Cheryl A. Swain pleaded guilty to a charge of mail fraud in connection with her conduct as the Vice President for Marketing Syndication of Mortgage Corporation of America (MCA), according to an announcement from the U.S. Attorney’s office last week. Swain, 36, admitted that she participated in the marketing and sale of MCA securities knowing that the offering materials contained false information about the performance of the pools and the value of the assets . She also admitted that she kept the Financial Management Committee of MCA informed of the true condition of the pools.
MCA, which collapsed in 1999, was a mortgage company that made conventional and subprime loans to borrowers in Michigan and several other states. MCA was also a mortgage and land contract broker and servicer. The company has been placed in a conservatorship by the Michigan Financial Institutions Bureau, which filed a petition for bankruptcy on its behalf in a case that is still pending.
Senior executives of MCA were charged with felony securities fraud in August for allegedly defrauding Michigan investors out of more than $83 million, making this the largest securities fraud case in the state’s history. In that announcement, Michigan State Attorney General Jennifer M. Granholm said, “what MCA billed as a ‘virtually risk free’ investment opportunity turned into an investment nightmare for more than 2,700 Michigan citizens.”
The August announcement went on to say the Attorney General alleged that land contracts were removed from investment pools and sold to Sterling Bank and Trust without returning the proceeds to the pools. Additionally, mortgages were removed from the pools and placed on bank lines of credit in order to raise cash for MCA, again without returning proceeds to the pools.
The plea agreement between the federal government and Swain, who lives in Beverly Hills, Michigan, leaves her facing up to 46 months’ imprisonment and $250,000 in fines. She also could be ordered to pay full restitution to the victims of her offenses in the approximate amount of $66 million. In addition, the plea agreement requires that she cooperate in the government’s investigation of other culpable individuals.
The investigation being conducted by the FBI and the HUD’s Office of Inspector General involves the SEC’s Division of Enforcement, the Michigan Financial Institutions Bureau, and the Michigan Bureau of Commercial Services.
