Securities America, plaintiffs making 'substantial progress'

After canceling a conference call with brokers on Friday afternoon, Securities America Inc. told its brokers that its negotiations with lawyers representing clients who bought $400 million were moving forward. “We made substantial progress in our mediation and all interested parties have committed to a process that we hope will result in a full and final resolution of these matters,” wrote Janine Wertheim, a spokeswoman, in an e-mail. The firm sent a similar e-mail to its brokers at about 7:00 on Friday evening The firm, along with its parent, Amerprise Financial Inc., is trying to resolve a class action lawsuit and numerous arbitration claims in connection with the sale of $400 million of allegedly fraudulent private placements. Securities America advisers spent a tense week as the firm faced the potential threat of shutting down due to legal expenses and damages from litigation — if some sort of wide- ranging settlement is not reached. On March 18, its chief financial officer Kelly Windorski testified in federal court in Dallas that the firm could go out of business if a federal judge rejected Securities America's initial, proposed $21 million settlement with investors. Judge W. Royal Furgeson Jr. rejected that proposed settlement and later sent the two sides into mediation. That process started Thursday in Chicago. The mediation is being overseen by retired federal judge James M. Rosenbaum. The multi-million dollar legal dilemma at Securities America has been unfolding since July 2009, when the Securities and Exchange Commission charged two sponsors of high risk private placements with fraud. Those sponsors, Medical Capital Holdings Inc. and Provident Royalties LLC, sold about $2.7 billion of investments through dozens of independent broker-dealers, many of which have gone out of business due to crushing legal bills and liabilities. Securities America brokers were by far the biggest seller of Medical Capital offerings, selling $700 million of the product. About half of that amount is in default.