The major players in the downtown club scene, which centers on South Elm Street, are Rocco Scarfone and Paul Talley, but Joey Medaloni created the scene in the late 1990s. Ask anyone who lived in Greensboro before 2000, and they’ll tell you that downtown was a ghost town before Medaloni arrived on the scene, that the place pretty much shut down after 5 p.m. Medaloni was celebrated by Mayor Keith Holliday (who reportedly showed up at the man’s plea hearing today) and other civic leaders as a leading driver’s in downtown’s economic development.
As best I can tell, Medaloni created the template for what passes for an entertainment industry in downtown: boom-boom dance music with pretensions of elegance; irony that the N Club (a former Medaloni holding) has drawn scrutiny from elected officials and Downtown Greensboro Inc., the very types that once celebrated it, for the violence of its patrons.
Dance music is a low-overhead enterprise, requiring the employment of a DJ and ample security to deal with high volume crowds. Live music — the calling card of hallowed venues such as the Cat’s Cradle in Carrboro and the Orange Peel in Asheville, which have lifted a plethora of smaller clubs in their wakes — is an investment with a slower return. It requires paying multiple musicians and a closer attention to sound production. Live music is a more labor intensive process all around, but while it’s profit margin is thinner, its rewards are a sense of community and more loyal patronage base.
So, what does it say about Greensboro and an entertainment industry with regional draw that Medaloni has pleaded guilty to loan fraud after reporting what a factual basis document terms “substantial business losses” in the early to mid-2000s?
A plea agreement signed by Medaloni on Dec. 30 indicates an agreement to plead guilty to two counts of federal fraud, including making false statements to a bank and making a monetary transaction with the proceeds of illegal activity.
Medaloni could face up to 30 years of prison time for the first count and a fine of as much as $1 million, but could qualify for supervised release after five years.
Factual basis document filed by US Attorney's Office:
Joey Angelo Medaloni operated nightclubs and restaurants in downtown Greensboro, in the Middle District of North Carolina, including the N Club, Red Room, Much Restaurant and Heaven Bar. Joey Medaloni operated the N Club and Red Room through North Carolina corporation Medaloni Inc. He operated Much restaurant and Heaven bar through North Carolina corporation Lafamiglia Inc. Accountant Fabian Covington prepared 2003 and 2004 forms 1120S US income tax returns for an S corporation forro Medaloni Inc. and 2004 forms 1040 US individual income tax returns for Joey A. Medaloni. These returns were prepared with documents provided by Joey Angelo Medaloni. The returns were filed with the IRS and showed that Medaloni Inc. and Lafamiglia Inc. had suffered substantial business losses.
Defendant Joey Angelo Medaloni also did business through a company known as Entourage LLC. Joey Angelo Medaloni owed $782,229.92 to Carolina Bank for previous loans. To pay off these loans and to obtain funds for his personal use, Joey Angelo Medaloni applied through Entourage LLC and personally for a loan in the amount of $996,000.00 from Truliant Federal Credit Union. Truliant was at the time engaged in the credit union business in interstate and foreign commerce and was insured by the National Credit Union Administration. As part of the loan application, Joey Angelo Medaloni provided 2003 and 2004 forms 1120 United States corporation tax returns for Medaloni Inc., 2004 form 1120 US corporate tax returns for Lafamiglia Inc. and 2003 form 1040 US individual form 1040 US individual tax return for himself. These tax returns showed that the companies, as well as Joey Angelo Medaloni, personally had significant positive income — contrary to the losses shown on the returns filed with the IRS. Truliant relied on these returns in deciding to make the loan to Joey Angelo Medaloni and Entourage LLC.
In particular, the positive cash flow on the returns filed by Joey Angelo Medaloni lead Truliant to believe that the loan application should be granted. Truliant distributed the amount of $782,229.92, which was paid to Carolina Bank to pay off prior loans. The amount of $206,232.58 which remained of the loan proceeds was paid by the attorney closing the loan by check maid payable to Entourage LLC. Joey Angelo Medaloni took this check and deposited it in his personal account at Bank of America. He then conducted the following further transactions with the proceeds:
1. Joey Angelo Medaloni wrote a check in the amount of $10,562.00 on his Bank of America account to pay off a loan;
2. Joey Angelo Medaloni wrote a check in the amount of $12,375 to his accountant Fabian Covington;
3. Joey Angelo Medaloni transferred $100,000.00 to his Bank of America savings account; and
4. Joey Angelo Medaloni transferred $67,000.00 to a second personal checking account at Bank of America in his own name.
Bank of America NA was at the time of the above transactions insured by the Federal Deposit Insurance Corporation.
The tax returns provided to Truliant were prepared at Joey Medaloni's request by a friend whose initials are MB. All of the false returns bear the signature of T. Hillian as the preparer. Medaloni provided the information to MB for the false returns. These returns were not filed with the IRS and were created for the specific purpose of inducing Truliant to make the loan.
Defendant Joey Angelo Medaloni also induced a second loan using false tax returns provided by MB at Joey Medaloni's request. In October 2005, Joey Angelo Medaloni induced Carolina Bank to loan him and Medaloni Inc. the amount of $314,034.07 to refinance a loan on a boat. Carolina Bank was at the time of the loan a bank engaged in the banking business in interstate and foreign commerce whose deposits were insured by the Federal Deposit Insurance Corporation. When Carolina bank requested tax returns to establish Joey Angelo Medaloni's income and the income of Medaloni Inc., Joey Angelo Medaloni or one of his associates on his behalf provided the bank with false 2004 Form 1040 US individual income tax return for Joey Angelo Medaloni and a 2004 Form 1120 US corporate income tax return fro Medaloni Inc. Both of these returns had been prepared by MB and substantially overstated the income of Joey Angelo Medaloni and Medaloni Inc. Carolina Bank relied on the tax returns to determine that Joey Angelo Medaloni and Medaloni Inc. had income to support the loan.
Defendant Joey Angelo Medaloni induced a further loan in 2006 using false tax returns. In July 2006, Joey Angelo Medaloni provided First Merit Bank NA with false 2004 and 2005 Forms 1040 US individual income tax returns to induce the bank to make a loan in the amount of $967,975.00 for the purchase of an aircraft in the name of Medaloni Air LLC. First Merit Bank NA at the time of the loan was a bank engaged in the banking business in interstate and foreign commerce whose deposits were insured by the Federal Deposit Insurance Corporation. Again, these returns were prepared by MB and overstated the income of Joey Angelo Medaloni. The bank relied on these returns and made the loan for the purchase of the aircraft.
Defendant Joey Medaloni or companies controlled by him repaid the loans described above. The Truliant loan was paid in full by Joey Angelo Medaloni or companies controlled by him in 2007. The Carolina Bank boat loan was repaid in 2007. The First Merit NA aircraft loan was repaid in 2006. Defendant Joey Angelo Medaloni had previously made regular payments on the above described loans. Joey Angelo Medaloni or companies controlled by him repaid the above described loans prior to the beginning of the government's investigation.
A key question unanswered by the feds' investigation: What was the source of income that allowed Medaloni to retire debt on loans for which he was not actually qualified?
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