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Entries in kansas (1)

Thursday
Aug092012

Kansas Lawyer Receives Three-Year Prison Sentence for Assisting Priest in $52 Million Ponzi Scheme

A Kansas lawyer has been sentenced to three years in federal prison for his role in a $52 million Ponzi scheme that bilked investors out of millions of dollars.  James Scott Brown, of Leawood, Kansas, received the sentence after previously pleading guilty in September to charges of conspiracy to commit mail and wire fraud.  Brown was originally indicted in April 2011.  

Brown practiced law in England for several years before associating with the British Lending Program ("BLP"), a program organized by Martin Sigillito, an ordained bishop and attorney.  BLP purported to operate as a loan program in which the proceeds were used to purchase land in England.  Potential investors were solicited through family and friends, as well as Sigillito's church, and received marketing materials that contained a variety of misrepresentations.  Investors were told that, in exchange for a 1-year "loan" made to BLP, they would receive an annual return ranging from 17.5% to 25%.  In addition, Sigillito and Brown assured investors that there was little to no risk involved, as BLP had sufficient assets to cover its operations, and in the event of a default, English laws contained a quick and efficient process to reclaim the land that would have an investor's original principal investment returned within 60 to 90 days. At the end of the loan period, investors were urged to roll-over their investment into a new loan.  In total, BLP raised more than $52 million from approximately 140 investors over the ten-year period from 2000 to 2010.

Rather than purchase land in England, authorities allege that BLP paid extravagant management fees to its principals and used new investor funds to make purported interest payments to existing investors.  For instance, Brown collected nearly $1.5 million in management fees, while Sigillito pocketed approximately $6 million. Sigillitolived a lavish lifestyle, collecting expensive antiques, including a $120,000 German book from the 15th century, Persian rugs, and British jewelry.  He was regularly shuffled around in a black Lincoln town car by his chauffeur, Virgil.  

As the real estate market collapsed in tandem with financial markets during 2008 and 2009, many concerned investors began to demand the return of their investment.  Many of these requests were rebuffed by Sigillito, who blamed the delays on the "world of international funding/transfers."  The Federal Bureau of Investigation ("FBI") became involved in May 2010 after being contacted by an investor, eventually convincing Sigillito'ssecretary to wear a wire.  The secretary (who later pled guilty to tax fraud for stealing money from Sigillito) provided the FBI with evidence of Sigillito's fraud and in April 2011, Sigillito, along with Brown and another co-defendant, was charged with twenty-two counts of fraud.  A federal jury later found Sigillito guilty of twenty counts.  

In addition to his sentence, Brown was also ordered by United States District Court Judge Linda R. Reade to pay $34 million in restitution to defrauded investors.  Sigillito is awaiting sentencing after his request for a new trial was denied