Category Archives: Medical Capital Holdings

Securities America, a subsidiary of Ameriprise Financial, is becoming the target of more investor claims filed with the Financial Industry Regulatory Authority (FINRA) over allegations it falsely misrepresented private placement offerings associated with Medical Capital Holdings – the same company that the Securities and Exchange Commission (SEC) has charged in a $2 billion Ponzi scheme.

In a federal lawsuit filed in Omaha, Nebraska, a Sarasota woman alleges that Securities America sold hundreds of millions of dollars worth of securities in the form of notes for Medical Capital Holdings, a medical receivables financing company based in Tustin, California.

In August, Medical Capital was sued by the SEC for investor fraud. Among the charges, the SEC alleges that Med Cap and various subsidiaries raised more than $2.2 billion since 2003 through the offering of notes. As of August 2008, five of the “Special Purpose Corporations” were in default or late in paying nearly $1 billion in principal and interest to investors.

The lawsuit contends Securities America violated Nebraska securities law and was negligent for failing to investigate accounting irregularities at Medical Capital. It seeks class action status to represent investors who bought the Medical Capital notes from Nov. 21, 2007, through July 31, 2008.

“Securities America did not care; instead, in favor of millions in commissions and fees, it turned a blind eye to the truth, which is that the medical receivables company’s accounting records and practices strongly pointed towards the existence of a Ponzi scheme,” the lawsuit says.

If Securities America or another brokerage has sold you Medical Capital notes, please contact us by leaving a message in the Comment Box below or on the Contact Usform.

Medical Capital Holdings, based in Tustin, California, is a medical receivables financing company that purchases accounts receivable from healthcare providers at a discount and then collects the debts owed on the accounts. Since 2003, the company has raised more than $2 billion from investors via offerings of notes issued by five Special Purpose Corporations (SPCs). Today, all five SPCs are in default to investors after failing to make interest and principal payments on almost $1 billion worth of Med Cap Notes.

In July, the Securities and Exchange Commission (SEC) filed securities fraud charges against Medical Capital. One month later, on Aug. 3, Thomas Seaman was appointed as the permanent receiver of Medical Capital. On Oct. 9, in a third report regarding Medical Capital’s financial status, Seaman concluded that of the $625 million of medical accounts receivable on the SPCs’ collective books, $80 million is verifiable. The remaining accounts – totaling $542 million – no longer exist.

For investors holding Medical Capital Notes, the news undoubtedly translates into substantial financial losses.

A class action lawsuit is now pending against Medical Capital. Filed Sept. 11 on behalf of investors in the five Special Purpose Corporations, the lawsuit alleges that the trustees of the SPCs repeatedly breached their fiduciary duty to investors. In addition, the class action states that while the trustees were paid “substantial fees” to represent the interests of MCH investors, they failed to uncover investments in areas other than accounts receivable from medical providers. Among other things, the lawsuit alleges that investments were made in a 118-foot yacht, mobile phones and movie ventures.

Medical Capital investors should consider carefully whether they wish to remain in the class action or file an individual securities arbitration claim with the Financial Industry Regulatory Authority (FINRA) to recover their investment losses. Among the facts to consider:

• Investors with significant losses are unlikely ever to be made
  whole in a class action.
• Class actions can sometimes take years before a resolution is reached. The FINRA arbitration process typically is completed in a much shorter period of time, often 15 months.
• Class action members are bound by the results of the class action decision.
• Many investors may have viable claims based on the
  unsuitability of their investments. Because a suitability claim is dependent on an
  individual’s circumstances, this claim cannot be prosecuted on a
  classwide basis.

If you are a Medical Capital investor and wish to discuss filing an individual arbitration claim with FINRA or have questions about your investment losses in Medical Capital notes, please contact us by leaving a message in the Comment Box below or via the Contact Us form.

The list of brokerage firms facing arbitration claims from investors who suffered losses from investments in

The basis of the lawsuits against concerns breach of fiduciary duty, with claimants alleging that brokerages like 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 $2.2 billion from 20,000 investors.

In addition, the SEC says Medical Capital made a number of multimillion-dollar investments that had nothing to do with its core business of medical receivables. Among those investments:

• $20 million for “The Perfect Game,” a film about a group of Mexican youths who became the first non-U.S. team to win the Little League World Series in 1957;

• $7 million in a company that marketed a mobile phone application, which consisted of a live video feed of a hamster in a cage; and

• An unspecified amount for a 118-foot yacht called The Home Stretch.

If you have questions about your Medical Capital investments, please contact us. If Securities America, QA3 Financial Corp. or another brokerage has sold you Medical Capital notes, tell us your story by leaving a message in the Comment Box below or on the Contact Us form. We want to advise you on your legal options.

Securities America, a subsidiary of Ameriprise Financial, has been sued by Ilene Grossbard of Sarasota, Florida, over allegations that the Omaha-based brokerage failed to warn her and other investors about what she says was a multibillion-dollar Ponzi scheme involving sales of notes in Medical Capital Holdings. According to the complaint, Grossbard bought two promissory notes from Securities America last year for $112,000. The notes were issued by Medical Provider Funding Corp. V, a subsidiary of Tustin, Calif.-based Medical Capital Holdings – the same company that the Securities and Exchange Commission (SEC) charged with securities fraud in July.

Since December 2003, Medical Capital Holdings has raised more than $2 billion from selling the notes to some 20,000 investors. The notes included those issued by Medical Provider Funding Corp. V, which as of March 2009 had more than $400 million in outstanding notes to 4,270 investors.

Grossbard’s lawsuit against Securities America alleges that it failed to detect, probe or make investors aware of the numerous red flags that pointed to the alleged Ponzi scheme at Medical Capital Holdings.

Grossbard is seeking class-action status in her lawsuit.

On Sept. 14, 2006, a National Association of Securities Dealers arbitration panel (now the Financial Industry Regulatory Authority) fined Securities America $2.5 million for failing to adequately supervise one of its brokers, David L. McFadden, who had been charged with securities fraud for allegedly luring long-term employees of Exxon Corporation into retiring prematurely with unreasonable and exaggerated promises of high returns from reinvested funds from their company retirement plans.

In addition to the fines, the arbitration panel ordered Securities America to pay $13.8 million in restitution to 32 former Exxon employees.

Tell us about your situation with Securities America by leaving a message in the Comment Box below or via the Contact Us form. We want to consult with you about possible legal options.

Investors who suffered huge financial losses from Medical Capital Holdings are now taking legal action against Wells Fargo & Co. and The Bank of New York Mellon Corp., charging that the two banks, which served as trustees for five of Medical Capital’s special-purpose corporations, failed to protect MedCap investors. All five of special-purpose corporations are now in default after failing to make interest and principal payments on almost $1 billion in notes.

As reported Sept. 15 by Investment News, the new lawsuit claims executives with Medical Capital “used the trustee-controlled accounts as their personal piggy banks,” siphoning off fees of nearly $325 million to spend on such lavish perks as an 118-foot yacht.

Read the lawsuit here.

In July, the Securities and Exchange Commission (SEC) charged Medical Capital, which has raised $2.2 billion in private placements from investors since 2003, with fraud. Two of MedCap’s top executives, Sidney M. Field and Joseph Lampariello, also are being sued by the SEC. Later that same month, the Financial Industry Regulatory Authority (FINRA) began probing for information about sales of private placements from broker/dealers who sold Medical Capital offerings to investors.

Questions continue to abound about the quality of Medical Capital’s assets. The court-appointed receiver for Medical Capital recently revealed that some $543 million, or about 87% of all the accounts receivables controlled by Medical Capital, are “nonexistent.”

Tustin, California-based Medical Capital is a medical-receivables financing company that purchased account receivables from health care providers at a discount and then collected on the debts.

Seven investor plaintiffs in Butte and Santa Cruz counties are seeking class-action status on behalf of all MedCap investors. Other lawyers are launching or preparing legal action against securities brokers who sold MedCap funds.

Investors who suffered losses because of financial ties to Medical Capital Holdings have taken a lead from a recently filed fraud lawsuit by the Securities and Exchange Commission (SEC) and are moving forth with legal claims of their own. In addition to suing Medical Capital, investors are initiating legal action against the brokerage firms that sold them Medical Capital investments and filing arbitration claims with the Financial Industry Regulatory Authority (FINRA) on charges of alleged breach of fiduciary duties and misrepresentation, as well as other allegations.

The SEC’s lawsuit against Tustin, California-based Medical Capital, which makes its profits by buying and then collecting on unpaid medical bills, alleges that the company stole some $18 million from investors and failed to disclose that several of its funds had entered into default.

At the same time the SEC filed its fraud charges against Medical Capital, FINRA issued a notice to an undisclosed number of broker-dealers for information about their sales practices regarding client investments in Medical Capital.

Currently, Medical Capital Holdings is under a court-appointed receiver, Thomas Seaman, along with its subsidiaries and affiliates: Medical Capital Corp. and Medical Provider Funding VI. The company’s assets, the assets of its affiliates and two executives – CEO Sidney Field and Joseph Lampariello, president and chief operating officer – also have been permanently frozen. Both men are named in the SEC’s July 16 lawsuit.

Tell us about your situation with Medical Capital by leaving a message in the Comment Box below or Contact Us form. We want to consult you on your legal options.

Sidney M. Field, CEO of Medical Capital Holdings and who along with Medical Capital was sued last month by the Securities and Exchange Commission (SEC) for allegedly cheating investors out of millions of dollars in securities notes, faced similar fraud charges in the early 1990s. At the time, Field was the founder, past president and chairman of FGS, a large insurance broker.

According to an Aug. 24 story in the Orange County Register, Field supervised agents who allegedly employed a deceptive practice known as “sliming” to sell automobile insurance policies. In essence, the agents would alter accident records of questionable drivers, falsify information about car values and commute mileage so that an applicant could qualify for insurance coverage.

FGS also allegedly duped customers into paying interest rates of 21% to 40% when they financed their premiums, according to Aug. 24 story in The Register.

In August 1990, the Department of Insurance sued Field for civil racketeering and ultimately revoked his license. Field was sued again three years later – this time for fraud. He paid $100,000 to settle that lawsuit.

Investors in Medical Capital Holdings never knew about Field’s previous disciplinary actions with regulators, according to The Register story. If such information had been at their disposal, they never would have put their money and trust in Field or Medical Capital Holdings.

“If I would have known, forget about it,” said Jim Palladino. Palladino, who invested $160,000 in Medical Capital, says his broker told him that Medical Capital “was as solid as a rock.”

In February, Palladino stopped receiving checks from his Medical Capital notes. In August, he was forced to put his home up for sale and look for part-time work at the age of 73.

Another investor, Carol Marini, 64, placed her life savings of $145,000 with Medical Capital. Marini, a former school teacher, says she has lost everything.

If you have questions about your Medical Capital investments please contact us. Tell us about your situation by leaving a message in the Comment Box below or Contact Us form. We want to consult you on your options.