Securities America advisers hawked private placements, suit claims

Despite warnings from court-appointed receiver, firm allegedly forged ahead

Oct 11, 2009 @ 12:01 am

By Bruce Kelly

Financial advisers with Securities America Inc. continued to sell offerings of allegedly faulty private placements after an executive at the firm sounded the alarm bell about the deals last year, according to a recently filed lawsuit.

The lawsuit also claims that Securities America “offered and sold hundreds of millions of dollars' worth of securities in the form of notes” of Medical Capital Holdings Inc., a medical-receivables company that faces charges of fraud from the Securities and Exchange Commission.

The suit, which was filed this month in federal court in Omaha, Neb., and seeks class action status, claims that Securities America sold the offerings of Medical Capital as late as last October. A few months earlier, a Securities America executive, W. Thomas Cross, wrote to a Medical Capital official that he feared “a panicked run on the bank” about Med Cap.

An official with Securities America said the claim that the company continued selling Medical Capital notes after Mr. Cross' concerns surfaced is hogwash.

“Securities America never marketed or sold Medical Capital VI, and we did not accept any new investment into any Medical Capital funds after Mr. Cross became concerned,” Janine Wertheim, senior vice president and chief marketing officer for Securities America, wrote in an e-mail.

In July, the SEC charged Medical Capital with fraud in the sale of $77 million of private securities in the form of notes. Since that time, a court-appointed receiver has questioned the value of the company's assets, throwing into question the structure of the six deals it sold from 2003 to 2008.

In total, Medical Capital raised $2.2 billion from investors.

Mr. Cross' dire predictions didn't stop Securities America from selling the Medical Capital notes, the lawsuit alleges.

Along with selling Medical Capital VI through October, Securities America continued selling Medical Capital's previous offering, Medical Provider Financial Corp. V, the lawsuit claims.

The firm also allegedly neglected to warn investors of the potential dangers in the Medical Capital notes, according to the lawsuit.

Filed on behalf of Ilene Grossbard of Sarasota, Fla., the suit alleges that Securities America sold the fifth Medical Capital offering “via verbal false and misleading statements and omissions.” She invested $112,000 in that deal in March and April 2008.

The lawsuit also names Securities America's parent company, Ameriprise Financial Inc., as a defendant.

Chris Reese, a spokesman for Ameriprise, declined to comment.

E-mail Bruce Kelly at


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