Weekly Story Cited in Major Bank Lawsuit!

Remember that ongoing controversy over Medical Capital Holdings, Inc, (MCH) the Orange County-based medical lender who the SEC claims bilked investor funds to dole out cash to its own executives while also allegedly investing in a yacht and a shady internet porn spamming operation, among other delightfully non-medical things?

The U.S. Securities and Exchange Commission (SEC) has already frozen the company's assets and a federal judge has appointed a receiver to try to regain hundreds of millions in missing cash. Good luck with that.

Indeed, at least one group of investors isn't waiting for that to happen. On Sept. 11, the investors filed a lawsuit against two banks, Wells Fargo and Bank of New York Mellon, both of which allegedly agreed to insure the investments should anything go sour, which it undoubtedly did. As the lawsuit argues, investors were told that MCH had retained the two banks as “trustees” to “represent their interests,” a service that earned the banks “substantial” fees. “Unfortunately, under the supposedly watchful eyes of the Trustees, MCH
was a scam,” the lawsuit claims.

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Here are a few key allegations in the lawsuit:

*As revealed in
the SEC's action against MCH, the company's chief executive officer and
president, Joey Lampariello and Sidney Fields, “used the
Trustee-controlled accounts as their personal piggy banks, improperly
requesting and obtaining investor funds to pay themselves massive
“administrative fees” of nearly $325 million which they used to
purchase lavish personal prequisites including a multi-million dollar
118-foot yacht.”

*MCH invested in non-medical projects under the
“personal supervision” of Lampariello, including mobile phone and movie
ventures.

*A total of five investment funds MCH created are now
“in default to investors, failing to make interest and principle
payments on almost $1 billon worth of notes.”

*According to MCH's court-appointed receiver, only $80 million of a claimed $625 million of
medical accounts is “verifiable” and the “remaining accounts totaling $542 million no longer exist.”

*Among
other crappy investments, MCH purchased a 40 percent ownership interest
in a movie called “The Perfect Game,” for about $18 million. The
movie sounds heartwarming: its about a bunch of Mexican kids in the
1950s who triumph in a baseball competition. According to IMDB,
however, “because of a funding problem, the film had to shut down just
a couple of weeks into filming. When they were able to start up again 3
or 4 months later, some of the boys had experienced a growth spurt and
all scenes with them had to be re-shot.” According to the lawsuit, “the
film has never been shown and all efforts to distribute the film have
failed.” Oops.

*MCH also invested millions of dollars in a
company called Vivavision that mostly provides downloadable bikini
chicks for cell phones. (Can't any 13-year-old figure out how to do
that for free?) As the lawsuit points out, the company's “initial
content being marketed…was a live video feed of a hamster in a cage.” Comedy gold!

*One
of the shadiest investments cited in the lawsuit, MCH's loan of $5
million to an internet porn spamming operation with a phony board of
directors and a phantom vice president, was first revealed by OC Weekly, and we got a nice credit from the lawyers.”The  OC Weekly,
in an article entitled, SEC Investigation of Medical Lender Sets Sail
for a Party Yacht, reported that Emark specializes in pornographic
website advertising,” the lawsuit states. “OC Weekly also
interviewed a former MCH executive who reportedly stated that the Emark
account was 'untouchable' and that there was no documentation for
underwriting the loan.

Stay tuned for more updates on this bizarre story…