Kansas Attorney Sentenced for $52 Million Ponzi Scheme
|U.S. Attorney’s Office August 07, 2012|
KANSAS CITY, MO—David M. Ketchmark, Acting United States Attorney for the Western District of Missouri, announced that a Leawood, Kansas attorney was sentenced in federal court today for his role in a fraud conspiracy that stole more than $52 million from its victims.
James Scott Brown, 67, of Leawood, was sentenced in the U.S. District Court in St. Louis, Missouri, before U.S. Chief District Judge Linda R. Reade, Northern District of Iowa, to three years in federal prison without parole. The court also ordered Brown to pay more than $34 million in restitution.
Co-defendant Martin T. Sigillito, 63, of Webster Groves, was convicted at trial of leading the conspiracy and awaits sentencing. Co-defendant Derek J. Smith, 68, of Oxfordshire in the United Kingdom, pleaded guilty to his role in the conspiracy and awaits sentencing.
On September 16, 2011, Brown pleaded guilty to participating in a conspiracy to commit wire and mail fraud. During a 10-year period from 2000 to 2010, investors in the United States loaned a total of $52.5 million to co-conspirators through a Ponzi scheme that was known as the British Lending Program (BLP). Victims believed they were loaning money for legitimate real estate development projects in England, but, in reality, most of their money was kept by Sigillito and Brown (or used to pay interest and principal to other lenders).
Brown, an attorney, practiced law in England for several years prior to 2000. Brown also participated in the UMKC program at Oxford University. Between 2000 and 2010, Brown did not actively practice law; instead, Brown’s primary occupation was the BLP, from which he took substantial fees. Brown did business as British American Group and as J. Scott Brown and Associates.
Sigillito is an attorney and an ordained priest and bishop in the church of the American Anglican Convocation. Sigillito, doing business as Martin T. Sigillito and Associates Ltd., maintained an office in Clayton, Missouri. The business claimed to provide international business consulting services but did not have any actual associates or law partners and employed only a single clerical assistant. Sigillito portrayed himself as an expert in international law and finance and an experienced international businessman and attorney.
Smith was a structural engineer and a business and real estate speculator/developer who resided near London, England. Smith did business as Princess Hotels Management and as Distinctive Properties. Smith was previously successful, but, during the 1990s, he acquired distressed hotel properties that were not profitable due to a recession in the English real estate market. By the end of the 1990s, Smith was in need of capital to maintain his ownership of several small hotels which were not trading profitably and to support his retention of several options to purchase land.
The British Lending Program
The British Lending Program (BLP) operated as a Ponzi scheme and served as a fee-generating machine for the benefit of co-conspirators. Sigillito and Brown marketed the BLP to lenders based upon a number of false, fraudulent, and deceptive material representations.
Rather than sending the funds to England for use in real estate projects as promised to investors, Sigillito pooled lender’s funds in his attorney trust account in the United States. Rarely would funds from this account ever be sent to Smith. Rather, the funds were used to pay fees to Sigillito and Brown for initiating the loans. In cases where lenders requested payments of interest on their loan or sought to withdraw their funds from the program, the funds used to pay them came not from any profitable business of Smith’s but instead from funds that had been contributed.
Smith received the benefit of a total of approximately $6.1 million during the time in which approximately $52.5 million in loan funds were received in the BLP. In contrast, during the same period, Sigillito took “fees” totaling more than $6 million, Brown took “fees” totaling approximately $1.4 million, and approximately $27 million was used to pay interest and principal to lenders. All BLP funds were dissipated, and as of June 2010, the BLP had no funds.
This case is being prosecuted by Jess Michaelsen, Steven Holtshouser, and Richard Finneran, special attorneys to the U.S. Attorney General. It was investigated by the FBI and IRS-Criminal Investigation.
This news release, as well as additional information about the office of the United States Attorney for the Western District of Missouri, is available online at http://www.justice.gov/usao/mow/index.html