CLAYTON, Mo. (CN) - The mastermind of a $50 million Ponzi scheme - an attorney-priest - claims in court that he was convicted because his attorneys failed to represent him adequately.
Martin Sigillito sued the Spencer Fane Britt & Browne law firm and attorney James R. Dankenbring in one lawsuit, and the HeplerBroom law firm and attorney Michael A. Becker in another one. Both complaints were filed Tuesday in St. Louis County Court.
Sigillito is serving a 40-year prison sentence for the Ponzi scheme that unraveled in 2010.
Sigillito, 64, was an American Anglican bishop. The Ponzi scheme is believed to be the biggest one in St. Louis history.
Sigillito persuaded family members, fellow parishioners and friends from his country club to invest in a so-called British Lending Program. Sigillito claimed the money would go to real estate investments in the United Kingdom, with little risk and high rates of return.
In the Spencer Fane complaint, Sigillito says that Dankenbring represented him starting in 2001 in regard to the British Lending Program (BLP). He claims the defendants knew of the BLP's operation and helped set up the loan agreements with investors.
"(D)efendant Dankenbring authored a provision in the standard loan agreement which provided that the purpose of the loan was for 'the cash flow purposes of the borrower,'" the complaint states. "Defendant Dankenbring did so for the purpose of allowing new loans to be used for the purpose of carrying any debt of the borrower (Derek Smith).
"That defendants knew that funds received from later lenders were often used to pay principal and interest due prior lenders."
Sigillito claims the defendants held themselves out as experts in securities regulation and compliance. He claims the defendants cautioned him on Nov. 26, 2001 regarding possible civil exposure if the transactions were considered securities.
At no time, Sigillito says, did the defendants advise him that the practice of using new loans to pay off debts to previous investors could be considered a Ponzi scheme by federal authorities.
Using new money to pay off early investors is the hallmark of a Ponzi scheme.
"Defendants failed to render such advice, even though as early as 2001, defendant Dankenbring was in receipt of allegations by attorneys for an early borrower that plaintiff Sigillito and Brown were engaging in fraud in contravention of state and federal law," the complaint states. "Thereafter, despite numerous conversations with plaintiff Sigillito, Brown and others associated with the BLP regarding the operation and management of the BLP, defendant Dankenbring and other attorneys at defendant Spencer Fane never suggested that the manner in which the BLP was being operated might involve possible criminal exposure. Nor did defendants ever suggest that plaintiff Sigillito consult with a criminal defense attorney even though defendant Dankenbring was personally acquainted with an experienced criminal defense attorney well versed in federal criminal violations."
Sigillito claims he could have altered the BLP's operations and therefore not have been convicted of running the Ponzi scheme had it not been for Spencer Fane's or Dankenbring's negligence.
In the complaint against HeplerBroom and Becker, Sigillito claims the defendants failed to divulge a conflict of interest. While representing Sigillito, he says, HeplerBroom entered into a confidential attorney-client relationship with Phil Roseman, to whom Sigillito owed money relating to BLP.
"On May 17, 2010, while plaintiff Sigillito was out of the country, defendant Becker went to plaintiff Sigillito's office and discussed the situation regarding money allegedly owed to Roseman with plaintiff Sigillito's administrative assistant," the complaint states. "Defendant Becker also reviewed confidential business records of the BLP and MTSA (Martin T. Sigillito Associates). At this point in time, however, defendant Becker was representing Rosemann, not plaintiff Sigillito. This was not disclosed to either plaintiff Sigillito nor plaintiff's administrative assistant.
"During the meeting with plaintiff's administrative assistant on May 17, 2010, defendant Becker advised plaintiff Sigillito's employee that she should seek representation from legal counsel because of alleged illegal conduct by plaintiff Sigillito in connection with the BLP. Defendants knew, however, that if federal law enforcement became involved, a strong probability existed that the BLP program would be abruptly shut down, causing all lenders to lose the funds they had invested in the BLP.
"Shortly after the meeting with defendant Becker, plaintiff Sigillito's administrative assistant, with the assistance of a criminal defense attorney, met with the FBI and accused plaintiff Sigillito and others of unlawful conduct.
"As a direct consequence of the allegations of the administrative assistant, the FBI on May 24, 2010, executed a search warrant on plaintiff Sigillito's law office and seized all of the BLP and MTSA records, effectively ending the program," according to the complaint.
As a result of the defendants' negligence, Sigillito claims, he was sentenced to prison, had a $51 million money judgment levied against him, was ordered to pay $36 million in restitution and he and his wife lost $1 million in forfeited assets.
Sigillito seeks an undetermined amount of damages for professional negligence and breach of fiduciary duty. He is represented in both cases by Douglas P. Roller of St. Louis.
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