- Associated Press - Friday, June 13, 2014

ST. LOUIS (AP) - Victims of a $56 million Ponzi scheme in St. Louis are suing two banks and a law firm the duped investors say failed to put a stop to long-running financial fraud.

Martin Sigillito, 65, is serving a 40-year federal prison sentence after his 2012 conviction for fraud, conspiracy and money-laundering. The former Clayton lawyer and American Anglican bishop diverted more than $6 million of money invested by his friends, family and parishioners for personal use in an 11-year scam that began in 1999.

The St. Louis Post-Dispatch (bit.ly/1iu1ute ) reported Friday that a series of federal suits filed in late May allege that St. Louis Bank and the former Pioneer Bank should have detected Sigillito’s illegal activity. Pioneer Bank later merged with National City Bank, which in turn merged with PNC Bank, one of the named defendants.

The complaints cite thousands of pages of documents from the federal criminal investigation into a phony real estate investment scheme known as the “British Lending Program.” The pyramid collapsed in 2010 after the FBI raided Sigillito’s office. His personal purchases included antique books, papers, rare coins and other items, including a $1,200 bottle of cognac and a lamp dating to 34 B.C.

The lawsuits state that the banks should have questioned how Sigillito was able to funnel tens of millions of dollars through his accounts even though he wasn’t actively practicing law.

When Pioneer Bank merged with National City, auditors “came to the inescapable conclusion that the bank was a party to a fraud” according to the suit.

A PNC spokeswoman told the newspaper the bank doesn’t comment on pending lawsuits. In a written statement, St. Louis Bank CEO Mark Muesenfechter called the suit against his company “baseless and without merit” and vowed to “defend against it vigorously.”

Another suit alleges that lawyer Jim Dankenbring of the Clayton firm Spencer Fane Britt & Browne knew that money from new investors was being used to “pay principal and interest due prior lenders.” The lawyer warned Sigillito as early as 2001 that the British Loan Program could expose him “to potential liability arising from regulatory enforcement actions, as well as civil claims,” the suit says. Dankenbring represented Sigillito in inquiries by the Kansas state securities commission as well as in a 2007 dispute with an investor that resulted in a settlement paid personally by Sigillito and a 2008 dispute with the custodian for a Sigillito account that suspected fraud.

Dankenbring’s firm said in a written statement that its lawyers “had no involvement in, or knowledge about, the Ponzi scheme for which Mr. Sigillito was convicted.”

The statement pointed to a pretrial brief prepared by the U.S. Attorney’s Office, that said ” there will not be any evidence that Sigillito ever consulted an attorney to seek review of the (British Loan Program) and render an opinion that the manner in which it was being conducted was or was not illegal.”

Sigillito sued Dankenbring and his firm in St. Louis County Circuit Court in April, suggesting the lawyers should have alerted him that paying off old investors with new investors’ money “could be seen by federal authorities as a fraudulent ‘Ponzi’ scheme.”


Information from: St. Louis Post-Dispatch, https://www.stltoday.com

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