We write today about a federal grand jury indictment filed in the U.S. District Court for the Eastern District of Missouri on April 28, 2011 against Martin Sigillito, James Scott Brown, and Derek Smith, for allegedly orchestrating a multi-million dollar Ponzi scheme.
According to the indictment, Sigillito "was a St. Louis, Missouri attorney who resided in the Eastern District of Missouri....He was also an ordained priest, and eventually a 'Bishop,' in the church of the American Anglican Convention." The indictment alleges that Brown "was an Arkansas-born attorney residing in Leawood, Kansas." The indictment charges that Sigillito and Brown conspired with Smith, "a structural engineer, businessman and real estate speculator/developer who resided outside of London, England."
According to the indictment, Sigillito's and Brown's "primary occupation between 2000 through 2010 was as a 'merchant banking' business" known as the "British Lending Program" (the "BLP"). The indictment alleges that "U.S. lenders were recruited, based primarily on representations by Sigillito, Brown and third-party recruiters trained by Sigillito and Brown, to loan funds to Smith and his businesses." The indictment states that "Sigillito represented that Smith and the BLP had a track record of success and a unique ability to identify undervalued properties and properties whose value could be greatly increased through the re-zoning process....Sigillito...represented that lenders' loan funds were sent to Smith in England for use in his real estate activities and that payments of interest and principal came from England out of Smith's business revenues and profits." According to the indictment, "[m]any BLP lenders placed a great deal of trust in Sigillito and Brown based on their claimed expertise, their status as attorneys, affinity through family connections and private organizations, and particularly Sigillito's mastery of multiple languages, his status as a Board Member of The Racquet Club and his status as a 'Bishop.'"
According to the indictment, "[b]etween 2000 through 2010, U.S., and a few U.K., investors lent" approximately $52.5 million through the BLP. The indictment alleges that "[as] part of the scheme and artifice to defraud, false, fraudulent and deceptive material misrepresentations were made to potential lenders and actual lenders." The indictment further alleges that "the vast majority of BLP loan funds were never sent to or received by Smith for use in productive business activities." Rather, according to the indictment, "Smith received the benefit of a total of ... approximately $6.1 million," "Sigillito took 'fees' totaling approximately $7.8 million," and "Brown took fees totaling approximately $1.4 million and approximately $27 million was used to pay interest and principal to lenders." The indictment states that, "as of June, 2010, the BLP had no funds." In sum, according to the indictment, "the BLP operated as a 'Ponzi' scheme and served as a fee-generating machine for the primary benefit of Sigillito." According to the indictment, "the fees Sigillito took from the BLP supported an affluent lifestyle....He routinely traveled first class, including internationally, took his family on expensive vacations, purchased a country home in Marthasville, Missouri, employed a chauffeur, paid large charges at various domestic and international private clubs, sent his children to private schools, purchased and leased Volvo automobiles, and invested in a condominium project at the Lake of the Ozarks in Missouri."
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