News Hits would like to applaud Pat Quinlan, former MCA Financial Corp. CEO, for the clairvoyant prediction he made to Metro Times more than two years ago. At the time, we were talking to him about his mega-mortgage corporation which had just gone belly-up, leaving its investors, employees and the City of Detroit high and dry. When he gazed into his crystal ball, Quinlan saw trouble waiting for those who had mismanaged the company’s operations. But his psychic powers (at least those displayed to us) failed to reveal that Mr. Q. would be among those eventually charged in what’s being labeled the largest securities-fraud case in Michigan history.
Oh well, no one’s perfect — especially, we’d venture to say, Quinlan.
Here’s the scoop according to state Attorney General Jennifer Granholm, who filed felony securities-fraud charges against Quinlan and his associates last week: In 1991, MCA set up in Michigan and attracted about 2,700 investors. These folks weren’t big muckety-mucks, but retirees and working Joes and Janes who invested considerable chunks of their savings — some as much as $300,000 — in MCA with the understanding their money would be used to purchase mortgages and land contracts from individual homeowners.
Investors were promised a 12 percent rate of return from the money MCA said it would make reselling the paper. Within a few years, however, the state says company officials started pocketing the profits. To cover up the shortfall, MCA allegedly began falsifying information it provided investors who ended up losing about $105 million when the giant “pyramid scheme” they were unwittingly caught up in came tumbling down.
When state officials were asked how the company was able to keep the alleged scheme going for eight years without anyone catching them, the answer was “no comment.”
Julie Smith, spokesperson for the state Office of Financial and Insurance Services, told News Hits that there wasn’t much regulators could have done to protect investors. She says that MCA’s alleged illegal activity would not have shown up in day-to-day monitoring “especially since they are releasing false information” to their investors.
Smith adds that in most cases the office discovers a company is acting improperly when a customer calls to complain. But in the MCA case, the investors had no way of knowing this.
But the investors are not the only victims in this house of cards, which Metro Times first reported on two years ago. In 1999, the company closed its 40 branch offices without warning, leaving 900 employees jobless. It also owned 3,400 rental properties in Detroit. The city was stuck with caring for about 2,000 dilapidated shacks whose ultimate ownership is unclear; the city is still sorting out the mess. A private company took over the other 1,400 or so homes.
When the company began unraveling, Quinlan revealed his prescience to Metro Times (“All fall down,” Metro Times, April 7-13, 1999). Asked how the company wound up in financial ruins Quinlan gave this less-than-satisfying answer: “It would have to be an error in (MCA’s) back office.” But then he added, “It’s a big error, and I think those people will have to be held accountable.”
You said it, sir. Quinlan was arraigned last week in Southfield’s 46th District Court and could face up to 10 years in prison and a $435,000 fine if convicted; his partners face similar sentences.Ann Mullen contributed to News Hits, which is edited by Curt Guyette. He can be reached at 313-202-8004 or [email protected]