:  

The Scranton-area bank directed by landfill magnate Louis A. DeNaples has handed out the biggest loan yet — for $50 million — from a taxpayer-backed program to help mid-sized businesses during the coronavirus pandemic.

The recipient: the Mount Airy Casino Resort, owned by trusts for DeNaples’ children and grandchildren. DeNaples had to relinquish his own ownership to resolve charges that he’d concealed his ties to organized crime.

FNCB Bank’s loan to the casino could throw an unflattering light on the federal government’s strategy of deputizing banks to write loans under its $600 billion Main Street Lending Program, which was authorized this spring over fears that lenders might cease supporting even thriving businesses.

Small banks such as Dunmore-based FNCB don’t typically make such large loans and aren’t equipped to evaluate repayment risks and other potential perils that come with issuing the large amounts of debt permitted by the federal program, analysts said.

If borrowers default, it’s mostly the public’s money — not the bank’s — that runs the risk of not being repaid.

This particular case could draw special scrutiny because of the family ties between FNCB and the Mount Airy Casino, where revenue from gambling had flattened even before the coronavirus stopped its roulette wheels and slots and now threatens to upend the entire gaming industry.

DeNaples, 79, is chairman of FNCB and its biggest shareholder, with a 9.2% stake in the bank as of April 3, according to regulatory filings. His son Louis A. DeNaples Jr. is also on the board as the bank’s vice chairman with a 1.3% stake and is the beneficiary of one of the seven trusts that share ownership of the Mount Airy casino.

Another board member is DeNaples’ nephew, Joseph L. DeNaples, while his brother Dominick L. DeNaples is a former chairman who continues to advise the company as director emeritus.

The loan may not even have been possible but for a decision by the Federal Reserve and the Treasury Department to exempt the Main Street program from longstanding rules barring banks from making taxpayer-backed loans to businesses owned by their directors.

But it may still trigger the federal restrictions on insider lending that cover all activity by regulated banks, known as “Regulation O,” said Braden Perry, a lawyer who specializes in banking compliance.

“If you see a $50 million loan of your money going to an insider or a family member of an insider, it certainly raises some concerns,” said Perry, who formerly tried cases for a federal financial regulatory agency.

Some critics of the Trump administration’s response to the coronavirus, meanwhile, cast the loan as another case of rescue money being channeled away from those who need it most.

[…]

License granted

DeNaples, whose sprawling Northeastern Pennsylvania commercial empire also includes auto salvage yards, heavy equipment sales, and towing services, moved to get into the casino business in 2005 by applying for one of the slot licenses that were newly being awarded in the state. He aimed to redevelop the Poconos’ storied Mount Airy Lodge into a gaming resort.

As a generous political donor and philanthropist with strong ties to business and government leaders across the state, DeNaples was seen as a likely licensee. Common Cause Pennsylvania, a good-government advocacy group, tallied his contributions to Pennsylvania office seekers at $403,125 from 2002 to 2007.

DeNaples did have on his record a 1978 no-contest plea to charges that he and three others bilked the federal government out of recovery funds following Tropical Storm Agnes. But that did not disqualify him, thanks to a provision that had been written into Pennsylvania’s gaming regulations letting applicants off the hook for criminal convictions that occurred more than 15 years in the past

He was granted his casino license in late 2006 and opened his $412 million resort about a year later.

By early 2008, however, he had been indicted on perjury charges, in part for allegedly lying about his relationships to mobsters including William D’Elia, a former leader of the crime family of Northeastern Pennsylvania kingpin Russell Bufalino (played by Joe Pesci in the 2019 film The Irishman.)

Those charges were eventually dropped in a deal that required DeNaples to pass control of the casino to his adult daughter, Lisa DeNaples. But Louis DeNaples was allowed to continue advising the casino.

[…]

Lending rules relaxed 

The Main Street Lending Program was devised as part of financial rescue legislation in the spring to help businesses that are too big to qualify for the better-known Paycheck Protection Program, but too small to benefit from the Fed’s big purchases of corporate debt.

Unlike the PPP program’s forgivable loans, funds from the Main Street program must be repaid. Loan standards are also more selective, requiring participants to have been in solid financial shape with a manageable existing debt load before the pandemic.

Banks write loans under the program but are then able to hand 95% of that debt off to the Fed, so they have fewer of their own assets at risk. The idea was to make banks less nervous about lending during what was expected to be a long period of tight credit.

Despite that opportunity to offload risk, few banks have so far signed up to participate in the program.

Nationwide, only $497 million in Main Street loans had been made as of Aug, 19, although details of only the first $92.2 million of that cash — accounting for 13 transactions — have so far been disclosed.

The Mount Airy loan is one of only two in the country that is for more than $5.5 million.

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