MIAMI, March 12, 2010 (GLOBE NEWSWIRE) -- The securities law firm of Dimond Kaplan & Rothstein, P.A. (http://www.dkrpa.com or http://www.investmentfraud-lawyer.com) files additional FINRA arbitration claims to recover Medical Capital investment losses. The firm represents investors throughout the United States who collectively have lost tens of millions of dollars in Medical Capital notes purchased through Securities America, QA3 Financial, WFP Securities, and other brokerage firms. Many of the firm's clients also lost money in Provident/Shale Royalties and DBSI investments.
The Medical Capital notes allegedly were backed by medical receivables. But according to a complaint filed by the court-appointed SEC Receiver for Medical Capital, many of the receivables did not exist or were overvalued. As such, Medical Capital investors bought non-existent receivables. In order to keep its scheme alive, Medical Capital apparently used newer investors' money to pay promised investment returns to earlier investors, in classic Ponzi-scheme fashion. Medical Capital also appears to have used investors' money to pay itself excessive fees of greater than $300 million. Finally, Medical Capital made undisclosed expenditures unrelated to medical receivables, including $20 million on a Hollywood movie and a 118-foot yacht. Investors are unlikely to recover much, if any, of their losses from the Medical Capital receivership.
"We believe that the best opportunity for investors to recover their Medical Capital investment losses is to file a FINRA arbitration claim against the brokerage firms that sold the investments," said Dimond Kaplan & Rothstein, P.A. partner Jeffrey Kaplan. "We further believe that documents that we have obtained support a finding that brokerage firms, such as Securities America, either failed to conduct appropriate due diligence before approving and selling Medical Capital notes or chose to ignore glaring red flags," said Mr. Kaplan.
Securities America appears to have ignored its own President's pleas. Its President, Jim Nagengast, e-mailed Securities America's Senior Vice President, Thomas Cross, who was the Chairman of Securities America's Due Diligence Committee imploring:
My big concern is the audited financials. At this point, there is no excuse for [Medical Capital] not having audited financials. . . . it is a cost [Medical Capital] simply ha[s] to [pay] to offer product through our channel.
We simply have to tell [Medical Capital] that if they don't have financials by XXXX date we will stop distributing [Medical Capital notes] on that date. Then they can decide if that is worth spending $50,000 to have [an audit] done. If [Medical Capital] won't spend the money, that should give us concerns.
But Securities America ignored its own President's plea, failed to demand or even request that Medical Capital have its financials audited, and sold hundreds of millions of dollars more of Medical Capital notes without the benefit of audited financials.
Stunningly, despite the fact that a third-party due-diligence company advised Securities America to provide its due diligence reports, along with the reports' warnings, to Securities America's customers, Securities America decided not to do so. Securities America even refused to provide the warnings to its own brokers. Mr. Cross testified to Massachusetts securities regulators that the reason that Securities America did not provide any warnings or due diligence reports to its brokers was that:
. . . if the [due diligence] analyst makes a statement and we put that statement in the hands of the advisor, guess what happens? Somehow that document . . . will find its way into the hand of an investor. . . [brokers] can take that document to the investor and that's just a bad thing.
So, according to the SEC Receiver's complaint, Securities America intentionally kept its own brokers in the dark about Medical Capital warning signs in a callous attempt to prevent its customers (investors) from being fully informed about the true nature of Medical Capital investments. Securities America appears to have acted in this manner because it was more concerned with profiting from the $30 million in commissions it earned from Medical Capital investment sales than it was with its legal duties owed to its customers.
Dimond Kaplan & Rothstein, P.A. is an AV-Rated law firm that represents investors nationwide in stockbroker fraud and investment loss cases. The firm represents numerous Medical Capital investors, and has represented investors in claims involving limited partnerships, stocks, bonds, options, and hedge funds. If you suffered Medical Capital investment losses, please contact Jeffrey Kaplan, Esq. of Dimond Kaplan & Rothstein, P.A. at (888) 578-6255 or jkaplan@dkrpa.com for a free case evaluation. You also may visit the firm on the web at www.dkrpa.com or www.investmentfraud-lawyer.com.
The Dimond Kaplan & Rothstein, P.A. logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=4684