In a resolution of a major 1990s case, John Brincat, the one-time chief executive officer of Mercury Finance Co., pleaded guilty to wire fraud and lying to a bank, according to the Associated Press.
Brincat reportedly admitted to overstating the sub-prime lender’s earnings and delaying the reporting of bad loans, resulting in the company’s eventual collapse nine years ago. His actions cost investors more than $2 billion, according to the wire service.
The AP reported that Brincat admitted to engaging in a scheme in which he used so-called “cookie jar” funds the company secretly kept in reserve to cover losses. The ex-CEO wanted to make it seem as though Mercury was meeting earnings projections even though it was actually losing money, according to the wire service. When the scheme collapsed in early 1997, Mercury reportedly was forced to restate its earnings, causing the stock to shrink by $2 billion.
Brincat admitted in a signed, 30-page plea agreement that he received a huge salary, bonuses and other benefits from the company, and cash from the sale of his Mercury stock, according to the AP.
Although he faces as many as 10 years in federal prison, the two sides can negotiate the sentence under the plea agreement, AP reported. Brincat is slated to be sentenced on Jan. 26.
Former treasurer Bradley Vallem was sentenced to 20 months in prison after pleading guilty to wire fraud and making false statements to a financial institution, while former accountant Lawrence Borowiak was sentenced to a year and a day in federal prison after pleading guilty to insider trading in Mercury stock, according to the AP.
The wire service noted that three other Mercury executives, including CFO James Doyle, were involved in the company’s collapse. Doyle, who died in mid-1997 while he was cooperating with federal prosecutors, was never charged with a crime.
Mercury was delisted in May 1998 from the New York Stock Exchange. It filed for bankruptcy about two months later and was reorganized into what was then called MFN Financial Corp. In 2002, Consumer Portfolio Services acquired MFN Financial.