On April 14, U.S. District Judge Sam A. Lindsay entered a memorandum opinion and order in a class action case filed in the U.S. District Court for the Northern District of Texas by doctors alleging Ascentium Capital was involved in a Ponzi scheme.

The order denied the plaintiffs’ motion for temporary restraining order, denied without prejudice the plaintiffs’ motion for preliminary injunction and denied without prejudice Ascentium’s motion to dismiss the class action complaint.

The court said the plaintiffs’ allegations were “woefully deficient” because they failed to state claims for relief upon which relief can be granted against Ascentium. However, the court is allowing the plaintiffs to file an amended complaint.

Background

This case originated from two separate class action complaints, each filed by two doctors, the first filed on January 17 and the second on March 13. In a separate order entered by Judge Lindsay on April 14 consolidated these cases.

The doctors are not seeking damages, but instead are requesting relief from any legal liability for obligations resulting from what they allege was a pyramid scheme perpetrated by America’s MHT, Ascentium Capital, MHT’s officer Scott Postle and Ascentium’s former employee Cliff McKenzie.

In its motion to dismiss the complaint filed on February 27, Ascentium alleged, “The plaintiffs are attempting to avoid their valid payment obligations under fully enforceable contracts with Ascentium because the business ventures they chose to enter did not perform as they hoped.”

Medical Home Team Services Program

According to the class action complaints, MHT offered physicians the opportunity to expand their practices by purchasing “licenses” to start a Medical Home Team Services Program practice in which the doctors would supervise nurse practitioners making house calls to patients in their region.

The complaint alleged that MHT was solely responsible to run these practices, from marketing and patient care to billing and administrative management, but MHT often failed to provide the staff and software necessary for the practices to begin operating.

The plaintiffs alleged that MHT’s revenue stream was not based on income derived from patient care but solely based on selling software “licenses” to physicians, which were a guise for the sale of a worthless franchise.

According to the plaintiffs, MHT offered to simplify the process by creating legal entities in the names of the physicians (LLCs) and to open bank accounts in the names of those entities, of which MHT maintained absolute control.

The complaint alleges that MHT caused the LLCs to incur substantial indebtedness — up to $300,000 per physician — through a financial vehicle custom-created by Ascentium.

Installment Payment Agreement

According to the complaint, MHT pressured physicians to sign or forged an installment payment agreement (IPA) with Ascentium, which obligated the LLCs to make payments for software that MHT was to provide to the physicians and which the plaintiffs allege was often never provided.

In its response to the complaint, Ascentium stated that the plaintiffs signed the IPAs as well as additional “Physicians Acknowledgment” documents, and that Ascentium received a photograph of one of the plaintiffs with the iPads provided by the MHT program.

According to the plaintiffs, MHT represented that it would make all payments for the software using a bank account set up for the LLC and that MHT would fully fund the payments to Ascentium. In response, Ascentium said according to the terms of the IPAs, the LLCs agreed to make monthly payments to Ascentium and those payments would be personally guaranteed by the physicians.

The plaintiffs alleged that Ascentium “conspired” with MHT to deposit the funds from the IPAs directly to MHT instead of to the LLCs. However, in its response, Ascentium asserted that financing of MHT’s licenses operated as a typical financing arrangement: “Because Ascentium was financing the Doctor LLCs’ purchase of the licenses from MHT, Ascentium paid MHT directly. MHT then was to provide the products and services to the Doctor LLC under separate agreements entered into by the physician-owner, the Doctor LLC and MHT.”

“Outrageous” and “exorbitant” interest rates are another allegation of the plaintiffs, who asserted that while the IPA did not disclose an interest rate, Ascentium charged a rate of 24% on the installments. In its response Ascentium argued these allegations are a ‘red herring’ since “the IPA was not an amortizing loan, but instead a non-cancelable, non-prepayable installment payment agreement with fixed monthly payments. The IPAs disclose the installment payment amounts, so there was no hidden or undisclosed ‘interest.’”

Missed Payments and Kickbacks

The plaintiffs further alleged that MHT continued to make payments on the IPAs to Ascentium between 2014 through 2016, and at some point in 2016, MHT began to pay McKenzie, then senior vice president of Sales at Ascentium, $20,000 per month plus an “exorbitant finder’s fees” for placing new loans with lenders other than Ascentium.

Editor’s note: Ascentium did not address the allegations regarding kickbacks to McKenzie in any of its filings.

Separately, according to documents filed in the U.S. District Court for the Eastern District of Pennsylvania, Univest Capital has brought a civil class action suit for breach of contract against customers, guarantors and Ascentium Capital for nonpayment of installments arising out of contracts with limited liability companies, individual doctors and Ascentium who is said to have “breached contractual warranties and representations” under a broker agreement. According to the complaints, Univest Capital is a plaintiff in at least 26 cases where individual LLCs and their related guarantors along with Ascentium are defendants. Each individual case involves approximately $115,000 in original amounts owing.: