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Sigillito Ponzi scheme plaintiffs sue attorneys, bank

Suits allege attorneys, bank knew about misuse of funds from client account

Catherine Martin//May 28, 2014//

Sigillito Ponzi scheme plaintiffs sue attorneys, bank

Suits allege attorneys, bank knew about misuse of funds from client account

Catherine Martin//May 28, 2014//

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More than 80 people who lost money in a Ponzi scheme for which Martin Sigillito is serving a 40-year sentence are suing attorneys that represented him, claiming the attorneys participated in the scheme by knowingly accepting embezzled funds.

The suit filed May 23 in U.S. District Court for the Eastern District of Missouri comes several weeks after Sigillito filed his own suit against his attorneys, including James Dankenbring and law firm Spencer Fane Britt & Browne. Sigillito’s lawsuit claimed he would not have suffered damages including a $51 million judgment against him and a 40-year prison term “but for the breach of duty” by the attorneys.

Sigillito was a St. Louis attorney and American Anglican Convocation bishop convicted in 2012 of orchestrating a massive real estate scheme that sought investors, supposedly for land development deals in Britain. His suit alleges that his attorneys were aware of the scheme, but California attorney Sebastian Rucci, who represents the plaintiffs in the latest case, said he was already working on the suit before Sigillito filed his.

“There were a lot of facts we went through,” he said.

The suit alleges that Sigillito paid the lawyers with money from a client trust account known as an Interest on Lawyers Trust Account, or IOLTA. “At all relevant times,” the suit claims, the defendants knew the funds were from the IOLTA account and belonged to investors of the BLP or other third parties.

“He took a check, knowing that money came from some of the … victims,” Rucci said of Dankenbring. “That’s a violation of the law, and we feel he has to answer for that.”

The St. Louis Spencer Fane office released a written statement that denied those claims.

“First, this firm and our lawyers had no involvement in, or knowledge about, the Ponzi scheme for which Mr. Sigillito was convicted,” the statement said. “Second, this lawsuit is merely a reincarnation of a previous failed action. A few years ago, this same plaintiffs’ attorney tried to assert a claim against this firm and our partner, Jim Dankenbring, on behalf of lenders in Mr. Sigillito’s loan program. This same federal court dismissed that claim. This lawsuit is likewise unfounded, and we will respond to it accordingly.”

The firm also pointed to a trial brief from the federal court case in which the U.S. Attorney’s Office stated that “there will not be evidence that Sigillito ever consulted an attorney to seek review of the British Loan Program.”

The brief went on to state that “to the extent Sigillito did discuss the BLP with counsel … he did not make anything close to full disclosure of the relevant facts.”

Sigillito’s IOLTA account is also at the center of two suits against St. Louis Bank, including one in state court with multiple plaintiffs and another in the U.S. District Court for the Eastern District of Missouri filed by plaintiff Phil Rosemann. Rosemann lost about $14.3 million, and his suit also includes charges of racketeering.

According his suit, Sigillito housed the IOLTA account and multiple other accounts at St. Louis Bank. Maintaining the multiple accounts needed for the fraud at a single bank “gave St. Louis Bank a unique and unobstructed view of the very nuts and bolts of the Ponzi scheme,” the suit claims.

Money invested in the IOLTA account was not invested into British real estate as investors were told, the suit says, but was transferred into Sigillito’s “alter ego” account and used to pay his personal line of credit.

“There are tons of facts in there to show you how to not operate an IOLTA account,” Rucci said of the suit.

The suit acknowledges that “numerous financial institutions enabled Sigillito’s fraud” but claims “St. Louis Bank was at the epicenter.”

Mark Muesenfechter, chief executive officer of St Louis Bank, said in a prepared statement that the bank “is aware that a lawsuit exists but has yet to have it served against us. We find this suit baseless and will defend against it vigorously.”

The two latest lawsuits are among five pending against entities allegedly involved in the scheme, Rucci said. He said no additional suits are planned.

The cases are Aguilar et al. v. Spencer Fane Britt & Browne and Dankenbring, 4:14-cv-00984, and Rosemann v. St. Louis Bank, 4:14-cv-00983.

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