Bad Boys of Bankruptcy: S2E2: Cash-Stuffed Envelopes at Dunkin’ Donuts: The Palladino Ponzi Scheme

In this episode, Judge Gunn discusses the case of Steven and Lori Palladino with Mark DeGiacomo, who served as the Chapter 7 trustee in their case. Mr. DeGiacomo was tasked with administering the fallout resulting from the debtors’ Ponzi scheme run through an entity called Viking Financial Group, Inc. Mr. Palladino used Viking to promise “investors” a guaranteed 12% return on their investments, initially meeting with family and friends at Dunkin Donuts or at his kitchen table, and paying out their “dividends” in cash-stuffed envelopes. Mr. Palladino was ultimately convicted of numerous crimes and sentenced to more than 10 years in prison after it was revealed that he had bilked his victims out of more than $10 million. Mr. DeGiacomo winded up conducting at least two dozen Rule 2004 examinations as part of his investigation into the assets and financial affairs of the debtors and used this information to prosecute numerous avoidance actions and liquidate assets of the debtors to repay their creditors and victims. Mr. DeGiacomo recovered numerous lavish gifts Mr. Palladino had given to his wife as well as to his 20-year-old girlfriend, including jewelry, designer handbags, shoes, and dresses which the trustee sold at auction for the benefit of creditors. He also prosecuted an adversary proceeding against Sacred Heart University to recover nearly $65,000 in tuition Mr. Palladino had paid on his adult daughter’s behalf, resulting in a decision by the U.S. Court of Appeals for the First Circuit that Mr. Palladino had not received “reasonably equivalent value” in exchange for the tuition payments, because emotional, intangible, or non-economic benefits did not satisfy the standard, and thus the university was required to return the funds to the estate for the benefit of creditors. Mr. DeGiacomo ultimately recovered approximately $2.5 million for distribution to the estate. Mr. Palladino ultimately died in state prison in 2020 before he ever began to serve his 2-year federal prison term for criminal contempt due to his failure to obey orders imposed in a civil action brought against him by the SEC related to the Ponzi scheme.