Investing

SEC Charges LA Firm With Defrauding Investors

Chris Lange

Published: April 19, 2016 11:05 am

Last Updated: January 13, 2020 10:36 am

The U.S. Securities and Exchange Commission (SEC) recently charged a litigation marketing company based out of Los Angeles, as well as its co-founders, with defrauding retirees and other investors. Ultimately, this company told its investors that their money would be used to help gather plaintiffs for class-action and other lawsuits and they would earn hefty investment returns from settlement proceeds.

The agency alleged that James Catipay and David Aldrich raised $11.7 million from roughly 250 investors during the past three years for their company PLCMGMT, also referred to as PLC or Prometheus Law.

Only $4.3 million was actually used to locate prospective plaintiffs for lawsuits, and the company has generated scant revenue from any settlements. Instead, Catipay and Aldrich diverted millions of dollars for their personal use while failing to deliver the promised 100%-to-300% returns to investors.

In total, PLC is obligated to pay investors at least $31.5 million.

According to the SEC:

• Investors were told their funds would be used for marketing and advertising to locate plaintiffs for cases involving failed prescription drugs or medical devices.  Each investor’s money would be associated with a specific potential plaintiff.  PLC would refer the potential plaintiffs to a contingency-fee attorney and use proceeds of lawsuit settlements to pay investor returns.
• The arrangements purportedly enabled investors, who were mostly non-attorneys, to split legal fees with the lawyer who actually litigated a particular lawsuit, which is generally prohibited.
• PLC, Catipay, and Aldrich enticed investors by claiming the investments were safe and “guaranteed” when in fact they were highly speculative and risky because only certain potential plaintiffs would typically qualify as actual plaintiffs, and even if a case was filed there was no guarantee they would win the lawsuit.
• In addition to the false and misleading statements, PLC, Catipay, and Aldrich misused $5.6 million in investor funds for personal purposes, including more than $1 million for Aldrich’s personal income taxes and another million dollars to purchase a residential condominium in the name of Aldrich’s privately-held company.
• Aldrich and Catipay also took large salaries and admitted to SEC investigators that they have made Ponzi payments to several PLC investors.