Securities Cases: Medical Capital Executive To Pay Almost $40M for Private Placement Fraud, Momentum Investment Partners Accused of Not Disclosing Fees, and First Mortgage Corp. Settles Mortgage Fraud Claims

Ex-Medical Capital Holdings COO Gets 10 Years in Prison
Joseph J. Lampariello, the ex-president and COO of Medical Capital Holdings, has been sentenced to 10 years and one month in prison for his involvement in a private placement fraud that became the Ponzi scam responsible for the shutdown of dozens of brokerage firms. Lampariello must also pay investors almost $40M in restitution.

Medical Capital Holdings, a medical receivables financing company, supervised funds that were supposed to buy account receivables from medical providers that were credited, provide money for general operating costs, and make loans that were secure. Instead, for almost a year, Lampariello misappropriated the money investors had given for MedCap deals, using the funds to pay earlier investors and himself.

Over 700 investors were bilked of close to $49M. Meantime, the independent brokerage firms that sold MedCap notes also suffered. They got in trouble over allegations that they did not conduct the proper due diligence on Medical Capital and other private placements that ended up being scams. A lot of broker-dealers had to close up shop because of the securities fraud cases brought by investors wanting their money back from the Medical Capital fraud.

Momentum Investment Partners Faces SEC Fraud Charges
Investment advisory firm Momentum Investment Partners , doing business as Avatar Investment Management, and principal Ronald Fernandes are charged with fraud. The U.S. Securities and Exchange Commission claims that the firm and Fernandes did not disclose to clients that they were charging them additional fees. Avatar is no longer in operation.

According to the regulator, Avatar and Fernandes transferred certain clients into new mutual funds in 2013 without telling them about the move or that the funds were costlier. he moved about $11M from 20 accounts. As a result, said the SEC, these clients paid close to $111K in additional fees.

The mutual funds eventually folded.

First Mortgage Corp. to Pay $12.7M to Settle SEC Claims of Mortgage Fraud
First Mortgage Corp. will pay $12.7m to resolve allegations accusing the company of making good loans appear bad. The former mortgage company is accused of telling investors that certain borrowers were late on loans when First Mortgage had actually received the payments.

The alleged misrepresentations allowed the mortgage lender to buy the loans back at discount prices, deposit payments, and resell the now-clean loans at full cost to other investors. The Commission said that this gave First Mortgage an immediate profit that was nearly free of risk. The mortgage lender purportedly did this with hundreds of mortgages, making $7.5M in the process.

First Mortgage is no longer in operation. Its specialty was lending to low-income and first-time buyers of homes. Also settling charges are several company executives, including former president Clement Ziroli Jr. and his father ex-CEO Clement Ziroli Sr. They have not, however, admitted to wrongdoing.

Ex-MedCap Prez Gets 10 Years For $50M Investor Fraud, Law360, June 15, 2016

Sale of Interest in Private Placement Offerings by Medical Capital Holdings, Provident Royalties DBSI Leads to FINRA Order that Investors Get $3.2M in Restitution, Institutional Investor Securities Blog, November 29, 2011

Momentum Investment Partners fraudulently failed to disclose higher fees, SEC says, Investment News, May 31, 2016

The SEC Complaint in the First Mortgage fraud case (PDF)