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.