MIAMI, June 29, 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 more than $5 million in 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 brokerage firms including Securities America.
The Medical Capital notes allegedly were collateralized by medical receivables. But according to Medical Capital's court-appointed Receiver, many of the receivables did not exist or were overvalued, meaning that Medical Capital investors paid for non-existent receivables. Medical Capital apparently used newer investors' money to pay promised investment returns to earlier investors, in classic Ponzi-scheme fashion.
Brokerage firms either failed to identify red flags or ignored warning signs about Medical Capital. For example, in January 2005, Securities America received a due diligence report that stated that the most critical concern was that "[Medical Capital] may use some of the offering proceeds to pay interest, repay principal, and/or pay commissions." Securities America ignored this earmark of a Ponzi scheme and proceeded to sell hundreds of millions of dollars of fraudulent Medical Capital notes.
Securities America appears to have ignored the pleas of its own President, Jim Nagengast. Mr. Nagengast e-mailed 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 . . . 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. . . . If [Medical Capital] won't spend the money, that should give us concerns.
But Securities America ignored its own President, failed to demand that Medical Capital have its financials audited, and went on to sell hundreds of millions of dollars of Medical Capital notes.
Securities America even chose not to tell its own brokers about the warning signs, testifying to securities regulators that the reason that it did not provide warnings 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.
Securities America appears to have kept its brokers in the dark in an attempt to prevent its investors from being fully informed about the true nature of Medical Capital notes. We believe that Securities America acted this way because it wanted to collect an ultimate $30 million in commissions selling Medical Capital notes.
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 many 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.
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