On May 6, 2016, investors filed a securities class action
lawsuit against law firm Stoel Rives, Charles Corces, CPA, and affiliated individuals for allegedly helping Tri-Med Corp operate a Ponzi scheme.
According to the complaint, which was filed in a Florida federal court, the defendants helped Tri-Med raise over $17 million, most of which funded personal expenses and outside ventures of the company’s principal insiders.
Tri-Med’s Ponzi Scheme: A “Safe Option” (For the Insiders).
Between 2011 and 2014, Tri-Med raised about $17.6 million by offering unregistered securities in an “investment program” that supposedly purchased accounts receivable generated from the medical treatment of accident victims.
Such accounts are generally created through a contract
—or letter of protection (LOP)—between the victim of an accident, the victim’s lawyer, and the victim’s doctor
. For example, car accident victims may enter into a contract
that creates an account receivable for the doctor
, promising to pay medical bills with proceeds from any future settlement or judgment related to the car accident.
According to the complaint, Tri-Med claimed to purchase these LOPs from accident clinics and medical service providers at a discounted price. Conceivably, the seller of an LOP would benefit from the immediate lump-sum payment, while the buyer would benefit from full or near-full payment of the receivable tied to the purchased LOP.
Tri-Med targeted the elderly and marketed the LOP investment program as a “very safe option for people seeking a fixed-income investment,” according to the complaint. Each investor was allegedly promised (1) at least one LOP, depending on the investment amount; (2) interest ranging from 5.75% to 8%; and (3) return of principal after certain conditions were met.
Investors claimed that only $2.8 million of the $17.6 million raised was actually earmarked to purchase LOPs. Tri-Med allegedly used the “vast majority” of the amount raised to issue cash payments to insiders and loans to their personal businesses.Law Firm Stoel Rives’ Involvement, According to Investors.
In 2012, Stoel Rives advised Tri-Med to “immediately” cease its sale of unregistered securities, warning the company that such actions could trigger an investigation and sanctions, according to the complaint. Investors assert that, after its warning, Stoel Rives “continued their representation of Tri-Med and took affirmative steps to ensure that Tri-Med could continue operating and that investors never learned of the insiders’ fraud.”
In March 2014, Florida’s financial regulators investigated Tri-Med and subsequently charged the company with violating securities laws. During the fraud investigation, Stoel Rives had “communicated extensively” with Tri-Med insiders and investors to support the scheme, according to investors. Investors also alleged that Tri-Med paid the firm over $200,000 in fees that Stoel Rives “knew originated from defrauded investors.”
Investors accuse Stoel Rives of legal malpractice, breach
of fiduciary duty, civil conspiracy, gross negligence, and aiding and abetting a Ponzi scheme.
Accounting Firm’s Involvement, According to Investors.
The investors’ complaint also targets Charles Corces and his accounting firm for helping Tri-Med operate its Ponzi scheme. Corces allegedly “made improper payments” to himself and others “from money he was supposed to be holding in escrow for investors.” The firm also received over $15,000 in consulting fees related to the scheme, investors claim.
Investors accuse Corces and his firm of breach
of fiduciary duty, breach
, civil conspiracy, gross negligence, and aiding and abetting a Ponzi scheme.
The case, Wiand et al v. Stoel Rives LLP et al, is currently pending in the U.S. District Court for the Middle District of Florida, case number 8:16-cv-01133.
Fraud Allegations Against Health Care Companies Have Serious Consequences.
State and federal agencies continue to devote substantial resources to investigating and prosecuting health
care fraud and securities fraud. Public health
care companies must have a reliable internal reporting and compliance program for two types of fraud: (1) fraud against the government; and (2) fraud against investors. As demonstrated by the recent securities litigation
against Express Scripts, health
care companies must continue to strengthen its customer and investor relationships.
Additionally, with the DOJ’s heightened focus on individual accountability, health
care companies and affiliated individuals must understand that allegations regarding fraud, even if later proven unfounded, can tarnish the reputation of those involved and cause other long-term consequences. One health
care executive is still fighting a $4.2 million SEC-enforced penalty for allegedly falsifying occupancy data
In order to combat such destructive accusations and avoid major punishments, health
care professionals and providers should find an experienced defense attorney
to represent them and provide a strong legal defense
Contact Health Law Attorneys Experienced in Representing Health Care Professionals and Providers.
At The Health
Law Firm we provide legal services for all health
care providers and professionals. This includes physicians
, nurses, dentists, psychologists, psychiatrists, mental health
counselors, Durable Medical Equipment suppliers, medical students
and interns, hospitals
, ambulatory surgical centers, pain management
clinics, nursing homes, and any other healthcare provider. We represent facilities, individuals, groups and institutions in contracts, sales, mergers and acquisitions.
The lawyers of The Health
Law Firm are experienced in both formal and informal administrative hearings
and in representing physicians
in investigations and at Board of Medicine and Board of Osteopathic Medicine hearings. We represent physicians
accused of wrongdoing, in patient complaints and in Department of Health
To contact The Health
Law Firm, please call (407) 331-6620 and visit our website at www.ThehealthLawFirm.com
About the Author:
Miles Indest, J.D./M.B.A., graduated in May 2016 from Tulane University Law School and the Freeman School of Business. He has served three years as a member of Tulane Law Review and served one year as the Writing Skills Chair of Tulane Moot Court.Source:
Kali Hays. “Stoel Rives Helped Prop Up $17M Ponzi Scheme, Investors Say.” Law360. (2016). Web.