Bloomberg Law®, an integrated legal research and business intelligence solution, combines trusted news and analysis with cutting-edge technology to provide legal professionals tools to be...
Wells Fargo Bank NA(WFC) agreed April 30 to pay $105 million to settle a consolidated class action in the U.S. District Court for the Central District of California, alleging that it breached its duties as a trustee of special purpose corporations created by a medical receivable financing company, by “willingly” handing out investor funds to the company executives, which were then allegedly used for fraudulent and personal uses (In re Medical capital Securities Litigation, C.D. Cal., Case No. SA 10-ML-2145 DOC(RNB), 4/30/13).
If approved by the court, Wells Fargo will pay the settlement amount within 10 business days after the preliminary approval order.
According to the first amended complaint, Medical Capital Holdings Inc. was in the business of purchasing accounts receivable from healthcare providers at a discounted price and collecting the debts. By offering notes issued by five SPCs it created--Medical Provider Funding Corporation II~VI--MCH had raised over $2.2 billion since 2003, the complaint said.
To ensure that investor funds were “carefully segregated and used to pay for accounts receivable[s],” MCH retained Wells Fargo and Bank of New York Mellon to serve as SPCs' trustees. However, the noteholder plaintiffs asserted, “under the claimed watchful eyes of the Trustees, MCH was a scam.”
According to the complaint, MCH and its executives allegedly “used the Trustee-controlled accounts as their personal piggy banks,” requesting and using investor funds to pay themselves “'administrative fees'” totaling nearly $325 million.
Further, it continued, MCH executives used the funds to “enjoy lavish personal lifestyles,” and to invest in a series of non-medical projects. Despite millions of dollars in investor funds being misappropriated, the plaintiffs said, Wells Fargo and BNYM “over and over again, without exception, willingly signed off on the requests.”
The plaintiffs explained that all five SPCs are now in default to investors, and are failing to make interest and principal payments on nearly $1 billion worth of notes. Further, the plaintiffs said, out of $625 million in medical accounts receivable on the SPC's books, only $80 million is “verifiable,” leaving the rest unaccounted for.
To see the Stipulation of Settlement, go to http://www.bloomberglaw.com/public/document/IN_RE_Medical_Capital_Securities_Litigation_Docket_No_810ml02145_/1.
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to firstname.lastname@example.org.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to email@example.com.
Put me on standing order
Notify me when new releases are available (no standing order will be created)