McKennon│Schindler LLP Client Awarded $543,612.62 in Damages in Investment Loss Case – the First of its Kind in Hundreds of Pending Medical Capital Cases

In what appears to be the first FINRA arbitration award of its kind in the pending Medical Capital cases, McKennon│Schindler LLP client Eric Anderson was awarded $543,612.62 in damages (the full amount of his investment losses) for his massive losses caused by his financial advisor firm’s negligence and breach of fiduciary duties owed to Mr. Anderson. Mr. Anderson looked forward to relaxing with his family and enjoying a well deserved retirement. After years of hard work and saving, Mr. Anderson had accumulated a sizable retirement fund which he intended to live off of for the rest of his life. These funds were entrusted with Cullum & Burks Securities, who managed both his finances and 401(k) retirement accounts. A Cullum & Burks’ agent and representative, Robert Clark took advantage of Mr. Anderson’s ignorance and pressured him into moving the entirety of his retirement funds into an extremely risky investment fund by Medical Capital Holdings. Clark ignored Mr. Anderson’s fragile financial situation made this recommendation despite being told that this money was the sole means of support for him and his wife. Award It turned out that Medical Capital Holdings, which provided financing to healthcare providers by purchasing the providers’ accounts receivables and making loans to those providers, was almost certainly a fraudulent ponzi scheme. The accounts receivables allegedly were packaged into notes and sold through private placements to investors. Approximately 20,000 investors purchased $2.2 billion in Medical Capital notes. Approximately $1 billion of the notes are in default, leaving investors like Mr. Anderson with massive investment losses. According to the SEC’s investigation, Medical Capital and its officers used the 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 perquisites, Medical Capital and its affiliates also invested in an array of non-medical projects that were placed under the personal supervision of Lampariello, including mobile phone and movie ventures, and commingled investor funds. Despite controlling hundreds of millions of dollars, the SEC and an appointed Receiver found that the Medical Capital entities operated without financial or accounting controls, failed to prepare financial statements in accordance with GAAP, failed to use audited financial statements, failed to perform annual appraisals of assets, and repeatedly obtained the Trustees’ permission to pay themselves fees based on a formula. Ultimately, Mr. Anderson lost his entire life savings. What was initially touted by Clark as a “safe” investment was wiped out in a little over a year. The loss was so complete that Mr. Anderson, at age 68, was forced to study for and obtain his insurance license in order to start working again so that ehe could support his family. His dream of a leisurely retirement had been shattered. McKennon|Schindler LLP filed an action on behalf of Mr. Anderson with the Financial Industry Regulation Authority (“FINRA”) against Cullum & Burks Securities and Robert J. Clark his financial advisors. McKennon|Schindler LLP, on behalf of Mr. Anderson, asserted claims for breach of fiduciary duty, unsuitability, failure to supervise, professional negligence, unjust enrichment, negligent and intentional misrepresentation, elder abuse, and violation of California Corporate Code section 25401. After a hearing and arbitration, the FINRA panel awarded Mr. Anderson the full amount of compensatory damages plus interest requested in the amount of $543,612.62. According to Robert McKennon, the lead attorney on the case, “this is the first of hwat is expected to be several other FINRA awards against financial advisors who sold Medical Capital investments to unsuspecting and vulnerable clients.”