Wells Fargo “Denies All Allegations” but Pays $105 Million in Medical Capital Holdings Fraud Case

Monday, May 06, 2013

Mind you, no one is admitting that anyone did anything wrong, but Wells Fargo has agreed to pay $105 million to settle allegations that it facilitated the rip-off of investors by Medical Capital Holdings, Inc. of Tustin, California.

The San Francisco-based bank “vigorously denies all allegations of wrongdoing, fault liability and damage of any kind to the plaintiffs,” according to court filings.

The U.S. Securities and Exchange Commission (SEC) sued the company and its top executives in 2009, one month before it went into receivership. Medical Capital and its affiliates raised $2.2 billion from 20,000 investors between 2001 and 2009 to buy accounts receivables from troubled health-care providers at a discount.

But according to federal complaints and a class-action lawsuit, executives tapped the funds for personal use and paid themselves $325 million in administrative fees. Joseph J. Lampariello, former Medical Capital president, pleaded guilty to wire fraud a year ago and faces up to 21 years in federal prison. He was ordered to pay $49 million in restitution but has not yet been sentenced.

Wells Fargo was one of two bank trustees with fiduciary responsibilities to look out for investor interests. The other was Bank of New York Mellon Corp., which agreed in February to pony up $114 million. Investors lost around half of their $2.2 billion, according to Investment News, in what the court-appointed receiver called a “Ponzi-like scheme.”

“We are pleased to put this matter behind us,” a Wells Fargo spokesman told Bloomberg News in an email.

–Ken Broder  


To Learn More:

Wells Fargo Pays Medical Capital Investors $105 Million (by Edvard Pettersson, Bloomberg News)

Wells Fargo Agrees to Pay $105M to End MedCap Suit (by Bruce Kelly, Investment News)

Wells Fargo in $105 Mln Pact over Medical Capital—Court Papers (by Nate Raymond, Thomson Reuters)

Medical Capital Receivership (Thomas Seaman, Receiver for Medical Capital)

Wells Fargo and Medical Capital Holdings Case to Move Forward (Maddox Hargett & Caruso, P.C.)

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