Securities America may be getting closer to an agreement with attorneys representing victims of the Medical Capital Holdings Ponzi scheme, a company statement suggests.
"We made substantial progress in our mediation and all interested parties have committed to a process that we hope will result in a full and final resolution of these matters," Janine Wertheim, Senior Vice President and Chief Marketing Officer for Securities America, said in an e-mail received by Financial Advisor Saturday morning.
Details of that progress have not yet been released, and attorneys on both sides of the case have refused to comment, but a key question remains: Will Ameriprise-the parent company of Securities America-come up with the funds needed to bail out its subsidiary in the case?
Securities America, which sold about $400 million in allegedly fraudulent Medical Capital securities, according to court documents, had hoped a judge would approve a $21 million settlement with investors. A Texas court rejected that settlement March 18, stating that the firm, which only held about $2 million in reserve, was operating with inadequate capital and inadequate insurance pursuant to their clients' investments.
While Securities America does not have sufficient funds to pay claimants 100 cents on the dollar, its parent, Ameriprise, does. Earlier this year, Ameriprise had indicated a willingness to sweeten the settlement by as much as $27 million, though how far it will go remains unclear. Securities America officials have told the judge that it might be forced to close because of the case.
In an earlier statement to Financial Advisor, Wertheim implied that assistance from Ameriprise seems the most likely course
"Ameriprise has reached out to us to determine whether it can help the parties to find a reasonable resolution for all constituents. We hope to develop a process in the coming days that would facilitate exploration of such a resolution, and to have a good sense by the end of the week whether such a resolution is possible," said Wertheim.
However, Reuters News recently cited Ameriprise sources who said the investment giant was willing to walk away from the table completely-a move some viewed as posturing for a better deal.
The Medical Capital Ponzi scheme has already prompted several brokerage firms, including QA3, to fold. QA3 was started by Securities America founder Stephen Wild, who sold the firm to Ameriprise more than a decade ago. Like Securities America, QA3 was based in Omaha, Neb.