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Case Number (9
CLAIMANT,
-VS..
RESPONDENTS.
STATEMENT OF CLAIM
Ewald F. Groetsch, Sr. ("Claimant"), through undersigned counsel, states the following
claims against Respondents Ronald Joseph Carazo ("Carazo") and Securities America, Inc.
Hurricane Katrina, Claimant had lived in the same house that he owned in Metairie, Louisiana
for nearly 50 years. Claimant has 5 grown children, 9 grandchildren, and 3 great-grandchildren.
As a result of Claimant's current medical condition, he now resides full-time with one of his
adult sons and his family, who assist in all of Claimant's day-to-day care.
Carazo and Securities America are collectively referred to as the "Respondents." "Securities America" refers to
Securities America. Inc. and its current or former officers, agents, representatives and employees (including Ronald
Joseph Carazo or any member of his team), and any predecessor or successor firm thereto.
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Lavista, Nebraska 68128, but it maintains an office in Metairie, Louisiana. Securities America is
a wholly owned subsidiary of Ameriprise Financial, Inc. On its website, Securities America
claims to be "one of the nations largest and most successful independent general securities
broker/dealers." Securities America's Advisory Division was founded in 1993 and is an SEC
Registered Investment Advisor firm with over $13 billion in assets under management. Among
other representations on its website, Securities America promises its customers that they can
"rest assured that the advice and guidance you receive [from Securities America's "independent
financial consultants"] is based on what's best for YOU, and not because your advisor is
hindered by a limited range of products or a corporate mandate dictating what they can sell or
do."
as "President" of "Ron Carazo and Associates, LLC." He claimed to have a special expertise in
assessing the investment needs of Claimant. Carazo has been a registered representative of
Securities America since August 1992. Accordingly, Securities America had the ability to and
did control Carazo's actions. Carazo's actions are attributable to Securities America, and
Securities America is responsible for all of Carazo's actions complained of herein. Carazo's
commission-generating status caused Securities America to look the other way at Carazo's
behavior.
Carazo at a local hotel. Claimant was 77 years old at the time. From the outset of the
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relationship, Carazo was an extremely aggressive salesman. Eventually, he was able to convince
Claimant to turn over the management of a significant portion of his investment portfolio to
Carazo. He repeatedly told Claimant that he could improve the "deficiencies" in Claimant's
portfolio and advised Claimant that he was always looking out for Claimant's "best interests."
5. Carazo knew that because of Claimant's age and medical condition that Claimant
relied heavily on his children (primarily, his son Mike and his daughter Jeanne) for advice and
assistance, particularly in connection with his financial affairs. In fact, on multiple occasions,
Claimant, Mike, and Jeanne (and even one of their attorneys) requested that Carazo
communicate directly with Mike and Jeanne regarding Claimant's investments. But Carazo
refused. Despite multiple requests, Carazo routinely contacted Claimant-and worse, secretly
sold him investments and made questionable financial transfers-without consulting with Mike
or Jeanne.
6. Based on Carazo's advice and aggressive sales tactics, Claimant invested several
hundred thousand dollars in (i) promissory notes issued by Medical Capital Holdings, Inc. or its
affiliates (the "Medical Capital Notes") and (ii) real estate investment trusts from Inland Western
and Behringer Harvard (the "REITs"). These investments were highly speculative and
expensive, and they were certainly not suitable for a retiree in his eighties that was suffering
from Dementia.
7. Carazo convinced Claimant that the Medical Capital Notes and REITs were safe
and secure.
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8. The reason that Carazo placed Claimant into the Medical Capital Notes and
REITs is abundantly clear: greed. These investments provided extremely high commissions for
Carazo,
9. Carazo knew and understood that Claimant was looking to him for advice and
professional guidance. Carazo's actions in this case are particularly egregious given Claimant's
age and mental condition. Notwithstanding that Carazo was advised of Claimant's mental
condition on multiple occasions by Mike and Jeanne, Claimant's mental condition should have
been obvious to Carazo, particularly when discussing relatively complicated topics, such as
financial investments.
10. Claimant should not have been placed in the Medical Capital Notes or REITs.
Given Claimant's age, mental condition, and moderate investment goals, it was extremely
foolish to invest Claimant's money in the highly speculative and costly investments.
11. Carazo did not fully disclose the large commissions or the illiquidity of his
investment recommendations to Claimant. In selling the Medical Capital Notes and REITs,
Carazo put his interest in his own income ahead of Claimant's interests in picking a suitable and
desirable investment product. Carazo's sale of the Medical Capital Notes and REITs to Claimant
13. Claimant's investments are illiquid, and Claimant is no longer receiving periodic
interest payments from the Medical Capital Notes. In addition, Claimant's periodic interest
payments from the REITs have been significantly reduced. Worse, it appears very likely that
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Claimant will lose all, or a substantial portion, of his principal investments in the Medical
14. On July 16, 2009, the Securities and Exchange Commission (the "SEC") filed a
complaint against various Medical Capital entities and two officers and directors of the entities,
alleging, among other things that the defendants were committing fraud in the offer and sale of
Medical Capital Notes. This Statement of Claim incorporates by reference all allegations set
15. On information and belief, Respondents were aware of, or should have been
aware of, the materially false and misleading information contained in the marketing materials
relating to the Medical Capital Notes that were presented to Claimant by the Respondents when
they were convincing Claimant to purchase the Medical Capital Notes. Even after being
specifically advised by Mike and Jeanne not to do so, the Respondents intentionally and/or
the contrary. While the specific acts and omissions of the Respondents will be proven at trial,
suffice it to say, the Respondents' misdeeds have caused and will continue to cause severe
mental anguish and anxiety for Claimant, as well as significant financial losses.
17. Securities America knew or should have known about Carazo's actions.
Supervisory personnel, including the compliance department and other Securities America
management, failed to supervise Carazo and failed to enforce industry and internal rules that
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18. Among other things, Securities America has a responsibility to supervise Carazo's
responsibility.
19. Securities America utterly and completely failed to properly supervise and
monitor Carazo and failed to timely prevent Carazo's mishandling of Claimant's retirement
funds.
20. Both Securities America and Carazo acted with scienter, in the form of at least
reckless disregard for the truth of the representations made to Claimant and as to the suitability
21. As a result of facts outlined above, Claimant is entitled to damages, costs, and
22. Claimant is entitled to have his transactions rescinded and his retirement funds
24. The Respondents owed Claimant a duty of ordinary care, a contractual duty, and a
fiduciary duty. Specifically, the Respondents had the duties to ensure that Claimant's retirement
funds were invested in a suitable fashion based on Claimant's needs and means and to always act
in Claimant's best interest. Moreover, Respondents had an obligation to ensure that Claimant
fully understood the nature of the investments chosen by Carazo. By investing Claimant in
highly speculative Medical Capital Notes and REITs, the Respondents breached the duties owed
to Claimant.
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25. The Respondents' intentional and negligent acts outlined above constitute
violations of Louisiana Civil Code article 2315 et seq., and as a result, the Respondents are liable
for damages.
damages, and attorneys' fees under Louisiana Civil Code article 1958.
27. The Respondents are further liable for damages as a result of their breach of
28. The Respondents are further liable for damages, costs, penalties, and attorneys'
29. Securities America had a duty to properly hire, train, monitor, and adequately
supervise its employees and representatives. Securities America grossly breached its duties in
connection with the negligent hiring, training, monitoring, and supervision of Carazo and other
30. Securities America's failure to properly hire, train, monitor and supervise Carazo
and other employees and representatives was a proximate cause of Claimant's losses.
31. As a result, Securities America is personally liable for its actions in connection
with the negligent hiring, training, monitoring, and supervision of its employees and
representatives.
32. Securities America is also derivatively liable for the actions of Carazo (and others
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33. The Respondents conduct violated the rules of FINRA, and, upon information
and belief, Securities America's own internal operating procedures. These rules and internal
operating procedures formed part of the contract between Claimant and Respondents.
34. Therefore, the Respondents conduct also constitutes breach of contract under
state law.
35. Claimant requests that the arbitration hearing be held in New Orleans, Louisiana
as this is the location where the conduct giving rise to the complaints contained in this demand
36. Claimant further requests that the Respondents retain all documents and
Claimant or between Respondents and Claimant's children, and/or to the facts and circumstances
at issue in this Statement of Claim. Such documents and recordings would include, among other
things, the following: calendar entries, financial statements, notes, memoranda, correspondence,
emails, faxes, manuals, policies, procedures, drafts, telephone recordings, marketing materials,
Relief Requested
As a result of the course of conduct outlined above, the Respondents are liable to
Claimant as follows:
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(4) for interest, both pre-judgment and post-judgment; and
(5) for all other sums that Claimant is entitled to at law or equity.
(k
James R. Swanson, 18455
Joseph C. Peiffer, 26459
Lance C. McCardle, 29971
FISHMAN HAY000D PHELPS
WALMSLEY WILLIS & SWANSON, L.L.P.
201 St. Charles Avenue, 46th Floor
New Orleans, Louisiana 70 170-4600
Telephone: (504) 586-5252
Facsimile: (504) 586-5250
Attorneys for Ewald F. Groetsch
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