Corporate & Securities Law

Medical Capital Holdings: What MedCap Investors Can Do

By Mark Maddox

Momentum continues to build over Medical Capital Holdings, as more MedCap investors file arbitration claims against the healthcare lender for the millions of dollars in losses suffered as a result of alleged questionable sales in Medical Capital private placement securities. Among the allegations investors cite in their claims: Misrepresentation on the part of Medical Capital, misuse of investors? funds to pay administrative fees, and omission of critical facts concerning the track record of Medical Capital entities and the backgrounds and qualifications of the people responsible for running the companies.

Based in Tustin, California, Medical Capital raised approximately $2.2 billion from 20,000 lenders in the past six years. In July 2009, the Securities and Exchange Commission (SEC) sued the company and its top officers, Sidney M. Field and Joseph ?Joey? Lampariello, for defrauding investors. A court-appointed receiver, Thomas A. Seaman, was appointed one month later.

In its lawsuit, the SEC accused Medical Capital - which raises money from investors then loans that money to hospitals - of misappropriating some $18.5 million from investors to pay administrative costs. The agency contends that when the company raised $77 million from investors it promised that none of the money would be used for such expenses.

In addition, the SEC claims Medical Capital misrepresented its financial track record. Contrary to the claims it made, three of its offerings programs had defaulted and a fourth was making late payments.

Since then, a number of lawsuits and arbitration claims have been filed by investors against various brokers/dealers that marketed and sold investments in Medical Capital. Then, in January 2010, the Commonwealth of Massachusetts filed a regulatory action against Securities America, accusing the broker/dealer of committing securities fraud on a ?massive scale.?

As with other claims related to Medical Capital, the Massachusetts complaint accuses Securities America of failing to conduct proper due diligence of Medical Capital and its related entities, of ignoring red flags and making material omissions and misleading statements in connection to $700 million of promissory notes that were sold to Medical Capital investors.

?…All material risks and information regarding MC Notes were not disclosed to investors. These risks were known to [Securities America]. Year after year, the due diligence analyst, retained by [Securities America] to conduct a review of the various Medical Capital offerings, specifically requested and at many times pleaded that investors be informed of certain heightened risks,? the complaint reads.

Maddox Hargett & Caruso P.C. continues to file arbitration claims with the Financial Industry Regulatory Authority (FINRA) on behalf of investors who have suffered investment losses in their Medical Capital investments. If you purchased Medical Capital Notes from a broker/dealer and wish to discuss your potential rights for recovery, contact us today.

Full post as published by Representing Investors on March 07, 2010 (boomark / email).