The Receiver for Medical Capital Holdings Inc. issued his Second Report on September 7, 2009. According to the Report the estimate for the amount of money raised through the six offerings is $1.778 billion with $268 million in administrative fees taken and a staggering $1.079 billion still due investors. On July 16, the SEC charged Medical Capital Holdings Inc. with fraud related to the sale of $77 million of private securities in the form of notes.
The Receiver’s Second Report paints a gloomy picture for Medical Capital investors. The Report states that, to date, the Receiver has collected only about $2.5 million after the payment of operating expenses and that, out of the 104 medical accounts receivable clients listed, 53 of the accounts, totaling some $542,894,528, appear to no longer exist. The Report goes on to indicate the following in connection Medical Capital VI: $74.4 million was raised from investors: $41.7 million in assets were bought from previous Medical Capital Offerings; $3. 5 million in interest was paid; no principal has been returned, and $24.4 million was paid to MCC for administrative fees. The Receiver is in the process of performing the same analysis for the other offerings.
According to Pratt H. Davis, an attorney at Page Perry, broker/dealers like Securities America who sold the Medial Capital offerings, “could face liability on several fronts for selling the fraudulent securities’It is clear that the firms selling these securities had a duty of due diligence to determine that the offerings were, in fact, what they were represented to be and to not misrepresent the safety of the investments if they knew or should have known of the problems with the securities.” Under the circumstances, it also appears that the Trustees of the funds may also face significant liability based upon their involvement on the transactions.
Mr. Davis indicates that those waiting for a return of their money from any SEC collections from Medical Capital may have a long wait for only pennies on the dollar. Due to the collectability issues related to Medical Capital, as evidenced by the Receiver’s Report, Mr. Davis noted that “those who have invested in these funds need to be proactive in seeking advice about recovering their damages from parties, other than Medical Capital, that may be liable for the damages sustained in these transactions.”
Page Perry is an Atlanta-based law firm with over 125 years collective experience representing investors in securities-related litigation and arbitration. While past results are not indicative of future success, Page Perry’s attorneys have recovered over $1,000,000 for clients on more than 30 occasions. Page Perry’s attorneys are actively involved in representing institutional and corporate investors in auction-rate securities cases. For further information, please contact us.