Colling, Gilbert, Wright & Carter Securites Fraud
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Tuesday, August 25, 2009
Colling Gilbert Wright & Carter Investigating Claims Related to Medical Capital Holdings Private Placement Notes
The law office of Colling Gilbert Wright & Carter is currently investigating and pursuing claims against brokerage firms that solicited and sold securities of Medical Capital Holdings. The Med Cap notes, including those titled MPFC V and MPFC VI, were sold as private placements under Rule 506 of Regulation D to accredited investors.
On July 16, 2009, the Securities and Exchange Commission ("SEC") filed fraud charges against Medical Capital Holdings in connection with the sale of $77 million of private securities. On the same day, the Financial Industry Regulatory Authority (FINRA) requested several broker-dealers turn over documents regarding the sale of Medical Capital's securities. Among the firms believed to be involved include QA3 Financial, American Portfolios Financial Services, Inc., National Securities Corp., Securities America, Inc. and Signature Financial Group.
An August 19, 2009 Investment News article regarding Medical Capital appears below:
Medical Capital Holdings Inc., which sold private-placement offerings through a number of independent broker-dealers and has been charged with fraud by the Securities and Exchange Commission, spent freely and lavishly on assets that had nothing to do with medical receivables — its core business — according to court papers filed last week.
According to a recent report by Thomas A. Seaman, the receiver for Medical Capital, the investments include: $20 million for “The Perfect Game,” a film about a group of Mexican youths who in 1957 became the first non-U.S. team to win the Little League World Series; $7 million in a company that marketed a mobile-phone application that consisted of a live video feed of a hamster in a cage; and an unspecified amount for a 118-foot yacht called The Home Stretch.
Medical Capital, which was based in Anaheim, Calif., packaged medical receivables and sold them as private placements.
The firm raised $2.2 billion over the past six years and had 20,000 investors, according to the SEC.
“It appears that note holders will almost certainly suffer significant losses on their investments,” the report stated.
In a response to the receiver's report filed over the weekend, Medical Capital's chief executive, Sidney Field, and its president and chief operating officer, Joseph Lampariello, said that the receiver “did not hesitate to attack the defendants and their assets with his inchoate, tentative and unsubstantiated analysis.”
“The note holders and the court would have been better-served if the receiver would have spent more time figuring out how to maximize the value of assets and less time trying to conduct discovery for the SEC and trying to provide the court with his analysis of the relative merits of the SEC's case,” the response stated.
In its lawsuit from July, the SEC alleged that Medical Capital had defrauded investors of at least $18.5 million.
But the fraud could be much greater.
According to last week's report by the court-ordered receiver, Medical Capital conducted numerous transactions with itself, transferring accounts receivable from one investment entity to another at least 301 times. The amount totals $829 million of such transfers.
That creates “a number of potential issues,” the report stated. First, some of those receivables were already old when purchased by the new Medical Capital investment entity, and receivables lose value as they age.
Second, some of the receivables that the new investment offerings bought did not exist.
And last, Medical Capital overstated the value of some of the receivables, according to the report.
In its response, the Medical Capital executives said the assertion that old receivables were sold from one investment to another was “perhaps the most ignorant statement in the entire report,” adding: “This assertion is patently false.”
Likewise, the motion picture asset, the boat and the hamster video were “mischaracterized,” according to the response.
Broker-dealers whose reps sold the Medical Capital private placements include: Securities America Inc., American Portfolios Financial Services Inc. and National Securities Corp.
If you have purchased notes issued by Medical Capital Holdings, please contact our office for a free case evaluation. Thank you.
On July 16, 2009, the Securities and Exchange Commission ("SEC") filed fraud charges against Medical Capital Holdings in connection with the sale of $77 million of private securities. On the same day, the Financial Industry Regulatory Authority (FINRA) requested several broker-dealers turn over documents regarding the sale of Medical Capital's securities. Among the firms believed to be involved include QA3 Financial, American Portfolios Financial Services, Inc., National Securities Corp., Securities America, Inc. and Signature Financial Group.
An August 19, 2009 Investment News article regarding Medical Capital appears below:
Medical Capital Holdings Inc., which sold private-placement offerings through a number of independent broker-dealers and has been charged with fraud by the Securities and Exchange Commission, spent freely and lavishly on assets that had nothing to do with medical receivables — its core business — according to court papers filed last week.
According to a recent report by Thomas A. Seaman, the receiver for Medical Capital, the investments include: $20 million for “The Perfect Game,” a film about a group of Mexican youths who in 1957 became the first non-U.S. team to win the Little League World Series; $7 million in a company that marketed a mobile-phone application that consisted of a live video feed of a hamster in a cage; and an unspecified amount for a 118-foot yacht called The Home Stretch.
Medical Capital, which was based in Anaheim, Calif., packaged medical receivables and sold them as private placements.
The firm raised $2.2 billion over the past six years and had 20,000 investors, according to the SEC.
“It appears that note holders will almost certainly suffer significant losses on their investments,” the report stated.
In a response to the receiver's report filed over the weekend, Medical Capital's chief executive, Sidney Field, and its president and chief operating officer, Joseph Lampariello, said that the receiver “did not hesitate to attack the defendants and their assets with his inchoate, tentative and unsubstantiated analysis.”
“The note holders and the court would have been better-served if the receiver would have spent more time figuring out how to maximize the value of assets and less time trying to conduct discovery for the SEC and trying to provide the court with his analysis of the relative merits of the SEC's case,” the response stated.
In its lawsuit from July, the SEC alleged that Medical Capital had defrauded investors of at least $18.5 million.
But the fraud could be much greater.
According to last week's report by the court-ordered receiver, Medical Capital conducted numerous transactions with itself, transferring accounts receivable from one investment entity to another at least 301 times. The amount totals $829 million of such transfers.
That creates “a number of potential issues,” the report stated. First, some of those receivables were already old when purchased by the new Medical Capital investment entity, and receivables lose value as they age.
Second, some of the receivables that the new investment offerings bought did not exist.
And last, Medical Capital overstated the value of some of the receivables, according to the report.
In its response, the Medical Capital executives said the assertion that old receivables were sold from one investment to another was “perhaps the most ignorant statement in the entire report,” adding: “This assertion is patently false.”
Likewise, the motion picture asset, the boat and the hamster video were “mischaracterized,” according to the response.
Broker-dealers whose reps sold the Medical Capital private placements include: Securities America Inc., American Portfolios Financial Services Inc. and National Securities Corp.
If you have purchased notes issued by Medical Capital Holdings, please contact our office for a free case evaluation. Thank you.
posted by
William B. Young Jr. Esq.
at
8:30 AM
Thursday, August 13, 2009
Morgan Keegan Receives SEC Wells Notice Regarding RMK Bond Funds
In early July, regional brokerage firm Morgan Keegan received a Securities and Exchange Commission (SEC) Wells Notice notifying the firm they are investigating the possible violation of securities laws believed to be related to the RMK Bond and Income Funds.
The notice does not mean the SEC will ultimately take action but in about half of the cases, once a Wells notice is issued, enforcement action of some kind follows.
The full text of the Wall Street Journal article appears below:
NEW YORK (Dow Jones)--The threat of possible civil charges against Morgan Keegan could help lighten the burden for many investors who filed arbitration claims against the brokerage, attorneys say.
Regions Financial Corp. (RF), which owns Morgan Keegan, disclosed in a mid-July securities filing that it received a Wells notice from the Securities and Exchange Commission on July 9. In it, the SEC warned the company that it may pursue enforcement action for possible violations of securities laws involving "certain mutual funds."
While not naming the funds, the SEC said they were managed by Morgan Asset Management Inc., part of Morgan Keegan, a regional brokerage firm based in Memphis, Tenn. Seven funds run by Morgan suffered sizable losses in 2007 and 2008 because of exposure to collateralized debt obligations and other mortgage-related holdings, and numerous investors have filed claims against the company.
Regions transferred management of the funds last July to Hyperion Brookfield Asset Management Inc. of New York.
A Wells notice doesn't mean for certain that the SEC will initiate an enforcement proceeding. It does give the recipient an opportunity to demonstrate why the SEC shouldn't. The commission only approves about half of the recommendations for action made by its staff, according to Jahan P. Raissi, a San Francisco-based securities litigation attorney and former enforcement attorney for the SEC.
It should, however, make securities arbitrators more inclined to order Morgan Keegan to provide unhappy investors with copies of certain documents they believe will help their claims against the company, investors' lawyers say.
The funds have been the subject of a flood of claims by investors who were hit by losses and who blame Morgan Keegan, charging that it, among other things, misrepresented its securities and sold them to investors for whom they weren't suited.
The company has fought the claims and challenged investors' rights to some documents. "The fight that Morgan Keegan is putting on is unbelievable," says Brian Smiley, president of the Public Investors Arbitration Bar Association, or Piaba, a Norman, Okla.-based group of attorneys who represent investors.
Steven Caruso, a New York-based attorney who represents investors, says Morgan Keegan hasn't voluntarily shared documentation concerning its valuation of positions in funds or email communication between those involved in management and operation of its mutual funds.
Arbitration panels have ordered Morgan Keegan to produce the documents "in very few cases," Caruso said. But the Wells notice is likely to change that pattern.
"That notification has to influence arbitrations when the issue of discovery of regulatory documents comes up," he says.
Raissi said, "The fact the enforcement staff thinks there's something there is helpful and significant in determining the relevance of documents in arbitration proceedings."
However, arbitration panels don't generally allow a Wells notice to influence their ultimate decision in a case, he said. "They're pretty good about being objective."
Kathy Ridley, a Morgan Keegan spokeswoman, said the brokerage has produced required documents, subject to arbitration rules. She said that some investors haven't produced certain documents, such as tax returns, required by arbitration rules.
If you have lost money due to investment in any of the six RMK Bond and Income Funds, please contact our office for a free case evaluation. Thank you.
The notice does not mean the SEC will ultimately take action but in about half of the cases, once a Wells notice is issued, enforcement action of some kind follows.
The full text of the Wall Street Journal article appears below:
NEW YORK (Dow Jones)--The threat of possible civil charges against Morgan Keegan could help lighten the burden for many investors who filed arbitration claims against the brokerage, attorneys say.
Regions Financial Corp. (RF), which owns Morgan Keegan, disclosed in a mid-July securities filing that it received a Wells notice from the Securities and Exchange Commission on July 9. In it, the SEC warned the company that it may pursue enforcement action for possible violations of securities laws involving "certain mutual funds."
While not naming the funds, the SEC said they were managed by Morgan Asset Management Inc., part of Morgan Keegan, a regional brokerage firm based in Memphis, Tenn. Seven funds run by Morgan suffered sizable losses in 2007 and 2008 because of exposure to collateralized debt obligations and other mortgage-related holdings, and numerous investors have filed claims against the company.
Regions transferred management of the funds last July to Hyperion Brookfield Asset Management Inc. of New York.
A Wells notice doesn't mean for certain that the SEC will initiate an enforcement proceeding. It does give the recipient an opportunity to demonstrate why the SEC shouldn't. The commission only approves about half of the recommendations for action made by its staff, according to Jahan P. Raissi, a San Francisco-based securities litigation attorney and former enforcement attorney for the SEC.
It should, however, make securities arbitrators more inclined to order Morgan Keegan to provide unhappy investors with copies of certain documents they believe will help their claims against the company, investors' lawyers say.
The funds have been the subject of a flood of claims by investors who were hit by losses and who blame Morgan Keegan, charging that it, among other things, misrepresented its securities and sold them to investors for whom they weren't suited.
The company has fought the claims and challenged investors' rights to some documents. "The fight that Morgan Keegan is putting on is unbelievable," says Brian Smiley, president of the Public Investors Arbitration Bar Association, or Piaba, a Norman, Okla.-based group of attorneys who represent investors.
Steven Caruso, a New York-based attorney who represents investors, says Morgan Keegan hasn't voluntarily shared documentation concerning its valuation of positions in funds or email communication between those involved in management and operation of its mutual funds.
Arbitration panels have ordered Morgan Keegan to produce the documents "in very few cases," Caruso said. But the Wells notice is likely to change that pattern.
"That notification has to influence arbitrations when the issue of discovery of regulatory documents comes up," he says.
Raissi said, "The fact the enforcement staff thinks there's something there is helpful and significant in determining the relevance of documents in arbitration proceedings."
However, arbitration panels don't generally allow a Wells notice to influence their ultimate decision in a case, he said. "They're pretty good about being objective."
Kathy Ridley, a Morgan Keegan spokeswoman, said the brokerage has produced required documents, subject to arbitration rules. She said that some investors haven't produced certain documents, such as tax returns, required by arbitration rules.
If you have lost money due to investment in any of the six RMK Bond and Income Funds, please contact our office for a free case evaluation. Thank you.
posted by
William B. Young Jr. Esq.
at
6:46 AM
Wednesday, August 12, 2009
FINRA Opposes Rule Change Regarding Industry Arbitrator
A recent Wall Street Journal article details the the Financial Industry Regulatory Authority (FINRA) resistance to the elimination of the industry arbitrator from panels hearing customer complaints. The Plaintiffs bar has long advocated the elimination of the industry arbitrator on the perceived bias the industry arbitrator may bring to the proceeding. FINRA put a pilot program in place last year but it is too early to tell if eliminating the industry arbitrator will have any bearing on customer awards. In the meantime, FINRA is opposing any further changes at this time.
The full article appears below:
NEW YORK (Dow Jones)--The retail brokerage industry's self regulatory organization urged the SEC to allow a pilot program for securities arbitration to conclude before considering a rule change petition filed by investor advocates that would eliminate industry arbitrators from certain panels.
The Financial Industry Regulatory Authority, or Finra, says it supports the goal of an arbitration system that's fair to investors, but a two-year pilot program in which certain investors can opt for three-person panels comprised of all public arbitrators, instead of a panel that includes an industry arbitrator, should be allowed to continue until October 2010, wrote Linda D. Fienberg, president of Finra dispute resolution.
Finra submitted the Aug. 3 letter to the SEC in response to a June 11 rule change petition filed by the Public Investors Arbitration Bar Association, or Piaba, a Norman, Okla.-based group of attorneys who represent investors. The petition requested the SEC require that parties in an arbitration be empowered to select an all-public panel in any investor claim exceeding $100,000.
Feinberg wrote that allowing the pilot to conclude would allow Finra to analyze data from the program and "make an informed decision on how to proceed concerning panel composition in investor cases heard by three arbitrators." Criteria for evaluating the program will include the percentage of investors who elected to participate in the program, the length of hearings, and results of pilot and non-pilot cases.
Eleven brokerages are participating in the pilot, which launched in 2008, each contributing a set number of cases per year, during the two-year period. Feinberg wrote that Finra will try to expand the number of brokerages that participate and the cases they contribute.
As of July 17, Finra noted 444 cases that were eligible for the pilot program. Of those, 52% of investors chose to participate in the pilot program, resulting in 233 pilot cases, according to the letter. Parties have completed the arbitrator selection process in 193 of those cases. Investors chose not to eliminate industry arbitrators in half of those cases, according to the letter.
If you suspect you have lost money due to broker negligence or fraud, your new accounts dictate your claim is contractually obligated to be filed with FINRA. Please contact our office for an explanation of your writes and for a case evaluation. Thank you.
The full article appears below:
NEW YORK (Dow Jones)--The retail brokerage industry's self regulatory organization urged the SEC to allow a pilot program for securities arbitration to conclude before considering a rule change petition filed by investor advocates that would eliminate industry arbitrators from certain panels.
The Financial Industry Regulatory Authority, or Finra, says it supports the goal of an arbitration system that's fair to investors, but a two-year pilot program in which certain investors can opt for three-person panels comprised of all public arbitrators, instead of a panel that includes an industry arbitrator, should be allowed to continue until October 2010, wrote Linda D. Fienberg, president of Finra dispute resolution.
Finra submitted the Aug. 3 letter to the SEC in response to a June 11 rule change petition filed by the Public Investors Arbitration Bar Association, or Piaba, a Norman, Okla.-based group of attorneys who represent investors. The petition requested the SEC require that parties in an arbitration be empowered to select an all-public panel in any investor claim exceeding $100,000.
Feinberg wrote that allowing the pilot to conclude would allow Finra to analyze data from the program and "make an informed decision on how to proceed concerning panel composition in investor cases heard by three arbitrators." Criteria for evaluating the program will include the percentage of investors who elected to participate in the program, the length of hearings, and results of pilot and non-pilot cases.
Eleven brokerages are participating in the pilot, which launched in 2008, each contributing a set number of cases per year, during the two-year period. Feinberg wrote that Finra will try to expand the number of brokerages that participate and the cases they contribute.
As of July 17, Finra noted 444 cases that were eligible for the pilot program. Of those, 52% of investors chose to participate in the pilot program, resulting in 233 pilot cases, according to the letter. Parties have completed the arbitrator selection process in 193 of those cases. Investors chose not to eliminate industry arbitrators in half of those cases, according to the letter.
If you suspect you have lost money due to broker negligence or fraud, your new accounts dictate your claim is contractually obligated to be filed with FINRA. Please contact our office for an explanation of your writes and for a case evaluation. Thank you.
posted by
William B. Young Jr. Esq.
at
10:18 AM
Friday, August 7, 2009
Morgan Keegan Asks Courts to Overturn Abitration Awards
According to an August 4, 2009 Wall Street Journal article, Regions Morgan Keegan has taken an unprecedented and unusual step when the firm filed motions to vacate arbitration awards in favor of three Morgan Keegan bond fund investors. Arbitration awards are only appealable in very limited circumstances and are considered binding. This move appears to be a stall tactic to put off the payment of monetary compensation to investors who purchased the RMK bond funds, filed claims for their losses and prevailed in FINRA arbitration hearings.
The full article appears below:
A binding arbitration award typically marks the end of a battle between an investor and broker. Not so with three awards against Morgan Keegan & Co.
In an unusual action, the company is asking a state court to overturn the rulings, angering lawyers for investors who say Morgan Keegan is prolonging their clients' trouble and expense.
Morgan Keegan, a regional brokerage owned by Birmingham-based Regions Financial Corp. (RF), has faced a flood of claims by investors who were hit by sizable losses in 2007 and 2008 in seven funds that made bets in debt and other mortgage-related holdings.
Arbitration awards are typically binding. Federal arbitration law gives parties the right to appeal awards only under very limited circumstances, such as when arbitrators clearly ignore established law.
Appeals are very difficult to win, and thus rarely are made, says Peter Henning, a securities law professor at Wayne State University Law School in Detroit.
"The presumption is that arbitration is the end. You don't have judges second-guessing it," he says.
Kathy Ridley, a Morgan Keegan spokeswoman, acknowledged the appeals were unusual "but we believe the arbitrators exceeded their authority or improperly applied the law."
Morgan Keegan filed its motions to vacate in a Birmingham, Ala., court. The most recent appeal was filed July 22 and involved a $220,000 award including attorneys fees and costs. In that case, the brokerage argues that the panel's chairman, who previously sat on another panel that ruled against Morgan Keegan, should have been recused, according to Debra Brewer Hayes, a Houston-based securities attorney who represents the investor.
Hayes' client in the case is United Prison Ministries International in Verbena, Ala., which distributes free bibles and religious books to prisoners and their families. She says the $220,000 award is about half the original request and calls it "level and even handed."
The appeal, she says, could prolong the case another eighteen months to two years. Hayes says she's dealt with only one or two other motions to vacate during her more than 20 years of practice.
In another appeal, filed in May, Morgan Keegan asked the court to vacate an award totalling over $628,000 on behalf of two investors. The motion accuses arbitrators of misconduct for not postponing a hearing during which the investors presented suitability claims. The investors, Morgan Keegan says, had "disavowed" such claims.
Andrew Stoltmann, a Chicago-based attorney who represents the investors, calls the allegation "categorically not true." He said it was the second motion to vacate he has faced in some 700 cases over 10 years.
A third motion to vacate, also filed in May, says an arbitration panel exceeded its authority in awarding more than $187,000 in damages, attorneys fees and costs, according to Steven B. Caruso, a New York attorney who represents the investor.
Henning, the law professor, calls the motions "basic trendsetter cases."
"They may be trying to get the test cases sorted out, see what a court would say, and then they can go about settling," he says.
But the strategy - and its delays - may also come with a price tag, says Caruso. "Who pays for it? The shareholders of Regions Financial," he says.
Colling Gilbert Wright & Carter is currently representing investors who have suffered damages as a result of purchasing the RMK bond and income funds. Please contact us for a free case evaluation.
The full article appears below:
A binding arbitration award typically marks the end of a battle between an investor and broker. Not so with three awards against Morgan Keegan & Co.
In an unusual action, the company is asking a state court to overturn the rulings, angering lawyers for investors who say Morgan Keegan is prolonging their clients' trouble and expense.
Morgan Keegan, a regional brokerage owned by Birmingham-based Regions Financial Corp. (RF), has faced a flood of claims by investors who were hit by sizable losses in 2007 and 2008 in seven funds that made bets in debt and other mortgage-related holdings.
Arbitration awards are typically binding. Federal arbitration law gives parties the right to appeal awards only under very limited circumstances, such as when arbitrators clearly ignore established law.
Appeals are very difficult to win, and thus rarely are made, says Peter Henning, a securities law professor at Wayne State University Law School in Detroit.
"The presumption is that arbitration is the end. You don't have judges second-guessing it," he says.
Kathy Ridley, a Morgan Keegan spokeswoman, acknowledged the appeals were unusual "but we believe the arbitrators exceeded their authority or improperly applied the law."
Morgan Keegan filed its motions to vacate in a Birmingham, Ala., court. The most recent appeal was filed July 22 and involved a $220,000 award including attorneys fees and costs. In that case, the brokerage argues that the panel's chairman, who previously sat on another panel that ruled against Morgan Keegan, should have been recused, according to Debra Brewer Hayes, a Houston-based securities attorney who represents the investor.
Hayes' client in the case is United Prison Ministries International in Verbena, Ala., which distributes free bibles and religious books to prisoners and their families. She says the $220,000 award is about half the original request and calls it "level and even handed."
The appeal, she says, could prolong the case another eighteen months to two years. Hayes says she's dealt with only one or two other motions to vacate during her more than 20 years of practice.
In another appeal, filed in May, Morgan Keegan asked the court to vacate an award totalling over $628,000 on behalf of two investors. The motion accuses arbitrators of misconduct for not postponing a hearing during which the investors presented suitability claims. The investors, Morgan Keegan says, had "disavowed" such claims.
Andrew Stoltmann, a Chicago-based attorney who represents the investors, calls the allegation "categorically not true." He said it was the second motion to vacate he has faced in some 700 cases over 10 years.
A third motion to vacate, also filed in May, says an arbitration panel exceeded its authority in awarding more than $187,000 in damages, attorneys fees and costs, according to Steven B. Caruso, a New York attorney who represents the investor.
Henning, the law professor, calls the motions "basic trendsetter cases."
"They may be trying to get the test cases sorted out, see what a court would say, and then they can go about settling," he says.
But the strategy - and its delays - may also come with a price tag, says Caruso. "Who pays for it? The shareholders of Regions Financial," he says.
Colling Gilbert Wright & Carter is currently representing investors who have suffered damages as a result of purchasing the RMK bond and income funds. Please contact us for a free case evaluation.
posted by
William B. Young Jr. Esq.
at
2:41 PM
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