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More Broker/Dealers Go Bust Over Medical Capital Holdings Sales

The Medical Capital Holdings debacle continues to make headlines, as more broker/dealers that pushed Medical Capital private placements onto unsuspecting investors face intense regulatory scrutiny. Now, one of those broker/dealers - Cullum & Burks Securities - has officially gone bust. On May 25, the Financial Industry Regulatory Authority (FINRA) suspended the license of the Dallas-based company.

In July 2009, the Securities and Exchange Commission (SEC) charged Medical Capital Holdings with fraud in connection to sales of private placements. In total, Medical Capital raised more than $2.2 billion from investors, selling its private placements through a number of broker/dealers.

Cullum & Burks is one of those broker/dealers. Others include the now-defunct First Montauk Securities Corp and Securities America Inc. All three sold investments in Medical Provider Funding Corp. V.

Cullum & Burks also faces a class action lawsuit over sales of Medical Capital notes.

Based in Tustin, California, Medical Capital loaned money to financially troubled hospitals and health-care facilities that it secured by the hospitals' unpaid bills, or receivables. It then sold interests in the receivables through private placements.

Court-appointed receiver Thomas Seaman has reported that Medical Capital Holdings had $543 million in phony receivables on its books, that it had lost $316 million on supposedly profitable loans and collected $323 million in fees for managing those loans. In addition, the company allegedly sold receivables at a markup among the six funds it controlled, using money from newer investors to pay investors in the older funds.

Maddox Hargett & Caruso P.C. currently is investigating the sales practices and due diligence of various broker/dealers that sold private placements in Medical Capital Holdings to retail and institutional investors. If you sustained investment losses related to Medical Capital Holdings, contact our securities fraud team. We can evaluate your situation to determine if you have a claim.