Tuesday, August 2, 2005
In many white collar cases, prosecutors start at the bottom and move up the ladder as they secure new information and the assistance of lower level employees through the use of cooperation agreements. Pleas are often offered to employees within a corporation to testify against higher-ups. And as recently seen in many cases, the government tries to secure a plea of a chief financial officer before proceeding up the ladder.
In the case of MCA we saw five pleas before moving to the CEO. Pleas included "MCA's former President and Chief Operating Officer," "MCA's former Chief Financial Officer," "MCA's former Controller," "MCA's former Vice President for Marketing Syndication," and "the former head of MCA's Special Loan Group." (DOJ Press Release 2-24-04)
And then we reported here the plea entered by Patrick Quinlan, who was CEO of MCA Financial Corp. The company "invested in Detroit-area real estate and financed its operations by selling securities." Quinlan received ten years on a plea to charges of conspiracy to commit mail, wire and securities fraud. When he plead guilty, the press release of the Eastern District of Michigan stated:
"MCA was a privately held concern that raised capital in large part by selling debt and pass-through securities to the general public. Through his guilty pleas today, Mr. Quinlan admitted that from as early as 1993 until its seizure by state regulators in January 1999, MCA engaged in a scheme to defraud its investors and institutional lenders by misrepresenting its true financial condition through the preparation and use of false and fraudulent financial statements that were regularly filed with the SEC and made available to brokers and investors and to banks and other institutional lenders. As the result of paper transactions involving low-income housing in the City of Detroit between MCA and numerous off-book partnerships controlled by Mr. Quinlan, millions of dollars in sham assets and revenues were created and included in MCA's balance sheets and statements of income."
The government secured another important plea today with "John P. O'Leary, a former senior vice president for corporate finance" pleading guilty "to one count of concealing a felony" in return for "prosecutors drop[ping] 12 other fraud and conspiracy charges." (see here AP). This has all individuals initially charged in the matter now entering pleas.