BEFORE THE FINANCIAL INDUSTRY REGULATORY AUTHORITY, INC.

Case Number

(9

EWALD F. GROETSCH, SR.
CLAIMANT, -VS..

RONALD JOSEPH CARAZO and SECURITIES AMERICA, INC.
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. ("Securities America")' pursuant to the FINRA Uniform Code of Arbitration: 1. Claimant is an 84-year old retiree suffering from Alzheimer's Dementia. Prior to

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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2.

Respondent Securities America is headquartered at 12325 Port Grace Boulevard

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." 3. Respondent Carazo held himself out as a representative of Securities America and

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 Carazo's

Securities America is responsible for all of Carazo's actions complained of herein.

commission-generating status caused Securities America to look the other way at Carazo's behavior. 4. In or around 2002, Claimant met Carazo at a financial seminar conducted by Claimant was 77 years old at the time. From the outset of the

Carazo at a local hotel.

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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. and secure. Carazo convinced Claimant that the Medical Capital Notes and REITs were safe

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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 is an obvious breach of his duties of trust and loyalty. 12. 13. Carazo's investment recommendations have been disastrous for Claimant. 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 Capital Notes and REITs. 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 forth in the SEC's July 16, 2009 Complaint.
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 recklessly pushed the Medical Capital Notes on the Claimant anyway. 16. Carazo promised peace of mind to Claimant. Instead, Claimant is experiencing

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 governed Carazo's conduct.

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18.

Among other things, Securities America has a responsibility to supervise Carazo's There is no evidence that it discharged this

advice and investment recommendations. 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 of the investment choices and recommendations made to Claimant. 21. As a result of facts outlined above, Claimant is entitled to damages, costs, and

attorneys' fees from the Respondents. 22. Claimant is entitled to have his transactions rescinded and his retirement funds

plus interest returned to him. 23. 24. Claimant is entitled to disgorgement of Respondents' ill-gotten revenues. 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. 26. Respondents' fraudulent actions entitle Claimant to rescission of the contract,

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

fiduciary duty to Claimant. 28. The Respondents are further liable for damages, costs, penalties, and attorneys'

fees under the Louisiana Blue Sky Law. 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 employees and representatives. 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

within the Securities America organization).

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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 arose and is in close proximity to Claimant's residence. 36. Claimant further requests that the Respondents retain all documents and

recordings relating to Claimant's claims, to any communications between Respondents 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, analyses, and any recorded statements. Relief Requested As a result of the course of conduct outlined above, the Respondents are liable to Claimant as follows: for compensatory damages; for attorneys' fees, costs and other expenses; for exemplary or punitive damages and other penalties as allowed by law;

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(4) (5)

for interest, both pre-judgment and post-judgment; and for all other sums that Claimant is entitled to at law or equity.

November 6, 2009

Respectfully submitted,

(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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