Category Archives: Securities America

Private placements – from Medical Capital to Provident Royalties – have made a name for themselves this year, producing massive financial losses for unsuspecting investors. Unsuspecting because, in many instances, investors were unaware of the untold risks associated with these largely unregulated investments.

Take Tracy Nye, a 50-year-old Idaho restaurant owner who was forced to come out of retirement after losing $1.5 million on private placements in Medical Capital Holdings and in Shale Royalties, an affiliate of Provident Royalties LLC. Both entities were sued for fraud by the Securities and Exchange Commission (SEC) in the summer of 2009.

In total, investors lost more than $1 billion in private placements issued by Tustin, California-based Medical Capital and some $485 million from Dallas-based Provident Royalties, an oil and gas investment firm.

According to the SEC, both Medical Capital and Provident misrepresented their investments, as well as misappropriated investors’ money.

Meanwhile, investors like Nye are paying the price. Many have witnessed their life savings vanish overnight, while others say their money for retirement and children’s college education are now a thing of the past.

As reported in a Nov. 19 article by Bloomberg, private placements were initially marketed and sold to institutional investors and financially savvy individuals. However, because the SEC hasn’t changed the majority of its net-worth requirements for private placements since 1982, the products are being sold to investors even though many may not thoroughly understand what they’re actually getting into. In particular, retirees are a favored target of issuers of private placements because they have access to retirement accounts and equity in their homes.

According to the Financial Industry Regulatory Authority (FINRA), complaints about private placements have increased 35% in this year alone and more than 50% in 2009. Earlier this year, FINRA issued a notice to brokers regarding private placements; it also has launched an investigation into an undisclosed number of broker/dealers regarding sales practices of the products.

If you sustained financial losses related to Medical Capital, Provident Royalties or another private placement investment, contact our securities fraud team. We will evaluate your situation to determine if you have a claim.

Even though Securities America continues to wage legal battles stemming from sales of Medical Capital private placements, the company apparently is beefing up its network of independent representatives and advisers.

As reported Nov. 1 by Investment News, Securities America acquired a branch of about 45 representatives and managers in control of $500 million in client assets formerly affiliated with Equitas America LLC in September. One month earlier, Steve Bull, a former branch manager with 20 reps under him at Next Financial Group, joined Securities America.

Additional acquisitions and/or mergers could occur in the future, according to Securities America CEO Jim Nagengast, especially in light of the fact that more broker/dealers are closing up shop – either for capital funding issues or legal battles over private placement deals.

For more than a month, Securities America has been involved in an administrative hearing with the Massachusetts Securities Division over allegations that the firm misled Massachusetts investors who bought $7.2 million in Medical Capital Holdings notes from Securities America reps.

The administrative hearing comes on the heels of a Jan. 26 lawsuit in which Massachusetts Secretary of State William Galvin accuses Securities America of committing securities fraud on a “massive scale.” Among the charges, Massachusetts regulators allege that Securities America intentionally failed to reveal potential red flags to advisers and clients about Medical Capital.

In July 2009, the Securities and Exchange Commission (SEC) filed fraud charges against Medical Capital, which currently is in receivership.

Since then, investors have filed lawsuits and arbitration complaints over the high-risk private placements against more than 50 securities firms.

If you suffered investment losses in Medical Capital notes sold by Securities America, please contact us. A member of our securities fraud team will help you determine if there is a viable claim for recovery.

Embattled broker/dealer Securities America is crying foul as it faces Massachusetts securities regulators over claims of misleading investors who bought $7.2 million in Medical Capital private placements. The legal showdown began in earnest last week, when Securities America appeared at an administrative hearing to answer allegations brought in early 2010 that the broker/dealer failed to disclose potential red flags to both advisers and clients about Medical Capital.

Medical Capital is a Tustin, California, lender that issued private placements to purchase medical receivables. Securities America was one of Medical Capital’s biggest distributors, selling an estimated $700 million of the private placements from 2003 to 2008.

Meanwhile, investors reportedly lost more than $1 billion with their purchases of Medical Capital notes.

In July 2009, the Securities and Exchange Commission (SEC) charged Medical Capital and its two top executives with securities fraud. After raising $2.2 billion in capital, the firm is now in receivership. Regulators have since discovered that Medical Capital’s assets included not only medical receivables and loans but also a 118-foot yacht and a $20 million stake in the movie, “Perfect Game.”

As reported Oct. 4 by Investment News, the Securities America case is the first major legal battle involving an independent broker/dealer that sold private placements, or Regulation D offerings.

According to the lawsuit brought by Massachusetts regulators, Securities America deceived investors by allegedly representing MedCap notes as safe, secure and guaranteed, and never revealing the true nature of risk that the investments presented.

In addition, the lawsuit alleges that a due-diligence analyst at Securities America had serious concerns about Medical Capital, including the lack of audited financials for the series of private placement offerings. In 2005, Jim Nagengast, who was then Securities America’s president and current its chief executive officer, wrote in an e-mail that he, too, had issues about the lack of audited financials.

“Massachusetts investors were sold unsuitable, fraudulent notes by fraudulent means,” said Richard Khalife, an attorney for the Massachusetts Securities Division, in the Investment News article. “Unlawful conduct can’t go unpunished.”

Massachusetts isn’t the only regulator suing Securities America over sales of Medical Capital notes. In August, Montana regulators also sued Securities America, alleging that the firm and executives “withheld material information regarding heightened risks” from its representatives and their clients regarding notes issued by Medical Capital Holdings.

More than 40 other independent broker/dealers sold private placements in Medical Capital.

Maddox Hargett & Caruso P.C. continues to file arbitration claims with the Financial Industry Regulatory Authority (FINRA) on behalf of investors who suffered investment losses in Medical Capital. If you purchased Medical Capital Notes from a broker/dealer and wish to discuss your potential rights for recovery, contact us.

Securities America has once again caught the attention of securities regulators over risky sales in Medical Capital Holdings. This time, Montana’s State Securities Commission is suing Securities America.

In January, Massachusetts Secretary of State William Galvin filed the first lawsuit against Securities America, accusing the broker/dealer of failing to reveal key information about failed private placements in Medical Capital.

According to the Montana lawsuit, Securities America and several of its top executives, including new chief executive James Nagengast, allegedly “withheld material information regarding heightened risks” from its representatives and their clients regarding notes issued by Medical Capital Holdings.

Securities America brokers sold $698 million worth of the notes from 2003 to 2008 and “concealed these risks” from its brokers and their clients, the Montana lawsuit contends.

In total, Medical Capital sold $2.2 billion of notes through dozens of independent broker-dealers, a number of which have failed or shut down. Securities America is the broker/dealer that sold the largest amount of Medical Capital notes.

Securities America is facing a number of lawsuits and arbitration claims from disgruntled investors who lost hundreds of thousands of dollars in their Medical Capital investments.

If you have a story to tell involving Securities America and/or Medical Capital Notes, please contact a member of the securities fraud team at Maddox, Hargett & Caruso.

Embattled broker/dealer Securities America has a new leader at the helm: Jim Nagengast. One of his first assignments as the new CEO: Dealing with the problems that Securities America brokers created when they unloaded Medical Capital private placements on investors from 2003 to 2008.

In January, Massachusetts Secretary of State William Galvin filed a lawsuit against Securities America, accusing the firm of misleading investors who bought the investments. According to the complaint, 400 Securities America representatives and advisers sold almost $700 million private placements issued by Medical Capital Holdings.

In July 2009, the Securities and Exchange Commission filed fraud charges against Medical Capital.

The Massachusetts lawsuit alleges that Securities America failed to tell investors key information about the private placements and, specifically, the financial condition of Medical Capital itself. In total, Medical Capital issued $2.2. billion in notes; about half are in default. Many broker/dealers sold the notes, but Securities America, which has more than 1,900 representatives and advisers, is the largest broker/dealer to have sold them.

As reported July 26 by Investment News, an administrative hearing at the Massachusetts Securities Division is set for Aug. 30. According to the story, Nagengast believes Securities America performed its due diligence in selling Medical Capital notes to investors.

There may be evidence to the contrary, however. The Massachusetts lawsuit cites several e-mails from Nagengast in 2005 stating that the firm should stop selling the product until it received audited financials from Medical Capital.

According to the complaint, Nagengast wrote the following in one e-mail:

“We simply have to tell [Medical Capital] that if they don’t have financials by [a specified] date, we will stop distributing the product on that date. Then they can decide if it’s worth spending $50,000 to have [the audit] done. If they won’t spend the money, that should give us concern.”

If you have a story to tell involving Securities America and/or Medical Capital Notes, please contact a member of the securities fraud team at Maddox, Hargett & Caruso.

Medical Capital fraud is on the minds of many investors. The shuttered lender, based in Tustin, California, has left thousands of investors in financial straits, with many still asking how it happened and why regulators didn’t do a better job of scrutinizing sales of private placements.

Private placements are stocks, bonds or other instruments that a corporation issues to investors outside of the public markets. Because the issuing companies don’t have to register private placements with the Securities and Exchange Commission (SEC), these investments are considered riskier than traditional securities.

Medical Capital Holdings operated its business by providing funds to financially troubled hospitals and health-care facilities. Once it secured the unpaid bills, or receivables, of those companies, interests in the receivables were sold to investors in the form of private placement securities called Medical Capital Notes.

From 2003 to 2009, through a group of special-purpose subsidiaries, Medical Capital Holdings issued more than $2.2 billion of Medical Capital Notes to some 20,000 investors across the country. By the time the Securities and Exchange Commission (SEC) sued Medical Capital for fraud in July 2009, Medical Capital had more than $543 million in phony receivables on its books and had lost $316 million on various loans. Meanwhile, the company had collected $323 million in fees for managing money-losing loans.

The SEC also uncovered the makings of a massive Ponzi scheme at Medical Capital. The scam ultimately would be called one of largest alleged Ponzi schemes in the history of Orange County, California. According to the SEC, Medical Capital was selling receivables at a markup among the funds it controlled and using money from newer investors to pay investors in the older funds.

In addition, the SEC says Medical Capital spent $4.5 million on a 118-foot yacht called the Home Stretch and another $18.1 million on unreleased movie about a Mexican Little League team.

In March 2010, federal prosecutors launched a criminal investigation into two key executives at Medical Capital: CEO Sidney M. Field and President Joseph J. “Joey” Lampariello. Interestingly, Field had previous run-ins with regulators. In the early 1990s, he was essentially ousted from the auto insurance industry after California insurance regulators sued him for fraud and revoked his license.

Adrian Cross invested more than $1 million of her “nest egg” money in private placement securities issued by Medical Capital and another company, Provident Asset LLC. As reported in a March 27, 2010, article in the Wall Street Journal, the former schoolteacher made the investment on the recommendation of the broker/dealer she trusted: Securities America. When Medical Capital and Provident Royalties collapsed in 2009, Cross’s investment was wiped out.

“I felt gutted like a fish,” Cross said in the Wall Street Journal article. “He had pushed it as a safe alternative to stocks.”

Cross isn’t alone. Hundreds of other Medical Capital investors express similar sentiments. Many have filed arbitration claims with the Financial Industry Regulatory Authority (FINRA), accusing their broker/dealer of misrepresenting private placements in companies like Medical Capital as safe and secure.

In January, Massachusetts Secretary of State William Galvin brought the first state enforcement case against Securities America over sales practices regarding Medical Capital. Among the charges, Galvin alleges that Securities America representatives failed to disclose certain risks to customers, many of whom were retirees.

The case is awaiting a hearing.

Maddox Hargett & Caruso P.C. continues to file arbitration claims with FINRA on behalf of investors who suffered investment losses in Medical Capital. If you purchased Medical Capital Notes from a broker/dealer and wish to discuss your potential rights for recovery, contact us today.

News involving Medical Capital fraud recovery has been on the minds of thousands of investors following a July 2009 lawsuit filed by the Securities and Exchange Commission (SEC) that accuses the Tustin-based company of securities fraud. In the lawsuit, the SEC alleges that Medical Capital misappropriated about $18.5 million of investor funds and misrepresented certain financial facts about the investments, otherwise known as Medical Capital Notes.

In March 2010, federal prosecutors launched a criminal investigation into two executives with ties to Medical Capital Holdings: Medical Capital CEO Sidney M. Field and President Joseph J. “Joey” Lampariello. Both Field and Lampariello were sued by the SEC in August 2009 for securities fraud.

A number of broker/dealers that sold Medical Capital investments also are facing regulatory scrutiny and lawsuits. At the top of the list is Securities America, which was sued in January 2010 by the Commonwealth of Massachusetts. According to the complaint, a number of Securities America reps allegedly misled investors about investments in Medical Capital and failed to disclose the risks associated with the investments.

The Massachusetts lawsuit further alleges that between 2003 and 2008, a group of Securities America executives repeatedly failed to heed the warning of an outside due-diligence analyst regarding the risks of the Medical Capital investments.

One Securities America rep facing legal troubles is William Glubiak, who’s been named in a $7.7 million complaint from about 24 households of investors who purchased investments in Medical Capital Holdings.

Another leading Securities America adviser involved in litigation connected to Medical Capital is Paula Dorion-Gray. In November 2009, Dorion-Gray was cited in a $254,000 complaint.

As for Securities America, it vigorously disputes the allegations of the Massachusetts Securities Division and contends that Massachusetts regulators don’t understand the workings of private placements and Regulation D offerings.

Maddox Hargett & Caruso P.C. continues to file arbitration claims with the Financial Industry Regulatory Authority (FINRA) on behalf of investors who suffered investment losses in Medical Capital. If you purchased Medical Capital Notes from a broker/dealer and wish to discuss your potential rights for recovery, contact us today.

Private placements, which have made news in connection to Medical Capital Holdings and Provident Royalties, are becoming an increasingly questionable investment for ordinary investors.

Private placements are securities in stocks, bonds or other instruments that a corporation issues to investors. The investments are riskier than traditional securities because many of the issuing companies don’t have to register their placements with the Securities and Exchange Commission (SEC).

Former schoolteacher Adrianne Cross found this out the hard way. According to a March 27 article in the Wall Street Journal, Cross, 64, invested her life savings in private placements. She thought the investments were safe. Now she’s lost everything.

According to the Wall Street Journal, Cross’ broker worked for Ameriprise Financial’s Securities America unit in Los Angeles. Cross says the broker persuaded her to invest more than $1 million in private-placement securities issued by Medical Capital Holdings and Provident Royalties LLC in 2007. The broker allegedly told Cross that the investments were a safe alternative to stocks.

The Securities America broker was wrong. Both Medical Capital and Provident Royalties, which face fraud charges by the SEC, collapsed in 2009. For Cross and thousands of other investors, it meant their investments became essentially worthless.

Cross has since filed an arbitration claim with the Financial Industry Regulatory Authority (FINRA) in an attempt to recover her losses.

In January, Massachusetts’ Secretary of State William Galvin brought the first state enforcement case against Securities America over the broker/dealer’s sales practices of Medical Capital securities. According to the complaint, Securities America’s representatives failed to disclose the risks to customers, many of whom were retirees.

If you have a story to tell involving Medical Capital Holdings, Securities America and/or Provident Royalties, please contact a member of our securities fraud team.

Six broker/dealers are in hot water with Massachusetts Secretary of State William Galvin over sales of private placements in Medical Capital Holdings and Provident Royalties LLC. Among the firms on Galvin’s hit list: QA3 Financial Corp., National Securities Corp., CapWest Securities, Independent Financial Group LLC, Investors Capital Corp. and Centaurus Financial.

Each of the firms have received subpoenas from Galvin’s office and ordered to turn over information on due-diligence efforts, suitability data and promotional materials regarding the private placements in question.

Earlier in the year, Galvin filed fraud charges against another broker/dealer, Securities America, on allegations that its reps misled investors about investments in Medical Capital.

According to the complaint, Securities America marketed Medical Capital notes for several years through seminars and other marketing tactics, allegedly selling private placements even after a senior-level officer expressed concerns about the financial health of Medical Capital.

Securities America was one of the biggest sellers of Medical Capital notes. From 2003 through 2009, it sold nearly $700 million in Medical Capital investments. That comes to 37% percent of the $1.7 billion in notes that Medical Capital issued.

Investors are continuing to come forth with fraud allegations against various broker/dealers in the Medical Capital case. According to investors’ complaints, certain brokerage firms allegedly marketed and sold private placement offerings in Medical Capital Holdings without first disclosing important facts about the company’s deteriorating financial health and the risks attached to the investments they were pushing. In July 2009, the Securities and Exchange Commission (SEC) charged Medical Capital with fraud.

One broker/dealer at the center of the arbitration claims is Securities America. In February 2010, the Massachusetts Securities Division filed a lawsuit against Securities America, which already was facing a pending class action in California, for allegedly misleading investors over sales tied to a series of Medical Capital’s private offerings.

According to the Massachusetts complaint, Securities America ignored red flags and deliberately failed to disclose the risks involved when selling millions of dollars worth of Medical Capital Notes to unsophisticated investors. The complaint further alleges that investors had been told the notes were secured and low risk when, in reality, they were “unregistered, speculative, high-risk securities.”

Based on the Massachusetts Securities Division’s complaint, 400 Securities America advisers allegedly sold $700 million of the private placements in Medical Capital, about half of which are now in default.

If you experienced investment losses related to Medical Capital investments, please contact us. A member of our securities fraud team will evaluate your situation to determine if you have a viable claim for recovery.