The first lawsuit over the sale of allegedly fraudulent notes issued by Medical Capital Holdings Inc. was filed last week, and more look likely to come.
The first lawsuit over the sale of allegedly fraudulent notes issued by Medical Capital Holdings Inc. was filed last week, and more look likely to come.
In what he believes is the first arbitration case involving the sale of Medical Capital notes, Chicago attorney Andrew Stoltmann of Stoltmann Law Offices PC last week filed a $500,000 claim against QA3 Financial Corp., an independent broker-dealer based in Omaha, Neb.
Mr. Stoltmann said he would have 20 to 30 more cases in the next six weeks.
“Almost all the others will be against Securities America,” he said.
Several plaintiff's attorneys said most of their cases will be against Securities America Inc. of La Vista, Neb.
Tustin, Calif.-based Medical Capital was charged by the Securities and Exchange Commission last month with fraud in the sale of $77 million of privately placed notes.
The SEC alleged that $18.5 million of the proceeds were illegally used by Medical Capital to cover administrative costs.
Many of the notes — which packaged receivables from the medical industry — were sold by independent contractor firms like Securities America.
“We've got eight to ten [Medical Capital investors] who have provided us with documents [and] we're proceeding with filing those claims” in the next few weeks, said Stephen Ostrofsky, a securities arbitration consultant with Tramont Guerra & Nunez PA of Coral Gables, Fla.
“Most seem to be against Securities America,” Mr. Ostrofsky said.
However, it's unclear if Securities America sold more of the Medical Capital notes than other firms.
Many of the firms that sold the deals are small, and there are issues of collecting on any damages, Mr. Ostrofsky and other attorneys said, adding that Securities America, with more than 1,900 reps, is seen as having deeper pockets than other firms.
A spokeswoman for Securities America did not respond to requests for comment.
