Case 4:10-cv-01165-DJS Document 16 Filed 08/12/10 Page 1 of 14

UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF MISSOURI
EASTERN DIVISION

Phillip L. Rosemann, et. al. )

)
Plaintiff’s, )
) Case No. 4:10-cv-01165-DJS
vs. )
)
Martin Sigillito, et. al. ) Judge: Honorable Donald J. Stohr
)
Defendant’s )
)

PLAINTIFFS RESPONSE AND OPPOSITION TO

MARTIN SIGILLITO'S MOTION TO DISMISS

COME NOW, plaintiffs and in response and opposition to the defendants

Motion to Dismiss state as follows:

Defendant Martin Sigillito’s Fed. R. Civ. P. 12(b)(6) motion is guided by the

following principles. The “material allegations of the complaint are taken as

admitted.” Jenkins v. McKeithen, 395 U.S. 411, 421 (1984). The complaint is

“liberally construed” in the plaintiffs “favor.” Id. The “facts alleged in the complaint”

are viewed “in the light most favorable to” the plaintiffs. H.J. Inc. v. Northwestern

Bell Tel. Co., 492 U.S. 229 (1989) (civil RICO case). The “issue is not whether a

plaintiff will ultimately prevail but whether the [plaintiff] is entitled to offer evidence

to support the claims. Indeed it may appear on the face of the pleadings that a

recovery is very remote and unlikely but that is not the test.” Scheuer v. Rhodes, 416

U.S. 232, 236 (1974).

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Defendant Martin Sigillito’s motion repeatedly disregards the above cardinal

principles. Martin Sigillito denies material allegations, presents facts not found in the

Complaint, construes the allegations narrowly, and draws inferences in his favor. However,

what “Rule 12(b)(6) does not countenance are dismissals based on a [defendants] disbelief

of a complaint’s factual allegations.” Neitzke v. Williams, 490 U.S. 319, 327 (1989). As

shown below, the allegations in the Complaint present claims entitling the Plaintiffs to relief.

1. JURISDICTION EXISTS IN THIS COURT.

Defendant Martin Sigillito makes the novel argument that this lawsuit should be filed

in England because the fraudulent loans he originated have a forum selection clause. The

Forum Selection clause was previously identified and specifically states that “the courts of

England or the State of Missouri, U.S.A, at the lender's discretion, are to have jurisdiction

to settle any disputes which may arise. . .” [ECF Dkt #9 pg 2]. Martin Sigillito confuses civil

RICO with breach of contract claims and argues that civil RICO allows him to use American

soil as a base to commit fraud, but denies the American victims of a federal forum. This case

is underlain with false promises of buying land in England but the complaint against Martin

Sigillito is not a breach of contract from England, but about racketeering in the United States.

The Complaint alleges that “Martin Sigillito organized, operated and masterminded

a fraudulent loan program that induced individuals to loan money to an England based

company, Distinctive Properties.” (Comp. ¶ 7). “Martin Sigillito falsely represented to

plaintiff Phil Rosemann that his $15 million loan made in January 2007 to Distinctive

Properties would be used to purchase real estate in England.” (Comp. ¶ 30). Martin Sigillito

“falsely represented to each of the plaintiffs that their loan money was being borrowed by

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Distinctive Properties, to purchase real estate in England.” (Comp. ¶ 29). However, “more

than 98% of the loan money was fraudulently diverted by Martin Sigillito” to his “bank

accounts.” (Comp. ¶ 29). Some money was “disguised as interest on the loan when in fact

the money came from new loans” a “classic ‘ponzi scheme’ from inception.” (Comp. ¶ 9).

Martin Sigillito argues that Roby v. Corporation of Lloyd's, 996 F.2d 1353 (2nd Cir

1993) is “virtually identical” and requires that this case be tried in England. In Roby, the

plaintiffs signed agreements with defendant stock exchange and signed contracts with clauses

that bound them to “arbitrate in England under English law.” Id. at 1357. There is no

allegation in Roby that a third person solicited them and fraudulently diverted their money.

Martin Sigillito’s application of Roby to his fraudulent conduct is wishful thinking.

The Complaint alleges that Martin Sigillito “falsely represented to each of the

plaintiffs that the loan documents were signed by Derek Smith. However, Martin

Sigillito was assembling these loan documents in the United States using copies of

Derek Smith’s signature from a loan made six years earlier. A review of all fifteen

loans made from Phil Rosemann confirms that Derek Smith’s signature is identical

on each page.” (Comp. ¶ 37). Martin Sigillito seeks to use the purported forum

selection from a loan agreement which is fraudulent by inception, this is not

supported by Roby, nor any other legal authority. For example, M/S Bremen v. Zapata

Off-Shore Co., 407 U.S. 1 (1972), case which is quoted extensive by Martin Sigillito

commences with the language “that parties to a contract may” there is no authority

for Martin Sigillito to apply forum selection to “non-parties” like him.

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The Supreme Court has confirmed that “forum-selection clauses should be

given full effect” only when they are “freely negotiated” and the “international

agreement [is] unaffected by fraud.” Bremen v. Zapata Off-Shore Co., 407 U.S. 1,13

(1972). Forum selection is inapplicable “if the inclusion of that clause in the contract

was the product of fraud or coercion.” Scherk v. Alberto-Culver Co., 417 U.S. 506,

519 n.14 (1974). In Armco, Inc. v. North Atlantic Insurance Co., 68 F. Supp. 2d 330

(S.D. N.Y. 1999) the court refused to enforce a forum selection clause and concluded

that a wide ranging RICO conspiracy dispute did not arise out of an underlying sales

contract between the parties, and hence did not dictate the selection of a forum. Id.

at 338-340. The Armco opinion held that the forum selection clause was

unenforceable because it was induced by fraud. Id. at 340.

Martin Sigillito’s office and residence are in St. Louis, he arranged many of the loans

in St. Louis, and he is properly being sued in his home town. To suggest that the American

victims must proceed in foreign soil is simply absurd. Under this logic, every defrauder could

simply create some connection to a foreign country and deny the American victims their

rights to compensation in an American court. It’s no wonder that Martin Sigillito did not

offer to sell land in Cuba in order to deny the plaintiffs any rights at all. Civil RICO provides

a proper federal remedy to Martin Sigillito’s ponzi scheme, and those claims are within this

courts original jurisdiction, 18 U.S.C. § 1964(c), and this case is properly before this court.

This case displays the breath and depth of civil RICO claims which “has

become a tool for everyday fraud cases brought against respected and legitimate

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enterprises.” Sedima v. Imrex Co., 473 U.S. 479, 499 (1985). “RICO is to be read

broadly” and Congress intended that civil RICO have precisely such a broad

application. Id. at 497-500. Moreover, the Supreme Court has repeatedly reversed

motions to dismiss civil RICO cases. See Nat’l Org. for Women v. Scheidler, 510 U.S.

249 (1994) (reversing grant of 12(b)(6) motion in a political opposition context

because civil RICO does not require an economic motive); H.J. Inc. v. Northwestern

Bell Tel. Co., 492 U.S. 229 (1989) (reversing grant of 12(b)(6) motion in a civil RICO

case alleging long-term bribery of regulators by a telephone company and explaining

that racketeering predicates must be related and pose a threat of continued activity,

or continued for an extended closed time period); Sedima, S.P.R.L. v. Imrex Co., 473

U.S. 479 (1985) (reversing dismissal of civil RICO in a garden-variety fraud and

breach of contract case); American National Bank & Trust v. Haroco, Inc., 473 U.S.

606 (1985) (reversing dismissal of civil RICO in a commercial banking context).

2. COMPLAINT ALLEGES ELEMENTS OF CIVIL RICO VIOLATION.

The Racketeer Influenced and Corrupt Organizations Act (“RICO”), 18 U.S.C.

§§ 1961-68, provides for liability in civil suits brought by any person injured “in his

business or property” by a RICO violation. 18 U.S.C. § 1964(c). RICO makes it

unlawful for “any person” who is employed by or associated with “any enterprise”

affecting interstate commerce to “participate, directly or indirectly, in the conduct of

such enterprise's affairs through a pattern of racketeering activity.” 18 U.S.C. §

1962(c).
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Four elements are necessary for a § 1962(c) violation “(1) conduct (2) of an

enterprise (3) through a pattern (4) of racketeering activity,” Sedima, S.P.R.L. v.

Imrex Co., 473 U.S. 479, 496 (1985). See also, Craig Outdoor Adver., Inc. v. Viacom

Outdoor, Inc., 528 F.3d 1001, 1026 (8th Cir. 2008) (same).

3. DISTINCTIVE PROPERTIES IS A RICO ENTERPRISE.

Civil RICO liability requires the existence of an “enterprise” through which the

illegal conduct occurs. An “enterprise” is defined broadly under RICO and included

any “corporation.” 18 U.S.C. § 1961(4). The Complaint alleges that Distinctive

Properties engaged in international loans the used as the “enterprise” and the vehicle

through which the pattern of racketeering activity was is committed. (Comp. ¶ 62-64).

RICO makes it unlawful for any person “associated” with any RICO enterprise

to “conduct or participate, directly or indirectly” in the RICO enterprise’s affairs

through a pattern of racketeering activity. 18 U.S.C. § 1962(c). The RICO “person”

(Martin Sigillito) is defined broadly to include “any individual or entity capable of

holding a legal or beneficial interest in property.” 18 U.S.C. § 1961(3).

The Complaint alleges that “Martin Sigillito organized, operated and

mastermind a fraudulent loan program.” (Comp. ¶ 56). Martin Sigillito “conducted

and participated, directly and indirectly, in the affairs of Distinctive Properties

through a pattern of racketeering activity, over a period of more than seven years.”

(Comp. ¶ 61). Martin Sigillito “falsely represented” to each “plaintiffs that the loan

documents were signed by Derek Smith.” (Comp. ¶ 37). Martin Sigillito “falsely
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represented Derek Smith’s involvement.” (Comp. ¶ 37). Martin Sigillito “knew that

the list of assets attached to the loans were fraudulent.” (Comp. ¶ 43). Martin Sigillito

“falsely represented” to each plaintiffs that he conducts “constant due diligence”

checking tax returns, land appraisals, balance sheet and income statements and he will

gladly “share that information.” (Comp. ¶ 39). Derek Smith has confirmed he “never

received any of the funds which were lent to Distinctive Properties under the

agreements arranged by Martin Sigillito.” (Comp. ¶ 42). Martin Sigillito “used many

false means to prevent the plaintiffs from investigating the loans.” (Comp. ¶ 48).

4. RACKETEERING ACTIVITY (PREDICATE ACTS).

Civil RICO prohibits conducting the affairs of an enterprise through a pattern

of racketeering activity. 18 U.S.C. § 1962(c). A “pattern of racketeering activity”

consists of two or more acts of racketeering activity. 18 U.S.C. § 1961(5).

“[R]acketeering activity consists of no more and no less than commission of a

predicate act.” Sedima v. Imrex Co., 473 U.S. 479, 495 (1985). “Racketeering

activity” is defined in 18 U.S.C. § 1961(1)(B) to include a slew of state and federal

crimes, including federal mail and wire fraud (18 U.S.C. §§ 1341, 1343).

RICO includes violation of federal mail and wire fraud (18 U.S.C. §§ 1341,

1343) as predicates that constitute racketeering activity. See 18 U.S.C. § 1961(1)(B).

The mail fraud statute prohibits the use of the mails “for the purpose of executing”

any “scheme or artifice to defraud.” 18 U.S.C. § 1341.

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“There are two elements of a mail or wire fraud charge: (a) a scheme to

defraud, and (2) a mailing or wire in furtherance of that scheme. Wholly intrastate use

of the mails for fraud violates the mail fraud statute. In contrast, the federal wire fraud

statute requires interstate use of the wire.” Annulli v. Panikkar, 200 F.3d 189, 200 n.9

(3d Cir. 1999). The wire fraud statute is “identical to the mail fraud statute except it

speaks of communications transmitted by wire.” U.S. v. Frey, 42 F.3d 795, 797 (3d

Cir. 1994). The “cases construing the mail fraud statute are applicable to the wire

fraud statute as well.” Id. at 797 n.2.

The “scheme or artifice to defraud need not be fraudulent on its face” and

“need not involve affirmative misrepresentation.” Kehr Packages, Inc. v. Fidelcor,

Inc., 926 F.2d 1406, 1415 (3d Cir. 1991). The “mailing need not contain any

misrepresentations” and even “innocent mailings -- ones that contain no false

information -- may supply the mailing element.” Id. at 1413-14. Also, each interstate

use of the telephone or “each mailing that is incident to an essential part of the

scheme constitutes a new violation.” Id. at 1413. The “scope” of the mail fraud statute

is “broad” and reaches “beyond the common law definition of false pretences.”

Tabas, 47 F.3d at 1290. The “use of the mails need not be an essential element of the

fraudulent scheme. Rather, so long as the mailings are ‘incident to an essential part

of the scheme,’ the mailing element is satisfied.” Tabas, 47 F.3d at 1293.

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The Complaint alleges that Martin Sigillito “falsely represented to each of the

plaintiffs that their loan money was being borrowed by Distinctive Properties, to

purchase real estate in England.” (Comp. ¶ 29). “More than 98% of the loan money

was fraudulently diverted by Martin Sigillito” to his “bank accounts.” (Comp. ¶ 29).

Martin Sigillito “falsely represented” to each plaintiffs that Distinctive Properties

“had repaid many loans over the years on time and as promised.” (Comp. ¶ 32).

Martin Sigillito “knew that Distinctive Properties did not purchase or sell a single

property from the plaintiff/lenders money and did not repay a single plaintiff/lender

for loans they did not make.” (Comp. ¶ 32).

Some of the money was “disguised as interest on the loan when in fact the

money came from new loans confirming that the loans were a classic ‘ponzi scheme’

from inception.” (Comp. ¶ 9). Martin Sigillito represented to each Plaintiffs “that

Derek Smith used the money from the loans to acquire land and options.” (Comp. ¶

10). Martin Sigillito “knew this to be false” he knew he “would not send Derek Smith

the loan money” and “in time the ‘ponzi scheme’ would come crashing down” and

leave the plaintiffs “with worthless loans.” (Comp. ¶ 10). In time that is exactly what

happened. Martin Sigillito “defraud[ed] over 100 individuals of more than $45

million in a classic ‘ponzi scheme’ where the purported returns were paid from funds

contributed by new investors.” (Comp. ¶ 6). “Martin Sigillito fraudulently diverts the

money to his personal needs” and on one occasion he sought reimbursement of a loan

that was repaid confirming the complete “dishonesty to which Martin Sigillito will

go to mask his fraudulent scheme.” (Comp. ¶ 33).

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Martin Sigillito “mailed over five hundred letters during the past seven years”

along with “over five hundred” Federal Express “packages” with copies of fraudulent

loan documents “in furtherance of their scheme to defraud the plaintiffs. (Comp. ¶ 67-

68). “Martin Sigillito sent over five hundred interstate faxes” of the fraudulent “loan

documents during the past seven years” and “over five hundred interstate faxes” to

England in furtherance of the scheme to defraud. (Comp. ¶ 71-72). Martin Sigillito

engaged in “more than one thousand interstate telephone calls” to England and “more

than five hundred interstate telephone calls” to the Plaintiffs in furtherance of the

“scheme to defraud the plaintiffs.” (Comp. ¶ 73, 74). Martin Sigillito “sent well over

five hundred emails to the Plaintiffs during the past seven years” in furtherance of the

“scheme to defraud the Plaintiffs.” (Comp. ¶ 75). The dates contents and other

specifics of some of the emails are detailed in the Complaint. (Comp. ¶¶ 29, 32, 33,

35, 38, 40, 41, 47, 50). Martin Sigillito “sent and received well over five hundred

electronic money wire transfers” during the past seven years in furtherance of the

“scheme to defraud the Plaintiffs.” (Comp. ¶ 77).

Martin Sigillito “committed well over two thousand separate acts of mail

and wire fraud in furtherance of the fraudulent scheme in violation of 18 U.S.C. §§

1341, 1343. The mail or wire communication related to their fraudulent scheme and

was incident to an essential part of the scheme, and involved many misrepresentations

reasonably calculated to deceive the Plaintiffs. Each time a letter, fax, phone call,

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email or wire transfer was sent it deprived, or attempted to deprive, the Plaintiffs of

their money and resulted in a distinct injury to the Plaintiffs and a concommitant

benefit” to Martin Sigillito. (Comp. ¶ 78).

The Plaintiffs have adequately alleged a cognizable scheme to defraud and the

use of mailing or wire in furtherance of the scheme.

5. PATTERN OF RACKETEERING ACTIVITY.

The “heart of any RICO complaint is the allegation of a pattern of

racketeering.” Agency Holding Corp. v. Malley-Duff & Assoc., Inc., 483 U.S. 143,

154 (1987). A pattern of racketeering activity “requires at least two acts of

racketeering activity,” i.e. two acts of extortion, or mail or wire fraud, within ten

years. 18 U.S.C. § 1961(5). “To prove a pattern of racketeering activity a plaintiff .

. . must show that the racketeering predicates are related” and they either extended

over “a substantial period of time” or “pose a threat of continued criminal activity.”

H.J., Inc. v. Northwestern Bell Tel. Co., 492 U.S. 229, 239, 242 (1989).

This is commonly referred to as the “continuity plus relationship test.” Id. at 239.

“For the past seven years” Martin Sigillito committed “over two thousand

separate acts of mail and wire fraud” against the Plaintiffs and each “act of mail fraud

and wire fraud constitutes separate instances of interrelated racketeering activity.”

(Comp. ¶ 78, 80). The Complaint also alleges that Martin Sigillito committed “over

two thousand separate acts of mail and wire fraud in furtherance of the fraudulent

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scheme.” (Comp. ¶ 78). The fraudulent loan scheme is widespread and spans “more

than seven years.” (Compl. ¶ 55). The scheme “defraud[ed] over 100 individuals of

more than $45 million.” (Comp. ¶ 6). This also shows relatedness as the victims are

many and the method is the same and not isolated. The Plaintiffs have properly

alleged a “closed-ended” RICO violation.

The Plaintiffs also allege that Martin Sigillito’s “racketeering activity threatens

to continue unabated, driven by the possibility of repeated economic gain, and the

ability to invest the racketeering income back into the enterprise. The acts of mail

fraud and wire fraud escalated confirming” that Martin Sigillito has “no intention of

stopping the racketeering activity which by its very nature is projected into the future

with a threat of repetition.” (Compl.¶ 81). This properly alleges an “open-ended”

RICO violation because the Defendants past conduct “by its nature project[ed] into

the future with a threat of repetition,’ thus satisfying RICO’s pattern requirement.”

H.J. Inc., 492 U.S. at 241.

6. INJURY.

“The injury to the Plaintiffs business or property was proximately caused” by

Martin Sigillito’s “pattern of racketeering activity. Each act of mail or wire fraud

injured the Plaintiffs business or property and represents a discrete attempt to injure

the Plaintiffs.” (Compl. ¶ 82). The Plaintiffs have properly alleged that they have

been injured in their business or property.

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7. COMPLAINT PROPERLY ALLEGES RICO CONSPIRACY

The RICO conspiracy statute, 18 U.S.C. § 1962(d), makes it “unlawful for any

person to conspire to violate” § 1962(c). Therefore, under § 1962(d) it is unlawful to

conspire to conduct the affairs of an enterprise through a pattern of racketeering

activity. In Salinas v. U.S., 522 U.S. 52 (1997) the Supreme Court held that there “is

no requirement of some overt act or specific act” in § 1962(d). Id. at 63. A

“conspiracy may exist even if a conspirator does not agree to commit or facilitate

each and every part of the substantive offense.” Id. at 63. The conspirators “may

divide up the work, yet each is responsible for the acts of each other.” Id. “If

conspirators have a plan which calls for some conspirators to perpetrate the crime and

others to provide support, the supporters are as guilty as the perpetrators.” Id.at 64.

The Complaint alleges that the “Defendant conspired and agreed with each

other to engage in the conduct or attempted conduct stated” in the substantive RICO

count. (Compl. ¶ 89). The Defendants “conspired and agreed to aid each other in the

commission of the acts of extortion, or of an attempt to commit extortion.” (Compl.

¶ 89). The Defendants conspired to conduct “the affairs of Distinctive Properties

through a pattern of racketeering activity, by committing multiple acts of mail and

wire fraud.” (Compl. ¶ 92). The “Defendants combined, conspired and confederated

with each other to commit” the racketeering activity. (Compl. ¶ 93). The allegations

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also describe the objectives of the conspiracy and the Defendant’s role in the

conspiracy. (Compl. ¶¶ 15-83). These allegations are more than sufficient to satisfy

the RICO conspiracy statute, 18 U.S.C. § 1962(d).

8. CONCLUSION.

The allegations in the Complaint state sufficient claims upon which relief can

be granted, and the Plaintiffs pray that this Court deny the Motion to Dismiss.

WHEREFORE, plaintiffs pray that defendants motion to dismiss be denied.

Respectfully submitted,

Sebastian Rucci (Eastern Dist Reg. No. 76207)

Law Offices of Sebastian Rucci
401 E. Ocean Blvd., Suite 200
Long Beach, CA 90802-4993
Tel: (562) 901-0199
Email: SebRucci@gmail.com
Attorney for Plaintiffs

CERTIFICATE OF SERVICE
I hereby certify that on August 12, 2010, a copy of the foregoing was filed
electronically. Notice of this filing will be sent to all parties via the Court’s electronic
filing system and parties may access this filing through the Court’s Case
management/Electronic Case Files (CM/ECF) found on the internet at
https://ecf.moed.uscourts.gov.

Sebastian Rucci (Eastern Dist Reg. No. 76207)

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