Remember Medical Capital Holdings (MCH), the Tustin-based medical lending firm that was actually bilking investors of millions of dollars while using the cash to fund a shady Internet-porn advertising company, an outfit that makes downloadable slideshows of bikini-clad women for cell phones, and even a multimillion-dollar party yacht?
The SEC sued MCH and its two top executives, Sidney Field and Joey Lampariello, back in June 2009, and the company went into receivership. There's a long line of investors hoping to get back tens of millions of dollars in funds, an estimated $18.5 million of which were illegally diverted for personal use by MCH executives. But just like the bad real-estate loans that rippled out to cause a global economic meltdown, the scandal involving MCH has now spread to brokers who urged investors to buy shares in the medical-lending pyramid scheme.
The first major victory for investors who were ripped off was on June 1, 2010, when Peak Securities Corp., a Florida broker, was ordered to pay $400,000 to investor Marilyn Hazell. On Dec. 21, the Chicago-based White Law Group filed claims against Nevada-based broker Securites America on behalf of numerous clients who allege it should have never recommended MCH as a viable investment.
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The latest victory comes via the OC-based law firm Burkhalter Kessler Goodman & George (BKGG). On Jan. 26, it won $1,160,695.38 from Securities America on behalf of 82-year-old Orange Countian Justine Wayman. The award includes all of Wayman's losses, as well as attorney's fees, other litigation costs and $250,000 in punitive damages.
Joshua Waldman, the BKGG attorney who handled the case, says the award is the largest won so far against Securities America, which has handled more bogus MCH investments than any other broker. "What we did was follow the money," Waldman told the Weekly. "Medical Capital is in receivership. I think it's likely investors will recover only a small percentage of their loss. We knew there was no money to go after with them, so the obvious choice [to sue] was the broker who sold her."
According to Waldman, Securites America ignored numerous red flags about MCH that the broker would have noticed if it were doing its due diligence before recommending the company to investors. "Medical Capital was becoming larger and larger but didn't have audited financial statements," Waldman explained. "With an audit, there are checks and balances that ensure the information is correct. That never happened. There was evidence from [Securities America's] highest-ranking officers saying that this is a concern, and they even requested Medical Capital do an audit. Medical Capital never did that, and Securities America continued to sell notes to their investors."
Of course, the reason, as we now know, MCH didn't have audited financial reports is that the company was a Ponzi scheme. The Weekly first began covering this hot mess back in 2008, when we reported how a whistleblowing doctor was sued by his own boss (IHHI, a hospital company that owns Santa Ana's Western Medical Center and other OC hospitals) for questioning its ties with MCH. A judge dismissed that lawsuit, but the doctor, Mike Fitzgibbons, continued to endure some pretty bizarre attacks, including having a gun and gloves apparently planted in his car in an attempt to discredit him. You can read a longer story about the doctor who helped expose MCH and its shady dealings--at his own personal peril--here.