It looks like jail time for a former principal of Medical Capital Holdings Inc., the firm behind the fraudulent private placements that destroyed dozens of broker-dealers and wiped out almost $1 billion in investor cash.
Former Medical Capital president Joseph J. Lampariello last Monday pleaded guilty to wire fraud and faces up to 21 years in federal prison and an order to pay $49 million in restitution, according to a report in The Orange County Register. The press report stated that the plea agreement was filed under seal in U.S. District Court in the Central District of California.
Calls placed last Tuesday to Mr. Lampariello's attorney, Amy Karlin, to confirm the report weren't returned.
Assistant U.S. Attorney Jennifer Waier didn't return calls.
Thomas Mrozek, a spokesman for the U.S. Attorney's Office in Los Angeles, declined to comment.
Between 2003 and 2009, Medical Capital raised almost $2 billion by selling private notes, purportedly to buy discounted medical receivables such as unpaid doctor or hospital bills that the firm would collect at full price.
A court-appointed receiver later charged that Medical Capital was a “Ponzi-like scheme” that resulted in about $1 billion in losses for 12,000 investors.
WIPED OUT
Dozens of independent broker-dealers sold MedCap notes. Many have since gone out of business due to massive costs from lawsuits by investors looking to regain money lost in the fraud.
Medical Capital's former chief executive, Sidney Field, hasn't been criminally charged. Both Mr. Field and Mr. Lampariello, 58, were sued by the Securities and Exchange Commission in July 2009 for fraud in their running of Medical Capital's last offering, Medical Provider Funding Corp. VI, known as MedCap VI in the brokerage industry.
That case was later closed in order for criminal proceedings to continue.
According to the Justice Department's information filing against Mr. Lampariello last month, he defrauded the note holders of MedCap VI from August 2008 until June 2009.
Investors were told that the proceeds raised by MedCap VI would be used to purchase account receivables, make loans, pay sales commissions and other costs, and provide funds for general operating purposes, according to the filing.
In fact, Mr. Lampariello and others “misappropriated investor funds” in order to “make Ponzi-type payments to note holders from earlier” partnerships and to pay fees to Medical Capital.
He caused MedCap VI note holders to lose about $39 million, according to the filing.
Mr. Lampariello, according to a separate federal charge, “earned $6.2 million from MedCap from 2004 through 2008, including $1.47 million in 2008 alone, but failed to file federal tax returns.
On Monday, he pleaded guilty to a single count of failing to file a tax return in 2008,” The Orange County Register reported.
When the SEC took over, the company reportedly owned a medical nuclear reactor and two closed hospitals that had lost their operating licenses.
MedCap also was reportedly involved in producing a feature-length movie about a Mexican Little League team.
bkelly@investmentnews.com
