Articles Posted in Medical Capital

Yesterday’s article in Investment News confirms my opinion about the disadvantages of pursuing mass-arbitration claims before the Financial Industry Regulatory Authority (FINRA), which I try to avoid in my California securities law practice. On the heals of the Medical Capital class action lawsuits, law firms have begun filing mass-arbitration claims against broker-dealers such as Securities America and Capital Financial Services, often grouping as many as 15 individual Medical Capital investors into a single arbitration case in what almost amounts to a “mini-class action.” In response, broker-dealers have vowed to vigorously defend these claims.

sheep_herd.jpgMass-arbitrations can be very profitable for law firms hoping to earn large contingent fees by aggregating as many clients as possible into a single arbitration. Unfortunately, the best interest of the individual investor/client may suffer as a result. The challenge of taking a mass-arbitration claim to hearing and proving that each client is independently entitled to an award can be great. As part of their defense strategy, broker-dealers are filing motions to sever these claims into separate individual arbitrations which will undoubtedly delay and disrupt the entire process. When clients start getting separated from the herd, will mass-arbitration attorneys still be interested in representing those clients who had marginal claims to begin with? Undertaking a mass-arbitration raises a number of ethical issues for attorneys attempting to jointly represent a diverse group of unrelated clients who may have varying levels of commitment to pursue their claims. A client recently showed me a proposed contingent fee agreement given to them by a mass-arbitration law firm that would essentially force them to accept a settlement if 60% of the other clients agreed to settle.

Combining customer claims into a single arbitration often makes sense from a practical and economic standpoint, such as when the clients are related or are customers of the same financial advisor. However, individuals with strong cases may be better off going it alone rather than joining a mass-arbitration and being lumped together with other investors who may have weaker facts. Before deciding to become part of a mass-arbitration claim, clients should explore their options with a great deal of care.

Thumbnail image for Thumbnail image for Thumbnail image for Thumbnail image for Thumbnail image for medcap.jpgOn February 10, 2010, the court-appointed receiver in the Medical Capital fraud case, Thomas Seaman, filed his seventh status report in the matter of Securities and Exchange Commission vs. for Medical Capital Holdings, Inc. et al. that is pending in the U.S. District Court for the Central District of Northern California. As of January 31, 2010, the receivership has collected cash in the amount of $24,023,994.25 and disbursed funds in the amount of $5,602,179.15, leaving funds on hand in the amount of $17,306,596. The receiver plans to continue disposing of assets and raising funds for the benefit of investors; however, with investors owed approximately $1.079 billion, the $17,306,596 currently on hand still leaves investor’s about $1.061 billion short.

There are additional legal remedies available to Medical Capital investors to recoup their losses, which can be pursued simultaneously with the court-appointed receiver’s efforts, including class action lawsuits and arbitration before the Financial Industry Regulatory Authority (FINRA).

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The Alcala Law Firm was recently contacted by several California investors who invested in the IMH Secured Loan Fund, LLC, a private placement managed by Scottsdale based Investors Mortgage Holdings, Inc. The Financial advisors who sold the IMH Secured Loan Fund to these investors also sold them other private placements, including Medical Capital and Provident Asset Management, two speculative investments that turned out to be ponzi schemes and are now the subject of numerous securities fraud lawsuits.

Before recommending any investment, particularly risky and speculative private placements, financial advisors have a fiduciary duty to adequately disclose the risks involved and also to exercise due diligence in determining whether such investments are suitable for the customer. The Alcala Law Firm is in the process of investigating the possibility of filing securities arbitration claims before the Financial Industry Regulatory Authority (FINRA) to recover investment losses related to these private placements.

Click here for all IMH Secured Loan Fund Blog Postings.

Thumbnail image for medcap.jpgOn January 26, 2010, Securities America, the beleaguered brokerage firm that is already subject to a multitude of securities fraud lawsuits, including a pending class action in California, was charged by the Commonwealth of Massachusetts with misleading investors in the sale of notes issued by companies owned by Medical Capital Holdings, Inc. The regulatory complaint alleges that Securities America ignored red flags and deliberately failed to disclose the risks involved when selling $697 million worth Medical Capital Notes to unsophisticated investors. According to the complaint, investors were told that the notes were secured and low risk when, in reality, the notes were “unregistered, speculative, high risk securities, which were draped in the mantle of safety.”

Our securities law firm has been contacted by investors who purchased Medical Capital Notes from stockbrokers at Securities America, National Securities Corporation, CapWest, QA3 Financial and others. We are in the process of filing securities arbitration claims before the Financial Industry Regulatory Authority (FINRA) seeking to recover Medical Capital losses from these brokerage firms, pending further investigation.

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Striker debentures can now be added to the growing list of private-placement offerings that were marketed through a network of stockbrokers that have recently become embroiled in securities fraud lawsuits. This week, the SEC alleged that Striker Petroleum, LLC deceived approximately 540 investors into purchasing $57 million worth of fraudulent debentures. The SEC is alleging that Striker was selling the debentures to pay off prior debenture holders and to pay fixed returns to investors who had invested in Legacy oil and gas properties.

According to one industry news source, the Striker debentures were sold through a nationwide network of stockbrokers, including CapWest Securities. As a result, many investors who purchased Striker debentures may also have been sold interests in Provident Asset Management and Medical Capital–two private placements that are already the focus of SEC and investor lawsuits. As we noted in a recent blog posting on this very subject: Brokers who recommended these investments have a lot of explaining to do.

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Since my last two blog postings about the Medical Capital securities class action lawsuits pending in California, I have heard from several investors that were defrauded into purchasing not only Medical Capital Holdings, but also Provident Asset Management. Brokers who recommended either one of these private placement investments have a lot of explaining to do. Before recommending any investment, brokers have a fiduciary duty to exercise due diligence in determining whether an investment is appropriate and suitable for their customer. Defrauded investors interested in recouping their investment losses should consider all of their legal options, including the filing of a securities arbitration claim against their stockbroker or investment advisor that recommended the investment.

Below is a brief overview of the Provident Asset Management and Medical Capital securities fraud matters.

Provident Asset Management

Thumbnail image for Thumbnail image for medcap.jpgOn November 2, 2009, a class action was filed in the Central District of California against Wells Fargo Bank and Bank of New York Mellon on behalf of investors who purchased Medical Capital notes. The class action alleges that the banks failed to safeguard investor assets while acting as trustees of the Special Purpose Corporations created by Medical Capital Holdings. The action, Michel Rapoport v. Wells Fargo Bank, National Association et. al, has not yet been certified by the court.

There are currently two separate class actions arising from the Medical Capital fiasco. In addition, a growing number of investors are pursuing securities arbitration claims directly against the financial advisors that solicited their purchase of Medical Capital notes.

See related blog entry: Medical Capital Class Action or Arbitration: Investors Should Consider Their Options

Investors Have Choice to Make Regarding Medical Capital Corporation Fraud Recovery

Thumbnail image for Thumbnail image for Thumbnail image for medcap.jpgA class action lawsuit was filed in the Central District of California on September 18, 2009, against brokerage firms Cullum & Burks Securities, Inc., Securities America, Inc., Ameriprise Financial, Inc., and CapWest Securities, Inc., on behalf of investors who purchased so called “Medical Capital Notes” issued by Medical Provider Financial Corp. III, IV, V and/or VI on or after September 18, 2006.

The class action alleges that the defendant brokerage firms made materially false and misleading representations in the sale of the sale of the Medical Capital Notes. This class action has not yet been certified by the court. If the class is certified, the parties will be required to submit a proposed timeline for class members that want to opt out of the class action. Class members that elect to opt out can file a claim for their Medical Capital losses with FINRA. For more information about opting out of a class action and submitting an arbitration claim, please see our blog posting: Securities Arbitration vs. Class Actions: Consider Your Options. Investors who purchased Medical Capital Notes from brokerage firms that were not named as defendants are currently not included in the class action. If you believe you have a meritorious securities claim, speak with a securities attorney to discuss your rights and the advisability of opting out based on your individual circumstances.