Tuesday, September 26, 2023
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Investors Say Broker Sold Them a Ponzi Scam

OMAHA, Neb. (CN) - Securities America Financial knowingly sold hundreds of millions of dollars' worth of securities in a medical receivables company that turned out to be a $2 billion Ponzi scheme, investors claim in Federal Court.

They filed a class action against Securities America and parent company Ameriprise Financial, claiming the companies "turned a blind eye to the truth" in order to reap millions in commissions and fees.

Securities America sold notes and other securities issued by Medical Provider Financial Corporation V, known as MP V, even though the medical company's accounting records and practices "strongly pointed towards the existence of a Ponzi scheme," investors say.

"In doing so, SA acted with scienter and violated the Securities Act of Nebraska and other principles of law," the lawsuit states.

California-based Medical Capital Holdings, which isn't a party to the suit, raised more than $2.2 billion from more than 20,000 investors by selling notes in companies such as MP V.

The SEC recently sued Medical Capital, Med Cap and MP VI for allegedly running the Ponzi scheme.

"The receiver's preliminary report paints a shocking picture of a vast and long-running financial scam, where adherence to any defensible accounting rules and practices can nowhere be found," the lawsuit against Securities America claims.

The report allegedly indicates that as far back as 2004, MP V and other Med Cap entities were engaged in "gross accounting regularities, if not outright fraud."

Shareholders say Securities America either failed to perform due diligence or knew that Med Cap was likely a Ponzi scheme, but hid this crucial information from investors.

"The warning signs were present at Med Cap and various MP entities almost from the beginning, and were easy to spot," the suit states. Such signs allegedly included a $20 million investment in an unreleased film called "The Game," the ownership of a 118-foot yacht, and at least 301 incidents of "round-tripping," where related entities repeatedly sell each other the same asset, thereby inflating its value.

The instances of round-tripping added up to more than $829 million in phony sales, investors claim.

They demand actual and punitive damages for securities violations, negligence, and negligent and fraudulent misrepresentation.

Brian Brislen with Lamson, Dugan & Murray is their attorney.

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