Wells Fargo Bank N.A. has agreed to pay $105 million to settle investor claims related to its work with defunct Medical Capital Holdings Inc., a purported medical receivables purchasing company in California that was later revealed to be a $1 billion Ponzi scheme.

The bank, which was scheduled to go to trial on Tuesday, reached an agreement that same day. U.S. District Judge David Carter in Santa Ana, Calif., refused on April 2 to throw out the cases on a summary judgment motion filed by Wells Fargo.

"The settlement was reached literally right before we were to start trial," said Mark Molumphy, a principal at Cotchett Pitre & McCarthy, co-lead plaintiffs counsel. "And after resolving summary judgment motions and expert motions and jury instructions, it was clear to everyone that we were prepared to try this case. The settlement discussions definitely heated up as we got near opening statements."

Wells Fargo attorney Lawrence Barth, a partner at Munger, Tolles & Olson in Los Angeles, did not return a call for comment. Bank spokeswoman Jen Hibbard issued a statement via email: "This case is really about a fraud committed by Medical Capital, which unfortunately caused a number of parties to suffer losses. We are pleased to be able to put this matter behind us."

The settlement resolved the last of the investor claims coordinated in multidistrict litigation over Medical Capital, Molumphy said. Investors recently obtained a $114 million settlement with Bank of New York Mellon Corp. that won preliminary approval on February 28. Final approval of that deal is scheduled for June 24.

Investors plan to seek preliminary approval of the agreement with Wells Fargo in the next several days.

In June, both banks paid $106 million to settle related claims as part of a U.S. Securities and Exchange Commission action in which a receiver was appointed to recover investors’ money.

According to the litigation, Medical Capital retained both banks to serve as indenture trustees for about 10,000 investors, many of them senior citizens.

Investors who held notes issued by Medical Capital had alleged that the banks breached their duties under the trust agreements by improperly disbursing hundreds of millions of dollars to Medical Capital.

"The funds raised didn’t go directly to the company. Rather, as an added layer of protection, they went into trust accounts that were supervised by the two banks, and from there the monies were supposed to be released to the company," he said.

Instead, he said, a lot of the money was used to pay off early investors and to buy a yacht, he said.

Both banks have denied the allegations.

Molumphy said he anticipated that plaintiffs’ attorneys in the case would seek 15 to 20 percent of the settlement in fees as part of the Wells Fargo settlement. Attorneys moved on April 18 to approve $13.6 million in fees, or 15 percent, of the Bank of New York Mellon settlement, plus nearly $1.1 million in expenses.

Cotchett Pitre, based in Burlingame, Calif., handled the case with co-lead counsel Jeff Westerman, of Westerman Law Corp. in Los Angeles. Also, three firms served on the executive committee: New York’s Milberg LLP, San Francisco’s Minami Tamaki, and Aitken Aitken & Cohn in Santa Ana.

Contact Amanda Bronstad at abronstad@alm.com.