A former stockbroker in Colorado has been criminally charged with securities fraud for selling Medical Capital notes.
The nine counts of securities fraud filed Feb. 23 by the Weld County District Attorney's Office against John Brady Guyette are thought to be the first such charges against a broker stemming from the collapse of Medical Capital Holdings Inc. The medical receivables firm raised $2.2 billion from investors from 2003 to 2008 and allegedly operated as a Ponzi scheme.
The Securities and Exchange Commission accused Medical Capital and its two founders, chief executive Sidney Field and president Joseph Lampariello, of fraud in July 2009, but the SEC brings only civil claims. Dozens of broker-dealers with independent-contractor representatives sold the notes, and about half of investors' money — about $1 billion — is gone, according to regulators.
Until now, the Justice Department hasn't brought charges against any individuals involved with Medical Capital.
"FIRST GUY'
Mr. Guyette, 71, is “the first guy charged that we're aware of,” said Colorado Securities Commissioner Fred Joseph.
The state revoked Mr. Guyette's securities license in April 2010. At the time, the regulators alleged that he had sold MedCap private placements to a number of investors with whom he didn't have a substantial prior relationship.
That, attorneys said, put Mr. Guyette in violation of Regulation D, the federal securities law under which private placements are commonly offered.
Mr. Guyette, who didn't return a call last week seeking comment about the charges, said in 2010 that he bought $205,000 of MedCap notes.
His practice was based in Greeley, Colo., and he was affiliated with Community Bankers Securities LLC from 1997 to 2009. Community Bankers closed in December 2009.
Mr. Guyette faces nine securities fraud charges. The central accusation against him is that he allegedly omitted information or made untrue statements to investors.
According to the Weld County complaint and information, Mr. Guyette sold $1.3 million of MedCap notes to eight investors between August and December 2008. During that time, Medical Capital was beginning to unravel and had missed some payments to investors in previous note offerings.
LIFE SAVINGS
One investor, Lucille Linde, 92, reported losing her life savings in the investments, according to the complaint. She started investing in Medical Capital with Mr. Guyette in 2005, and in August 2008 invested $300,000 in Medical Capital VI.
“Linde reported that prior to writing the checks on Aug. 15, 2008, [she] had been told by a fellow MedCap investor, Borge Villemsun, that MedCap had been late in making principal and interest payments to [him]. Linde reported confronting [Mr. Guyette] with this information. Linde reported that [Mr. Guyette] assured [her] that Villemsun had been paid and that the MedCap VI investment was guaranteed safe,” according to the complaint.
“Linde was not aware that when [she] wrote the checks on Aug. 15, 2008, MedCap II had failed to make principal and/or interest payments due to MedCap II investors. [Mr. Guyette] failed to disclose this information to Linde,” according to the complaint.
bkelly@investmentnews.com
