Michigan State Attorney General Jennifer M. Granholm yesterday announced that senior executives of MCA Financial Corp. were charged with felony securities fraud. Chairman and CEO Patrick D. Quinlan, along with Lee Wells, Keith Pietila and Alexander Ajermian, are accused of defrauding Michigan investors out of more than $83 million, making this the largest securities fraud case in the state’s history.
Quinlan, Wells, and Pietila are each charged with 16 counts of securities fraud for failing to disclose material facts in connection with the offer and sale of securities. Each is also charged with one count of conspiring to commit securities fraud. Ajemian is charged with a single count of conspiring to commit securities fraud. Securities fraud is a felony punishable by 10 years in prison and/or a fine of $25,000. Conspiracy to commit securities fraud is also a felony punishable by 10 years in prison and/or a $35,000 fine. All charges were filed in the 46th District Court in Southfield.
“What MCA billed as a “virtually risk free” investment opportunity turned into an investment nightmare for more than 2,700 Michigan citizens,” the Attorney General said. “These citizens weren’t free-wheeling, big-time investment professionals with millions of extra dollars to play with; they were retirees and grandparents and working parents who wanted nothing more than to provide a secure future for themselves and their families. Instead, they lost their life savings.”
Granholm alleges specifically that beginning in 1993, land contracts were removed and sold to Sterling Bank and Trust. The proceeds from these sales were not returned to the pools. In addition, beginning in 1996, mortgages were removed from the pools and placed on bank lines of credit in order to raise cash for MCA. The proceeds from these lines of credit were not returned to the pools. As a result of these removals, the investment pools did not contain sufficient assets to repay investors their principal, nor did the pools generate sufficient cash flow to make the periodic payments due the investors. The Attorney General alleges that while Quinlan, Wells, Pietila, and Ajemian knew of the diversions from the pools, investors were never informed of these removals.
