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.

Securities America has fired off an angry letter to the Massachusetts Securities Division over its lawsuit against the broker/dealer for allegedly misleading investors who bought high-risk private placements in Medical Capital Holdings. The story was first reported Feb. 17 by Investments News.

According to the article, Securities America is outraged by the charges and contends Massachusetts regulators don’t understand the workings of private placements and Regulation D offerings.

The complaint that Securities America is referencing accuses the broker/dealer of misleading investors who bought nearly $700 million of private placements issued by Medical Capital from 400 Securities America representatives. The Massachusetts lawsuit also 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.

In July 2009, the Securities and Exchange Commission (SEC) charged Medical Capital with securities fraud. A number of lawsuits and arbitration claims have since been filed by investors who allege that various securities firms, including Securities America, failed to disclose the risks associated with the investments. As for Medical Capital, it currently is in receivership.

Securities America has a growing public relations problem. Last month, the broker/dealer was charged by Massachusetts regulators for allegedly failing to reveal key information to investors about high-risk notes issued by Medical Capital Holdings. Now, some of Securities America’s top producers are being sued by investors who say they were ill-informed about the risks of the Medical Capital deals that some Securities America advisers touted.

As reported Feb. 7 by Investment News, William Glubiak was named in December in a $7.7 million complaint from about 24 households of investors who purchased investments in Medical Capital Holdings.

Another leading Securities America adviser facing litigation connected to Medical Capital sales is Paula Dorion-Gray. In November, Dorion-Gray was named in a $254,000 complaint that alleges she recommended alternative investments in Medical Capital and another private placement, Provident Royalties LLC.

As for Securities America, it maintains its innocence.

“The Medical Capital situation is highly unfortunate for investors, advisers and broker-dealers alike, all of whom were intentionally defrauded by the principals at Medical Capital,” Securities America spokeswoman Janine Wertheim said in the Investment News article.

“Securities America performed extensive, industry-standard due diligence of Medical Capital, and every person that purchased Medical Capital through SA was an accredited investor, according to their financial suitability documents, and attested to that as well as to their understanding of the risks . . . We plan to vigorously defend our firm and our advisers that sold Medical Capital,” she said.

Investments in Medical Capital Holdings have resulted in millions of dollars in losses for investors across the country and, in turn, ignited a rash of lawsuits and arbitration claims. The focus of investors’ complaints is on the broker/dealers that sold the investments - known as Medical Capital Notes - and the information they allegedly kept hidden.

Securities America is one of the broker/dealers facing legal action in connection to Medical Capital Holdings. Massachusetts regulators sued the Omaha-based company on Jan. 26, claiming it misled investors about the risks involved in the Medical Capital Notes and the financial health of the issuer, Medical Capital Holdings. According to the complaint, 400 Securities America advisers allegedly sold $700 million of the private placements, half of which are now in default.

One of the advisers is William Glubiak, who was named in a December 2009 complaint involving Medical Capital Holdings. The suit alleges causes of action as unsuitability, misrepresentation and omission of material facts, according to records with the Financial Industry Regulatory Authority.

Paula Dorion-Gray is another adviser for Securities America. She also is facing a lawsuit over private placement deals gone wrong. As reported Feb. 3 by Investment News, Dorion-Gray was named in a $254,000 complaint in November that accuses her of recommending alternative investments in Medical Capital and another private placement, Provident Royalties LLC.

Medical Capital Holdings and Provident Royalties were both charged with fraud this past summer by the Securities and Exchange Commission (SEC).

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.