To borrow from Bob Dylan, ‘the times they are-a changin’ for Kirkland securities broker Rhonda Breard. Breard, a former broker for ING Financial Partners, faces 20 years in prison and a $1 million fine for the single count of mail fraud that federal prosecutors charged her with last week.

State regulators estimate that Breard may have scammed nearly $8 million from investors in a Ponzi scheme that allegedly had been going on since at least 2007.

According to prosecutors, instead of placing investors’ money in insurance and financial investments, Breard used the funds for her own profit and, in turn, allegedly gave phony statements to clients.

On March 10, in what is likely to be a slew of future lawsuits against Breard, James and Shelley Heath sued the disgraced broker, alleging they lost their life savings to her scam. The Heaths also sued one of Breard’s associates, Colleen Brown, and Breard’s former employer, ING Financial Partners.

The lawsuit, which was filed in U.S. District Court in Seattle, claims ING licensed Breard and Brown and then failed to properly supervise them. The suit also alleges that ING has a history of failing to supervise brokers, paying “huge fines and/or state-ordered restitution to clients” over the years.

Medical Capital losses tied to ill-fated deals involving private placements have investors on edge – and with good reason. Investors are owed upwards of $1 billion, according to the court-appointed receiver in charge of inventorying Medical Capital’s assets.

Medical Capital is accused of operating a Ponzi scheme. In July 2009, the company was charged with securities fraud by the Securities and Exchange Commission (SEC). Among the SEC’s allegations: Medical Capital Holdings lied to financial backers when it raised and allegedly misappropriated millions of dollars without revealing the fact that $1.2 billion in notes were outstanding and that $992.5 million in notes had entered into default or resulted in late payment of both principal and interest.

The SEC’s complaint went on to state that Medical Capital and its subsidiaries – Medical Capital Corp. and Medical Provider Funding Corp. VI – 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 named Medical Provider Funding Corp. I, II, III, IV and V.

Now it turns out that many of the receivables never existed or were highly overvalued. For investors, that means they bought non-existent investments.

One of those investors is Dr. Douglas Armbrust of Greeley, Colorado. As reported in a March 28 story by The Greeley Tribune, Armbrust’s broker allegedly told him that he was getting a “slam-dunk investment” with the Medical Capital’s private placement offerings. Armburst, a retired radiologist, believed him, and he got his 94-year-old mother involved and then some friends.

“She was more cautious than I,” Armbrust said of his mother, who lives in Ohio. “She said, ‘Doug, you’re going to lose all your money on this.’ ”

According to the story, Armbrust estimates he has lost $750,000 in the investments.

Armburst is one of many Greeley, Colorado, residents who apparently lost money in Medical Capital, which were sold by at least two local investment firms, Elite Investments and CapWest Securities.

Thousands of other Medical Capital investors are facing a similar predicament. Maddox Hargett & Caruso P.C. is investigating a number of complaints from investors regarding Medical Capital Holdings and the broker/dealers that sold them the investments. If you have investment losses related to Medical Capital, please contact us. A member of our securities fraud team will evaluate your situation to determine if you have a viable claim for recovery.

Provident Asset Management has officially been expelled by the Financial Industry Regulatory Authority (FINRA) for marketing a series of fraudulent private placements through its affiliate, Provident Royalties, LLC, in what the regulator calls a “massive Ponzi scheme.”

According to FINRA, Provident misrepresented to investors that the funds raised through the various offerings would be used to purchase interests in the oil and gas business. In reality, the funds were commingled and used by an affiliated issuer to make dividend and principal payments to other investors. In addition, FINRA says Provident acted as the agent in an oil and gas private placement offering but failed to establish an escrow account for investors’ funds during the contingency period of the offering.

FINRA found that from September 2006 through January 2009, Provident Asset Management marketed and sold preferred stock and limited partnership interests in a series of 23 private placements offered by Provident Royalties, LLC. Provident Asset Management’s only business line was acting as the wholesaling broker-dealer for the Provident Royalties’ offerings, which were sold to customers through more than 50 retail broker/dealers nationwide. In total,  more than $480 million was raised through approximately 7,700 individual investments made by thousands of investors.

Meanwhile, FINRA’s broader investigation into broker/dealers that sold Provident private placements remains ongoing.

Federal prosecutors have opened a criminal investigation into the top executives of Medical Capital Holdings. The two men, CEO Sidney M. Field and President Joseph J. “Joey” Lampariello, revealed the investigation last week when their attorneys filed an emergency request to use frozen assets of Medical Capital to pay their legal bills. The request was denied.

As reported March 22 by the Orange County Register, Field and Lampariello asked for $75,000 per month each for legal fees. According to their request, the money would be used to defend themselves against a summer 2009 lawsuit filed by the Securities and Exchange Commission (SEC), as well as for “specialized criminal defense counsel necessary to defend them in a parallel criminal investigation initiated by the United States Department of Justice.”

The SEC sued both Field and Lampariello in August 2009 for securities fraud and failing to disclose $18.5 million in administrative fees to investors. A month later, the court appointed Thomas A. Seaman to oversee Medical Capital’s finances.

Medical Capital is a Tustin, California, lender that loaned money to hospitals and health-care facilities, securing the money it loaned via unpaid bills or receivables. Investments in the receivables were then sold to investors through private placements known as Medical Capital Notes.

It’s since been learned that Medical Capital had more than $540 million in fake receivables on its books and lost $316 million on loans. The court-appointed receiver in the case later revealed that Medical Capital had collected $323 million in fees for managing its unprofitable loans.

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.

KING 5 News is reporting that ING Financial Partners is quietly looking for offers to settle with clients who were allegedly bilked out of some $8 million by former ING broker Rhonda Breard.

Breard is facing fraud charges by the Washington State Department of Financial Institutions and the Washington State Attorney. In February, Breard, who owns Breard Associates and Wealth Management in Kirkland, was fired from ING. She is scheduled to appear in federal court to face a preliminary hearing sometime next week.

Meanwhile, civil actions are just beginning for Breard. In one lawsuit, allegations also are being levied against ING Financial Partners for failing to properly supervise Breard.

According to a KING 5 News story, a second person, Colleen Brown, is cited for her alleged participation in Breard’s scheme. Brown worked in Breard’s office and is alleged to be the individual who sent out false monthly statements to Breard’s clients.

The Financial Industry Regulatory Authority (FINRA) has closed the doors on GunnAllen Financial. FINRA apparently informed the financially troubled broker/dealer late last week that if it fell below mandatory net capital requirements it would be forced to close its operations.

GunnAllen’s financial issues stem to the increasing number of lawsuits being filed by investors against the firm. As reported March 22 by Investment News, investors are seeking as much as $50 million in damages, with many of the claims tied to former GunnAllen broker Frank Bluestein.

The Securities and Exchange Commission (SEC) filed fraud charges against Bluestein in September 2009 on allegations that he lured elderly investors into refinancing their home mortgages so he could fund investments in a $250 million Ponzi scheme operated by Edward May and his company, E-M Management Company LLC (E-M).

GunnAllen also is facing a slew of lawsuits by investors over sales of private placements in Provident Royalties LLC.

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.

Rhonda Breard’s conscience may have finally caught up with her. The former ING investment broker has been under investigation for fraud on allegations that she bilked clients out of millions of dollars. On March 2, the disgraced investment advisor and TV personality reportedly tried to take her life.

Breard’s alleged actions came to the attention of regulators in February 2010 after she was fired by ING Financial Partners for reportedly “altering customer statements.” On March 10, federal prosecutors officially charged Breard, 47, with mail fraud. According to the criminal complaint, Breard accepted millions of dollars from investors, telling them that their money would be placed in a variety of financial and insurance products.

Instead, investigators say she used the money for her own expenses and mailed phony statements to clients.

A preliminary investigation by the Washington State Department of Financial Institutions (DFI) indicates that investors could be out more than $8 million. According to the DFI, Breard’s ability to act as a broker was terminated in nine states, including Washington and Oregon, on Feb. 10.

Breard, who also goes by the names Dean Tucker and Rhonda Lee Dean, is the owner of Kirkland-based Breard Associates and Wealth Management.

Breard isn’t the only one facing scrutiny. As her supervisor, ING also may also be held liable for investors’ financial losses because of its alleged supervisory failures.

Some of the investors affected by Breard’s alleged scheme include fifth-grade teacher Sandee Gren, who had plans to retire in the near future. Now, with half of her retirement account, roughly $300,000, gone, those plans are in peril.

“I stood in that woman’s office pouring my heart out about how I’ve been a single parent, how I’d just lost my daughter and I needed to know what to do with my stocks,” says Gren.

Records with the Financial Industry Regulatory Authority (FINRA) show a long and lengthy list of complaints and enforcement actions against Breard during the course of her investment career.

In 1991, Breard was allowed to resign from Smith Barney because of unauthorized trading of clients’ accounts. In 1992, she faced similar allegations and was fined $15,000. In 1993, while employed at Prudential Securities, Breard settled a complaint against her for $74,493.

The Washington State Department of Financial Institutions, the Washington State Office of the Insurance Commissioner, and the FBI are continuing their investigation of Breard.

Maddox Hargett & Caruso P.C. is launching its own investigation into investors’ allegations against Rhonda Breard. If you suffered investment losses through Breard, contact us with your story. You may have a claim for recovery.

The debacle involving Fair Finance and owner Tim Durham just keeps getting bigger. There are more than 13,000 outstanding Fair Finance investment certificates valued at more than $208 million, according to a just-released report from Brian Bash, the court-appointed trustee of Fair Finance. Translation: More than 13,000 claims will be filed as part of the Chapter 7 bankruptcy proceeding.

The offices of Fair Finance have remained closed since Nov. 24, after federal agents seized banking records and company computers. On that same day, the U.S. Attorney’s Office in Indianapolis filed court papers alleging that Fair Finance operated as a Ponzi scheme, using money from new investors to pay off prior purchasers of the investment certificates.

In other Fair Finance news, friends and business associates of Durham who accepted millions of dollars in loans from his company could be facing problems of their own.

As reported March 6 by the Indianapolis Business Journal, the trustee in the case, Brian Bash, is going to try and turn Fair Finance’s assets into cash wherever possible. That means firms and companies with outstanding loans from Fair Finance can expect to hear from Bash in the near future.

Extending loans enabled Durham to continue listing the money as assets on Fair Finance’s balance sheets, which in turn gave investors the false impression that the company was fiscally sound.

Moreover, Fair Finance had no outside auditor. In other words, there was no one to sound the alarm that there was something awry with Fair’s accounting procedures.

The various people and companies listed as owing money include Scott McKain, former vice chairman of Durham’s Indianapolis-based business Obsidian Enterprises; Joan SerVaas, Durham’s ex-wife and owner of Curtis Publishing; Jeff Osler, Durham’s brother in law and owner of Geist Sports Academy; Henri Najem, an Indianapolis restaurant owner who is best known for his Bella Vita restaurants; and MyGhetto.com, a social-networking site created by the rapper Ludacris, a close friend of Durham’s.

As reported in the IBJ article, some of the people and firms listed cite inaccuracies with the trustee’s list.

Financial reform is a hot topic on Capitol Hill, with legislation designed to rein in broker/dealers through new oversight measures currently being contested on the Senate floor. At the heart of the debate is a bill containing a provision to strengthen the protection of consumers by requiring stock brokers and insurance agents to act in the best interest of their clients. As it turns out, the provision may never see the light of day.

As reported March 8 by the Washington Post, certain Senators are in disagreement over the provision, prompting some insiders to predict that new legislative language will ultimately be inserted into the bill that directs the Securities and Exchange Commission (SEC) to study the rules currently governing brokers and registered investment advisers.

As it is, investment advisers operate under fiduciary standards. That means they are legally and ethically bound to put their clients’ interests ahead of their own. By comparison, brokers adhere to suitability standards, meaning they only need to have “reasonable grounds” to believe that the financial products they recommend to clients are suitable for their needs. In some instances, however, those investments could be lucrative for the broker at the expense of clients.

In addition, broker/dealers usually do not have to make as many disclosures regarding conflicts of interest, fees or previous infractions as investment advisers.

And therein is the problem. The services that broker/dealers and investment advisers provide are almost indistinguishable. Case in point: In 2008, the SEC commissioned a study by the Rand Corp., which showed that investors were equally confused about the differences between the two groups.

It would seem commonsense that investment advisers, broker/dealers and any and all financial professionals connected in some way to investment-related services and products should be subject to a consistent, uniform fiduciary standard. The operative word, however, is commonsense.