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Securities Arbitration recently concluded in a private placement suit between CapWest and 30 claimants. The initial filing with the Financial Industry Regulatory Authority (FINRA) took place in December 2009 and was amended in February 2010 and June 2010. Claimants asserted breach of contract, breach of fiduciary duty, negligence and failure to treat claimants in an equitable and just manner. The allegations of the claimants arose in connection with their investments in Medical Capital Corporation, DBSI, Inc. and Provident Royalties LLC.

FINRA Awards Claimants More Than $9 Million

Including the investments issued by the three companies, tens of millions of dollars in private placements were sold by CapWest. CapWest’s closing in September 2011 was prompted by these private placements. The onset of the “Great Recession” marked the point at which the private placement securities became toxic and many investors holding them suffered substantial losses, they argue.

The claimants have demanded the following amounts in compensatory damages, respective to each company, plus interest, costs and attorney’s fees: $6,055,763, $7,465,763 and $8,300,763. A comment on the decision stated that, “On September 23, 2011, the Panel conducted a hearing to consider Claimants’ motion for sanctions and to preclude. Respondent did not appear. The Panel determined that an attempt was made by the conference operator to contact Mr. H Thomas Fehn, counsel for Respondent, that Mr. Fehn had been notified by FINRA of the date and time of the hearing, and that the operator was unable to reach Mr. Fehn at the phone number provided.” The Securities Arbitration Panel ultimately found CapWest liable and ordered it to pay $7,925,763.00 in compensatory damages, $1,188,863 in attorneys’ fees, and $5,840 in costs. In addition, CapWest was ordered to pay 8 percent per annum interest on the sums awarded.

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