Risk Management

Former MCA Finance Exec Pleads Guilty

Another executive pleads guilty as several other company officers, including the CFO, are sentenced in Michigan’s biggest fraud scheme.
Stephen TaubAugust 2, 2005

A former finance executive of a defunct mortgage lender pleaded guilty for the role he played in a scheme that eventually led to Michigan’s largest securities fraud, according to several published reports.

John O’Leary, the former senior vice president for corporate finance at MCA Financial Corp., pleaded guilty to one felony-related count, according to the Associated Press.

When he is sentenced on December 6, O’Leary faces up to 18 months in prison and millions of dollars in restitution, says the report.

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O’Leary, who was with MCA from 1994 through 1998 and served as senior vice president of corporate finance from March 1997 until September 1998, also agreed to pay a $20,000 administrative fine to the Department of Housing and Urban Development, notes the AP.

“Mr. O’Leary left MCA early on before the collapse, and there are mitigating circumstances that would argue for a shorter sentence,” Mark Kriger, attorney for O’Leary, told The Detroit Free Press.

Under the plea agreement, government prosecutors will drop the remaining 12 counts against O’Leary, including mail, wire, and bank fraud, as well as conspiracy to commit fraud, according to the paper. “He was one of the first to sit down with the government,” Assistant U.S. Attorney Jennifer Gorland told the Free Press.

Federal regulators accused MCA of creating a scheme to inflate and mischaracterize its revenues, assets, and equity through the purchase of low-income housing in Detroit, according to the AP. The company then sold the real estate at inflated prices to partnerships and limited liability companies controlled by MCA. Meanwhile, the partnerships and companies often were late or delinquent in making payments, added the AP.

O’Leary was accused of directing MCA employees to prepare databases that fraudulently showed payments had been made, according to the AP, which cited prosecutors. His trial was scheduled to take place on September 20, says Crain’s Detroit.

O’Leary is one of seven MCA officers charged after the company closed down and state regulators subsequently seized the assets, according to the AP. Two weeks ago, former chairman and CEO Patrick Quinlan Sr. was sentenced to the maximum 10 years in prison, notes Crain’s Detroit.

Quinlan was described as the mastermind of the scheme, according to the paper.

Keith Pietila, former chief financial officer; Alexander Ajemian, former controller; and Kevin Lasky, former head of the special loan group, received sentences ranging from 24 to 48 months, according to the Free Press.

MCA’s former president and CEO Lee P. Wells, who pleaded guilty to conspiracy and mail fraud in July 2002, and former vice president for marketing syndication Cheryl Swain, who pleaded guilty to mail fraud in November 2001, are both awaiting sentencing.