The head of troubled Tustin lender Medical Capital Holdings is a one-time "bad actor" in the auto insurance industry, interviews and documents show.
California insurance regulators sued Sidney M. Field for fraud in the early 1990s after revoking his license.
"We thought he was a bad actor in 1991 and slapped him around and threw him out of the insurance industry, hopefully forever," Lt. Gov.John Garamendi told The Register. Garamendi was the state's elected insurance commissioner when he sued Field.
The SEC alleged that Field and Lampariello cheated investors of $18.5 million. A receiver has taken over the business.
Medical Capital raised $2.2 billion from 20,000 investors over the past six years. It put investors' money primarily into unpaid bills, or receivables, from hospitals and doctors.
Investors reached by The Register said they knew nothing of Field's prior run-in with regulators – and would not have invested if they had known.
"Absolutely not," said Carol Marini, 64, of Fairfield. She invested her life savings, $145,000, in Medical Capital.
"If I would have known, forget about it," said Jim Palladino, 73, of Palm Desert, who invested $160,000.
"Good Lord, what a record," said Bill Balogh, 75 of Mission Viejo. He and his wife Norma invested more than $1 million.
A brief biography contained in a March 2003 SEC filing says that Field "was the founder, past president and chairman of FGS, one of the largest insurance brokers in the United States with annual sales of over $200,000,000. Mr. Field sold his interest in that firm in 1990."
The Department of Insurance's lawsuit and news releases paint a much grimmer picture of Field's insurance career:
In February 1987, Field and several others allegedly arranged for Coastal Insurance Inc., which they controlled, to pay Field $17.5 million for FGS. Two years later, just before it slipped into insolvency, Coastal sold FGS back to Field for $206,000. Regulators called the deal a "sham transaction" that diverted cash from an ailing insurer to Field.
State insurance regulators revoked Field's insurance license in August 1987.
Regulators warned both Field and Coastal that they would not license FGS if Field remained involved. Despite that warning, he allegedly continued to control FGS and to serve as a "de facto" director of Coastal, which sold auto insurance to bad drivers.
Under Field's supervision, FGS agents allegedly used a deceptive practice known as "sliming" to sell Coastal auto policies. They would alter the accident records of questionable drivers and falsify information about car values and commute mileage so applicants could qualify for insurance.
FGS also allegedly duped customers into paying interest rates of 21 percent to 40 percent when they financed their premiums.
The Department of Insurance sued Field for civil racketeering in August 1990 and again three years later, this time for fraud, after he filed bankruptcy. He paid $100,000 to settle the second lawsuit.
In September 1991, after putting one of his companies into bankruptcy, Field told The Register, "I'm never going back into insurance, other than buying it for myself."
A few years later Field's new company, Medical Capital Holdings, was selling investments in medical receivables.
1 comment:
I used to be amazed at how stupid people would invest in scams like this. Now I am one of them and I know why this happens:
1. Brokers whose primary goal is commission, not a good investment for their investors.
2. Incredibly lax due diligence by all parties, including myself. Fields is a small time Madoff or Stanford and it was there for the reading.
3. Whenever the ROI is too good to be true, and your broker is wetting his or her pants to get you into it, a huge warning sign should be seen embossed on the investment agreement.
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