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Victim of St. Louis Ponzi Scheme Lawyer Loses at 8th Cir.

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By Mark Wilson, Esq. on May 05, 2015 4:15 PM

Want to prove legal malpractice in Missouri when it comes to international investments? According to the Eighth Circuit, you're going to need an expert witness for that.

Phil Rosemann sued Martin Sigillito for legal malpractice after Sigillito absconded with a large part of a $15.6 million dollar loan, ultimately leading to his conviction for wire fraud and money laundering.

That's Quite a Scheme

The Sigillito saga was "one of the biggest [P]onzi schemes to ever bef[a]ll St. Louis," reported the Riverfront Times in 2014. Sigillito -- once an Anglican priest as well as a lawyer -- conned about 100 investors out of $50 million. He's now serving 40 years in prison.

Rosemann hired Sigillito to help him invest the $15.6 million, which he suddenly possessed after he sold his shares in his family's company. Sigillito encouraged Rosemann to invest in a Turkish contracting company. Rosemann transferred all the money to him. Sigillito gave $5 million to the Turkish company, loaned $10.8 million to another person in England, and then kept portions of the money for himself.

The Turkish company went bankrupt in 2009, but -- contrary to Sigillito's representations -- Rosemann wasn't able to collect on what he was owed. Rosemann claimed he relied on assurances from Sigillito that the Turkish's companies' "NATO contracts" could be seized to repay the money, but of course, those don't exist.

An Expert Is Required

In Missouri, an expert is required to testify when a defendant allegedly breached a duty in matters of malpractice except where the malpractice is "clear and palpable."

You might think the case is pretty clear, but Rosemann doesn't make it so clear. He's not arguing on appeal that Sigillito was negligent for falsely telling him there were NATO contracts; rather, he claims Sigillito "negligently prepared the Promissory Note." This, the Eighth Circuit said, involves "somewhat arcane subjects to the ordinary juror" that merit an expert explaining "what an attorney, 'under the same or similar circumstances,' would have done and why Sigillito's actions were unacceptable."

There are exceptions for when a professional simply fails to follow instructions, but the court said that wasn't present here: At issue was whether Sigillito's actions fell below the actions of a reasonable attorney preparing a similar promissory note, and Rosemann needed to specify that an expert would testify to that.

It's unclear why Rosemann wouldn't allege negligence or some kind of fraud. At district court, he claimed Sigillito's assurances that he could get his money back through the non-existent NATO contracts induced him to invest. In any event, it's a win for Sigillito, even though he undoubtedly still has dozens of other investors out for blood.

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