A securities fraud lawsuit filed in federal court is suing Securities America and parent company Ameriprise Financial Inc. for selling allegedly faulty private placement offerings even after W. Thomas Cross, a Securities America executive, expressed concerns that the sales could result in a “panicked run on the bank.” The lawsuit’s plaintiff, Florida resident Ilene Grossbard, invested $112,000 in Medical Capital’s fifth deal in March and April. The complaint may become a class action lawsuit.
According to the complaint, Securities America advisers was still selling Medical Capital securities in the form of notes worth hundreds of millions of dollars in October of last year. Securities America, however, is discounting the claim that the company’ advisers continued selling the Med Cap notes even after Cross voiced his concerns.
Last July, the SEC charged Medical Capital Holdings with securities fraud over the sale of $77 million in private securities as notes. Now, a court receiver is questioning the worth of the medical receivables’ holding company. The company has raised $2.2 billion from investors.
The securities fraud lawsuit says that not only did Securities America promote, distribute, and sell the securities for Med Cap, Medical Provider Funding Corp. VI.’s sixth offering (despite Cross’s bleak assessments) while continuing to sell from an earlier offering, but also the investment firm allegedly failed to warn clients about the potential risks associated with the Med Cap notes.
Related Web Resources:
Despite warnings, Securities America advisers hawked private placements, new suit claims, Investment News, October 5, 2009
Private Placements, Investopedia