Posts tagged ‘medical capital investigation’

Medical Capital class action against Hantz Financial

According to reports, Hantz Financial is still contending with the fallout from Medical Capital, the $2.2 billion Ponzi scheme built on shaky medical receivable that the Securities and Exchange Commission shut down in July 2009.  These reports indicate that Hantz Financial Services Inc. is still facing the potential of class action lawsuit over the sale of the notes and that a judge in Oakland County could soon decide on what could be a final attempt to certify the class of investors.

If the class is certified, it appears that the class has a little more than $20 million in combined damages against the firm.

Hantz Financial is a mid-sized brokerage firm based in Michigan that has 260 affiliated financial advisers.

It would appear that the class investors are attempting to hold Hantz Financial responsible for its due diligence requirements.  Brokerage firms and financial advisors have a fiduciary duty to perform adequate due diligence on any investment they recommend and to ensure that such recommendations are appropriate for their client in light of that particular clients’ age, income, investment experience, investment objectives, and net worth.

Investors in Medical Capital could also attempt to recover their losses with a FINRA arbitration claim.  The White Law Group has represented numerous Medical Capital investors in claims against the brokerage firm that recommended the investment.

To speak with a securities attorney experienced in Medical Capital related claims, please call The White Law Group at 312/239-9650 for a free consultation.

The White Law Group is a national securities fraud, securities arbitration, and investor protection law firm with offices in Chicago, Illinois and Boca Raton, Florida.

For more information on The White Law Group, visit

Expert Says Some Brokerage Firms Performed Poor Private Placement Due Diligence

A recent article by Bruce Kelly of the reported the opinion of Gordon Yale, a forensic accountant, who has served as an expert for dozens of investors who have brought claims against brokerage firms related to the sale of failed private placement investments issued by companies like DBSI, Inc., Medical Capital Financial Corp., and Shale (Provident) Royalties. In Mr. Yale’s expert opinion, “Broker-dealers that sold billions of dollars in allegedly fraudulent private placements failed massively in their due-diligence responsibilities to investors.”

Yale likened the due diligence failures of firms that sold these private placements to the failures of large banks to perform due diligence on bad mortgage backed securities that led to the mortgage crisis. He said, “It was basically the same recklessness…but it was done by middle- or lower-tier firms and [with] a different set of products.”

Certainly, firms that sold these investments contend that they did do adequate due diligence. However, recent arbitration awards as well as fines and sanctions issued by securities regulators like the Financial Industry Regulatory Association (FINRA) indicate that they are at least skeptical of the due diligence work performed. Kelly notes that FINRA recently fined the former president of Capital Financial Services $10,000 related to the sale of Medical Capital and Provident Royalties. He also noted that only one of the cases that Yale has worked on necessitated his testimony in arbitration (many settled in advance of arbitration) and in that case a $1.2 million award was ordered to be given to an investor by Securities America Inc. and a broker.

In the piece Yale indicated his opinion that firms too often relied on 3rd party due diligence reports, he said, “They viewed those reports as the end of the process, rather than the beginning. There’s a notice to [Finra] members, 05-48, that basically says you can outsource any function, but you can’t outsource your responsibility for compliance with federal securities laws or regulations.” Yale feels like firms, especially one’s like Securities America who sold $700 million in Medical Capital notes, should have hired an independent CPA to conduct financial due diligence on the investments.

The White Law Group is all too familiar with the difficulties investors have had over the last several years with failed private placements. The firm has represented and currently represents many investors who have suffered damages as a result of the recommendation of their financial professional to purchase private placement investments from companies like DBSI, Medical Capital, and Shale (Provident) Royalties. We have found that in many cases the FINRA registered firms failed in their fiduciary duty to perform adequate due diligence and to disclose the risks involved with these investments. Brokerage firms that fail in this fiduciary duty may be liable in FINRA dispute resolution claims to recover investment losses.

If you are concerned about an investment you made in a private placement like those from DBSI, Medical Capital, and Shale (Provident) Royalties and would like to speak to an attorney about your potential to recover investment losses through a FINRA claim please call out Chicago office at 312-238-9650.

The White Law Group, LLC is a national securities fraud, securities arbitration, investor protection, and securities regulation/compliance law firm with offices in Chicago, Illinois and Boca Raton, Florida.

For more information on The White Law Group, please visit our website at

Ameriprise Settles Medical Capital / Provident Class Action?

According to the Investment News, Ameriprise Financial Inc. has reached a $27 million settlement with investors who bought private placements that have gone bust from reps at its independent broker-dealer subsidiary, Securities America Inc., according to an attorney with knowledge of the matter.

The proposed settlement, which must be approved by a federal judge later this month to become final, comes two weeks after Securities America reached a $21 million potential settlement with the class action plaintiff’s who sued Securities America and Ameriprise in 2009.

In one allegation from the suit, C. Richard Toomey, et al. v. Securities America Inc., et al, plaintiffs claimed that Securities America handed private placement memorandum to clients that contained untrue statements about the deals and omitted other material information about the deals.

It is part of a labyrinth of litigation before federal judge W. Royal Furgeson Jr. in Dallas, stemming from dozens of independent broker-dealers, including Securities America, selling two series of private placement deals that have left investors with tens of millions of dollars of losses.

The Securities and Exchange Commission charged both Medical Capital and Provident Royalties with fraud in 2009.

With Securities America looking to squeeze another $4 million from its insurance carrier, the money for investors would be about $52 million, said Dan Girard, lead plaintiff’s attorney for the investors in the class action lawsuit. He said that works out to be about 15 cents on the dollar per investor.

“The proposed class action settlement is substantially greater that the net worth” of Securities America, he said, pointing to the fact that a substantial portion, $11 million, ofSecurities America‘s settlement is to come from the firm’s future earnings.

Ameriprise’s liability stems from the fact that it was a “control person” with respect toSecurities America, he said.

He added that the Ameriprise and Securities America settlements were independent of each other.

Chris Reese, a spokesman for Ameriprise, said on Wednesday evening he could not confirm or deny the settlement.

In its annual report earlier this week, Ameriprise said Securities America clients were facing almost $400 million in losses from the Medical Capital and Provident investments, and the firm also said it had set aside about $40 million in legal reserves for the claims.

A key part of the potential Securities America settlement is the fact that it requires investors who have sued the firm through arbitration under the Financial Industry Regulatory Authority Inc. will have those claims halted. Investors would become part of the class. This has infuriated some investors, along with their attorneys, who want their claims to go forward through arbitration with hopes of winning 100 cents on the dollar, plus the potential for damages.

Indeed, the firm was dealt a costly legal blow on New Year’s Eve when a Finra arbitration panel awarded almost $1.2 million in damages and legal fees to a client who sued the firm and a broker over the sale of Medical Capital private placements. The award included $250,000 in punitive damages.

“A class action settlement treats everyone fairly,” Mr. Girard said. He added that some plaintiff’s attorneys representing clients in Finra arbitration have a “conflict of interest” over the matter because they have clients at the front and the back of the long line of litigation against Securities America. Those at the back of the line run the risk of getting nothing if the firm runs out of money, he said.

And that threat is substantial. Small to mid-sized independent broker-dealers that sold high risk private placements have gone out of business due to lawsuits and legal costs over the past two years. None have been as substantial as Securities America, which has about 1,800 reps and advisers who generated about $500 million in fees and commissions last year.

Securities America is also being sued by securities regulators from Massachusetts and Montana but the status of those suits is not clear in the light of the proposed settlements.

Mr. Furgeson will hold a hearing in federal court in Dallas on the proposed settlements on March 18. Lawyers for the plaintiffs in arbitration plan to argue vigorously against any settlement that would freeze investors’ arbitration claims against Securities America.

If you have questions about the proposed settlement and your legal rights, the securities attorneys of The White Law Group may be able to help.  For a free consultation, call the firm’s Chicago office at 312-238-9650.

The White Law Group, LLC is a national securities fraud, securities arbitration, investor protection, and securities regulation/compliance law firm with offices in Chicago, Illinois and Boca Raton, Florida.

For more information on The White Law Group, please visit our website at