3 Get Prison Terms on Tax Charges in Investment Scam

A suspected loan shark who pleaded guilty to tax charges in connection with a $4-million investment scheme was sentenced Monday to 5 1/2 years in prison.

Daniel L. Mondavano, 60, whose bilked clients included former Arizona Senate candidate Roy Elson, admitted under-reporting income he received from investors to whom he had promised interest rates of up to 1% a week by lending out money to desperate businessmen.

Mondavano’s son, Dennis, 38, was sentenced to four years in prison, and his former wife, Rose, 58, was ordered to serve 60 days in prison and perform 2,000 hours of charitable work.

According to government prosecutors, the Mondavanos solicited investments ranging from $5,000 to hundreds of thousands of dollars by promising large interest returns.

To reassure the skeptical, Daniel Mondavano often displayed a wad of cash in his sock or a suitcase full of money and implored investors “not to be a working stiff,” according to the government’s sentencing memorandum.

Although the Mondavanos paid initial returns on the investments, government officials said they found no evidence that any of the money was ever actually invested, despite longstanding allegations that the Mondavanos were engaged in loan sharking.

When some investors threatened to notify the Internal Revenue Service as their returns diminished, Daniel and Dennis Mondavano responded with threats of violence, according to the sentencing report, in one instance grabbing an investor by the throat and “urging” him to “reconsider his position.”

Rose Mondavano told one unhappy investor to “flush her dead father’s ashes down the sewer,” the sentencing report alleges.

Defense lawyers complained about the government’s allegations, noting that the only charges the defendants actually faced were charges of filing false tax returns.

“The essence of the sentencing memorandum is that Mr. Mondavano perpetrated a massive mail fraud or wire fraud and bilked at least 37 people out of large amounts of money,” said David Freedman, Daniel Mondavano’s attorney.

“Had that been what the government’s case was, they should have indicted him for it,” Freedman said.

Dennis Mondavano’s attorney, Elliot Stanford, conceded that “certain so-called investors did lose money.” But those investors, he said, “were more in the category of accomplices. They knew what they were doing. They knew that they were not reporting (the income from their investments),” Stanford said.

Martin Weinstein, the Justice Department attorney who prosecuted the case, said all of the allegations about investor losses, including allegations about threats of physical violence, were included in the conspiracy counts to which the defendants pleaded.

U.S. District Judge Manuel L. Real ordered Daniel and Dennis Mondavano to begin serving their sentences immediately. Rose Mondavano will be permitted to serve her 60-day term on weekends. All three defendants were also sentenced to terms of probation after their prison terms.