Securities Fraud Blog | Find out if your broker is liable for your losses

TAG | Wells Fargo Bank NA

May/11

26

Wells Fargo, BNY Mellon Corp., Sue Securities America, & other B-Ds over Medical Capital Holdings, Inc.

Comments off · Posted by admin in FINRA

In a May 26th., 2011, article from InvestmentNews.com, Bruce Kelly writes, that adding to the cascade of legal troubles for broker-dealers that sold private placements for Medical Capital Holdings Inc., two banks have now sued several independent B-Ds that hawked the failed offerings.

It was reported that the Bank of New York Mellon Corp. and Wells Fargo Bank NA, were trustees for Medical Capital. In fact, both were sued in a class action in 2009 in U.S. District Court for the Central District of California after the Securities and Exchange Commission charged Medical Capital with fraud. But Bank of New York Mellon and Wells Fargo want the broker-dealers to pay up money if they are found liable in those class actions.

On April 29, the two banks filed separate lawsuits against the broker-dealers, including struggling Securities America Inc., claiming that the broker-dealers “breached their obligation to MedCap investors” by selling the product to investors for whom it was not a suitable investment, and failing to make proper disclosure of the notes’ risks. Bank of New York Mellon has sued 13 broker-dealers, seven of which are no longer in business. Wells Fargo has sued six firms, as well as Ameriprise Financial Inc., which owns Securities America, the biggest seller of Medical Capital notes. Not all broker-dealers that sold the product were included in the suit. “We believe the banks’ actions are unwarranted and baseless,” said Janine Wertheim, a spokeswoman for Securities America. “The wrongdoing in this case lies with the principals of Medical Capital, who have been accused of fraud by the SEC.”

Kelly writes that the plaintiffs in the class action against the two banks claimed in a 2010 amended complaint that the two trustees signed off on a request by Medical Capital executives to take $325 million in fees — despite documents for the Medical Capital notes stating that fees were not supposed to come from investor funds. From 2003 to 2008, dozens of independent broker-dealers sold notes of Medical Capital, which raised $2.2. billion. Securities America sold about $700 million of the product and last month agreed to settle with investors who sued the firm in a class action. Investors have lost more than $1 billion in principal, and regulators and the Medical Capital bankruptcy trustees have said the operation was a Ponzi scheme.

The banks’ suits against the B-Ds is at least the third time in the past year that broker-dealers that sold failed private placements or real estate deals have been sued by outside parties such as a trustee or receiver. Last June, the trustee overseeing the receivership of another failed series of private placements, Provident Royalties LLC, sued almost 50 broker-dealers seeking to claw back $285 million, including commissions.

And in November, the bankruptcy trustee for DBSI Inc., which packaged real estate deals and went bust in 2008, sued almost 100 broker-dealers looking to get back about $49 million from the firms.

If you or a family member have become a victim of the alleged fraudulent sale of private placements for Medical Capital Holdings, Inc. by your broker-dealer, call a Securities Arbitration Lawyer for a free consultation on how you could potentially recover your losses.  To speak with an attorney, call 888-760-6552, or visit www.stockmarketlawsuit.com. Soreide Law Group, PLLC., representing investors nationwide before FINRA  the Financial Industry Regulatory Authority.

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