Category Archives: Medical Capital Holdings

Securities America, a broker/dealer division of Ameriprise Financial, is facing charges by Massachusetts Secretary of State William Galvin for allegedly making omissions and misleading statements in connection to sales of some $700 million in promissory notes. 

“Our investigation showed that Securities America ignored their own due diligence analysts and sold these notes to unsophisticated investors without telling them the risks involved,” Galvin said in a statement. “People invested their life savings, while this dealer hid from them the truth of what they were getting into.” 

The notes in question were issued by special-purpose corporations owned by Tustin-based Medical Capital Holdings, which was charged this past summer by the Securities and Exchange Commission (SEC) in a $77 million offering fraud. 

Private placement securities are supposed to be for “accredited” investors, but unsophisticated investors placed their life savings into Medical Capital notes based on recommendations from Securities America that the investments were suitable, according to the Massachusetts complaint. More than 400 registered reps of Securities America sold the notes using private placement memorandums, marketing flyers and pamphlets, the complaint states. The notes were characterized as “secured” in material from Medical Capital and Securities America, the division says. 

From 2003 through 2009, Medical Capital issued more than $1.7 billion in notes, and Securities America placed $697 million. For that work, Securities America received more than $26 million in compensation. 

Since August 2008, Medical Capital has defaulted on all of its outstanding notes and currently is in permanent receivership. As a result, millions of dollars of investors’ life savings remain frozen and illiquid.

If you have suffered investment losses connected to sales of private placements by Securities America and wish to discuss filing an individual arbitration claim with the Financial Industry Regulatory Authority (FINRA), please contact us. A member of our securities fraud will evaluate your situation to determine if you have a viable claim for recovery.

Thomas Seaman, the court-appointed receiver in the Medical Capital fraud case, filed his sixth status report on Medical Capital Holdings on Jan. 11, 2010. Among the highlights revealed in the document: Investors are owed more than $1.7 billion and Medical Capital’s lending activities have been deemed unprofitable beginning with the creation of its first Medical Provider Financial Corporation, or MPFC 1. (MPFC 1 is one of several wholly owned special-purpose corporations that Medical Capital used to raise money from investors via offerings of notes.) 

Other interesting details found in Seaman’s latest report include the following:

• Medical Capital requested and was paid administrative fees in excess of $323 million.
• No MPFC ever generated enough profit to pay investors’ principal and interest.
• Medical Capital transferred loans and other assets valued at just under $1 billion between eight money-raising MPFCs, which facilitated payments of earlier investors’ principal from new investors’ funds.

In July 2009, the Securities and Exchange Commission (SEC) shut down Tustin-based Medical Capital for allegedly defrauding investors out of at least $18.5 million. In an amended lawsuit filed in November 2009, however, the SEC alleges a much more systematic fraud against Medical Capital and its subsidiaries. 

The amended complaint accuses Medical Capital of “faking” receivables, which the SEC says were then sold to MPFC-VI. In turn, the fake receivables allowed Medical Capital to charge investors millions of dollars in unjustified fees. 

A Nov. 12 article in the Orange County Register describes how the process allegedly worked: 

“In August 2008, MP-VI bought receivables of NLV, Inc. from an older fund, Medical Provider-V, for $3.39 million in cash. In fact, NLV had been out of business for four years. The receivables were fake.

“In August and September 2008, MP-VI bought three batches of receivables for Trace Life Sciences, a Denton, Texas, radio medicine maker that Medical Capital had just seized. Two of the three batches of receivables were fake. 

“Medical Capital took the first 72 receivables from the first batch and created a fake second batch by adding the number 1045 to each line number to create a new line, the SEC alleged. It also upped the amount for each receivable by $100,000. It created the fake third batch by taking those same receivables and increasing the amount due on each receivable by $200,000.” 

The end result of Medical Capital’s alleged “accounting” was this: Trace Life Sciences generated more than $21 million in fake receivables in less than a month. The SEC alleged that MP-VI paid two earlier Medical Capital funds $9.7 million for the right to collect the fake bills.

Maddox Hargett & Caruso continue to file arbitration claims against various brokerage firms that sold investors Medical Capital Notes. If you suffered investment losses in Medical Capital Holdings, contact us today.

An increase in fraudulent private placement offerings has state regulators pushing for tougher regulatory reforms that will give them more control and oversight of private placement issuers. In particular, states securities regulators want authority to control those issuers that have prior convictions for securities fraud or other offenses. Case in point: Medical Capital Holdings.

The Securities and Exchange Commission (SEC) filed fraud charges against Medical Capital in July for private placement sales totaling $77 million. In the complaint, the SEC accuses Medical Capital and its principals of defrauding investors and misappropriating about $18.5 million of investor funds. The regulator also alleges that Medical Capital misrepresented the private placements by failing to inform investors that it had defaulted on loans connected to prior offerings, as well as was late in making payments to investors on principal and/or interest.

Following the SEC’s charges, it’s been determined that a number of broker/dealers knowingly marketed and sold unregistered Medical Capital notes to thousands of unsuspecting investors.

As reported Dec. 1 by Investment News, examples of private placement deals like those involving Medical Capital are one reason state regulators are calling for more authority over private-offering issuers with prior convictions for securities fraud. As it currently stands, private placements are generally exempt from review, which means state have no power to shut down issuers with past problems from selling private placements in the future.

“Before the North American Securities Administrators Association (NSMIA), if John Brown wanted to do a private placement but he had been convicted of securities fraud, he couldn’t use the exemption,” said Texas Securities Commissioner Denise Crawford, who is president of NASAA. “After NSMIA, the same John Brown could use the exemption” to sell private placements without registering,” the Investment News article said.

On Jan. 14, 2010, state regulators from across the country appeared on Capitol Hill to voice their concerns over private placements to the Financial Crisis Inquiry Commission. The Commission, which was created in May 2009 by President Obama, has been charged with dissecting the root causes of the nation’s financial meltdown. The consensus among state regulators who provided testimony thus far: Give states back the authority to police private-placement offerings or be prepared to see more private placement frauds down the road.

IIf you were ill-advised about the risks of investing in private placement offerings, contact our securities fraud team. We will evaluate your situation and explain your options.

The phrase “Medical Capital lawsuit” has become increasingly popular among investors following recent fraud charges filed against the Tustin-based healthcare company by the Securities and Exchange Commission (SEC).

In its complaint, the SEC accuses Medical Capital Holdings, Medical Capital Corporation, Medical Provider Funding Corporation VI and company officers Sidney M. Field, and Joseph J. Lampariello of securities fraud and misappropriating about $18.5 million of investors’ funds.

The SEC goes on to state that Medical Capital and related subsidiaries lied to backers as the companies allegedly raised and misappropriated millions of dollars of investors’ money while at the same time failing to disclose information about $1.2 billion in outstanding notes and $993 million in notes that had entered into default.

On the same day that the SEC filed fraud charges, the Financial Industry Regulatory Authority (FINRA) issued a sweep notice to an undisclosed number of brokerage firms to obtain information about sales of the Medical Capital Notes.

Investors who bought Medical Capital Notes based on the recommendation of a broker/dealer or investment firm may be able to recover their financial losses by filing an individual arbitration claim with FINRA. If you sustained investment losses in Medical Capital Holdings, contact our securities fraud team. We can evaluate your situation to determine if you have a viable claim.

Medical Capital losses may be changing the face of future private placement deals. In July, the Securities and Exchange Commission (SEC) levied fraud charges against Medical Capital Holdings, bringing into question the suitability of the products and the sales tactics used by broker/dealers that sold the private placements to individual investors.

Among the charges outlined in the SEC’s complaint: Medical Capital and top executives Sidney M. Field and Joseph J. “Joey” Lampariello allegedly defrauded investors, wrongfully diverted $18.5 million of their money and failed to disclose information about several defaults. A receiver has since taken over Medical Capital’s business.

According to the SEC, Medical Capital raised some $2.2 billion from approximately 20,000 investors over the past six years. The company, which is based in Tustin, California, places investors’ money primarily into unpaid bills, or receivables, from hospitals and doctors.

In November, a class action lawsuit was filed against a number of brokerage firms that sold the private placements in question. Those firms include: National Securities Corp., Cullum & Burks Securities, Securities America, Ameriprise Financial, Inc., and CapWest Securities.

The broker/dealers responsible for selling private placements in Medical Capital had an obligation to their clients to perform due diligence on the investments they sold. This didn’t happen. And now investors are paying the price.

Maddox Hargett & Caruso P.C. continues to investigate the sales practices of broker/dealers that sold Medical Capital notes to investors. If you sustained investment losses in Medical Capital Holdings, contact our securities fraud team. We can evaluate your situation to determine if you have a claim.

The number of investors who suffered losses in private securities issued by Medical Provider Funding Corporation and Medical Capital Holdings is growing daily. In July, the Securities and Exchange Commission (SEC) filed fraud charges against Medical Capital in connection to the sale of $77 million of these investments. A short time later, a class lawsuit was filed in the U.S. District Court for the Central District of California against various brokerage firms that sold the securities (called Medical Capital Notes). Among the firms cited as defendants: Cullum & Burks Securities, Securities America, Ameriprise Financial, and CapWest Securities.

According to the complaint, the private placement memoranda issued for the Medical Capital Notes misrepresented and omitted material facts regarding the terms of the offerings, the use of investors’ funds, the track record of various Medical Capital entities, the backgrounds and qualifications of the executives responsible for running the companies, and the overall risks of an investment in the Medical Capital Notes. 

In addition, the complaint alleges that the notes should have been registered with the SEC, but in fact were not. 

Maddox Hargett & Caruso currently is building cases for investors who lost money in Medical Capital Holdings. To begin your Medical Capital Fraud Recovery, complete this form.

Private placement claims are on the upswing, prompting new questions on whether these largely unregulated securities are appropriate investments for many individual investors. A number of the claims filed in recent months target smaller broker/dealers that investors say sold them fraudulent private placements. Case in point: Private placements in Medical Capital Holdings.

In July, the Securities and Exchange Commission (SEC) filed civil fraud charges against Medical Capital, alleging that the Tustin, California-based financial services company committed fraud as far back as 2003.

The SEC accuses Medical Capital Holdings of lying to backers as it raised and misappropriated millions of dollars of investors’ money while keeping mum to buyers about the more than $1.2 billion in outstanding notes and the $993 million in notes that had entered into default or resulted in late payments of both principal and interest to investors.

As reported Dec. 10 by the Wall Street Journal, the Medical Capital case has produced a slew of investor claims against smaller brokerages that sold Medical Capital private placements, including Securities America, Capital Financial Services and QA3 Financial Corp.

Investments in private placements carry a considerable amount of risk. To begin, securities sold through private placements are not publicly traded and, therefore, provide less liquidity to investors. Despite these concerns, the SEC has actually lowered the income and asset thresholds required to purchase private placements. In addition, issuers are allowed to sell a percentage of their private placements to individuals who don’t meet suitability standards.

Various independent broker-dealers that sold Medical Capital securities to investors are the subject of ongoing investigations, as well as class-action lawsuits and arbitration claims filed with the Financial Industry Regulatory Authority (FINRA). The cases themselves focus on the sales practices and due diligence of the broker/dealers that marketed and sold private securities known as Medical Capital Notes.

On July 16, 2009, the Securities and Exchange Commission (SEC) filed fraud charges against Medical Capital Holdings in connection to the sale of $77 million of private securities. On that same day, FINRA issued a “sweep notice” to obtain information from an undisclosed number of broker/dealers about sales of Medical Capital securities.

The SEC’s complaint alleges that Medical Capital and others defrauded investors by misappropriating about $18.5 million of investor funds and misrepresenting to investors that no prior offerings had defaulted or were late in making payments of principal and/or interest.

Based in Tustin, California, Medical Capital purchases accounts receivables of medical providers and then packages them as private investments. Over a six-year period, the firm raised approximately $2.2 billion from 20,000 investors through offerings of notes in Medical Provider Funding Corp. VI and earlier offerings made by five other wholly owned special-purpose corporations (SPCs). Those SPCs include Medical Provider Funding Corp. I, II, III, IV and V.

Today, all five SPCs are in default after failing to make interest and principal payments to investors.

On Sept. 18, 2009, a class action lawsuit – Case No: SACV 09-1084 – was filed in California on behalf of investors who purchased securities issued by Medical Provider Financial Corp. III, Medical Provider Financial Corp. IV, Medical Provider Funding Corp. V and/or Medical Provider Funding Corp. VI. In the complaint, broker/dealers Cullum & Burks Securities, Securities America, Ameriprise Financial and CapWest Securities are named as defendants. Among the allegations cited, the firms are accused of failing to properly investigate the securities and the track record of Medical Capital and its related entities

Currently, Maddox Hargett & Caruso P.C. is investigating potential claims to recover investor losses against various broker/dealers that sold Medical Capital securities. If you have questions about your Medical Capital investments, please contact us by leaving a message in the Comment Box below or on the Contact Us form.

Medical Capital Holdings is mired in legal issues these days, facing arbitration claims and a recently filed class action lawsuit over sales of Medical Capital Notes. In July, the Securities and Exchange Commission (SEC) entered the picture, as well, announcing fraud charges against Medical Capital Holdings and related Medical Capital entities. In its complaint, the SEC accuses Medical Capital Holdings of defrauding investors, misappropriating millions of dollars of investor funds and failing to disclose information about soured investments.

According to the SEC, Medical Capital raised more than $2.2 billion through offerings of notes in Medical Provider Funding Corp. VI and earlier offerings made by five other wholly owned special-purpose corporations (SPCs) named Medical Provider Funding Corp. I, II, III, IV and V. Today, all five SPCs are in default to investors after failing to make interest and principal payments.

Investors got another dose of bad news following a recent report by Thomas Seaman, the receiver assigned to inventory Medical Capital Holdings’ assets. In his report, Seaman wrote that Medical Capital had placed investors’ cash into investments completely unrelated to the medical receivables business. When those investments soured, Medical Capital defaulted.

Among the investments:

• An unreleased movie, The Perfect Game. Medical Capital poured at least $20 million into the project.
• Vivavision Inc., a maker of cell phone applications. Its sole product, the receiver wrote, “was a live video feed of a hamster in a cage.” Medical Capital spent $7 million on this “investment.”
• A yacht named “The Homestretch.” The receiver said a Medical Capital subsidiary occasionally employed a captain and crew for sailing excursions aboard the yacht, primarily for Medical Capital’s CEO Sidney M. Field and President Joseph Lampariello.

Medical Capital also had serious problems in its core business, according to the receiver.  On at least 301 occasions, investor funds run by Medical Capital sold some of their receivables to other Medical Capital funds – sometimes years after the due date. This information – which was never revealed to investors – is significant because receivables lose value with age.

Moreover, an additional $543 million – 87% of all the accounts receivable on MedCap’s books – are “non-existent,” according to the receiver’s report.

If you have suffered losses in Medical Capital Notes and wish to discuss filing an individual arbitration claim with the Financial Industry Regulatory Authority (FINRA) or have questions about your Medical Capital investments, please leaving a message in the Comment Box below or via the Contact Us form. We want to counsel you on your legal options.

Arbitration claims involving Medical Capital Holdings are expected to escalate in the coming months, as investors take certain broker/dealers to task over allegations of misrepresentation and omission of material facts in connection to sales of Medical Capital Notes.

On Sept. 18, 2009, a class action lawsuit – Case No. 09-CV-1084 – was filed in the United States District Court for the Central District of California on behalf of investors who purchased securities issued by Medical Provider Financial Corp. III, Medical Provider Financial Corp. IV, Medical Provider Funding Corp. V and/or Medical Provider Funding Corp. VI. In the lawsuit, broker/dealer Cullum & Burks Securities, as well as other broker/dealers, is named as a defendant. Among the allegations cited in the complaint are violations of Sections 12(a)(1) and 12(a)(2) of the Securities Act of 1933.

Specifically, the defendants are accused of failing to exert due diligence and properly investigate certain securities issued by Medical Capital. In July, the Securities and Exchange Commission (SEC) filed fraud charges against Medical Capital Holdings and related Medical Capital entities. In the SEC’s complaint, Medical Capital is accused of defrauding investors by misappropriating about $18.5 million of investor funds and by misrepresenting to investors that no prior offerings had defaulted on or been late in making payments to investors of principal and/or interest.

According to the SEC, Medical Capital raised more than $2.2 billion through offerings of notes in Medical Provider Funding Corp. VI and earlier offerings made by five other wholly owned special-purpose corporations (SPCs) named Medical Provider Funding Corp. I, II, III, IV and V. Today, all five SPCs are in default to investors after failing to make interest and principal payments.

The brokerage firms that marketed and sold Medical Capital Notes are alleged to have made untrue statements about the investments, including their risks. In addition, many of the broker/dealers failed to make “reasonable and diligent” inquiries regarding information about Medical Capital and its offerings. As it turns out, the information was seriously flawed. And investors are now paying dearly for this breach of fiduciary duty.

If you have suffered losses in Medical Capital Notes and wish to discuss filing an individual arbitration claim with the Financial Industry Regulatory Authority (FINRA) or have questions about your Medical Capital investments, please contact us by leaving a message in the Comment Box below or on the Contact Us form.