A Santa Ana federal judge on Monday barred Medical Capital Holdings Inc. from selling additional securities in an offering that has raised at least $76.9 million, in response to a complaint alleging fraud against the Tustin company filed by the Securities and Exchange Commission.
In addition to prohibiting the financial services company from taking in more investor money, U.S. District Judge David O. Carter froze the assets of Medical Capital Holdings and its subsidiaries and appointed a temporary receiver, among other actions. The SEC filed its complaint Thursday, alleging that the financial services company committed fraud as far back as 2003.
The filing also accuses Medical Capital Holdings of lying to backers as the company raised and misappropriated millions of investor dollars while telling buyers nothing about more than $1.2 billion in notes outstanding and $992.5 million in notes that went into default or resulted in late payment of both principal and interest.
The complaint said the company and its subsidiaries, Medical Capital Corp. and Medical Provider Funding Corp. VI, raised more than $2.2 billion through offerings of notes in Medical Provider Funding Corp. VI and earlier offerings made by five other wholly owned "special-purpose corporations" named Medical Provider Funding Corp. I, II, III, IV and V.
The SEC also said Medical Capital Holdings, Medical Capital Corp. and Medical Provider Funding Corp. VI failed to tell investors about defaults on payments to investors who bought into the offerings made by the first five Medical Provider Funding entities.
Medical Capital Holdings provides financing to healthcare providers by buying their accounts receivable and making secured loans.
The parent outfit ran its subsidiaries as fully operating companies that provided management, underwriting, bookkeeping, payroll and accounting services to clients, in addition to using the companies to raise money in the form of securities, court documents said.
In one instance, the SEC alleged, $18.5 million of a total $76.9 million raised through the sale of securities by Medical Provider Funding Corp. VI was used to pay administrative fees to Medical Capital Corp. Original offering documents issued by Medical Provider Funding Corp. VI failed to disclose that administrative fees would be paid out of proceeds from the sale of notes.
Sidney M. Field is named in the complaint as the chief executive and Joseph J. Lampariello is identified as the chief operating officer of the companies in the complaint, said Andrew G. Petillon, associate regional director of the SEC's Los Angeles office.
Field, 63, lives in Villa Park, and Lampariello, 55, lives in both Newport Beach and Huntington Station, N.Y., Petillon said.
Requests for comment from legal representatives of Field, Lampariello and Medical Capital Holdings and its subsidiaries were not returned Monday.
The restraining order blocking Field, Lampariello and Medical Capital Holdings from offering more securities expires Aug. 3. The SEC is seeking permanent injunctions blocking Field and Lampariello from selling securities as well as civil penalties against all defendants.
In an unrelated case, the SEC filed an insider trading complaint in federal court Monday against Andres Leyva, a former director of strategic marketing analysis at Qualcomm Inc. of San Diego.
The SEC alleges that Leyva received more than $34,000 in illegal profits by trading on the basis of confidential information about Qualcomm's new licensing agreement with Nokia Corp. and the settlement of litigation between the companies.
Leyva couldn't be reached for comment.