A Long Island man who pleaded guilty to felony charges in the collapse of a $1-billion-a-year mortgage lender is scheduled to be sentenced in federal court Wednesday, one of the few financial executives to face potential prison time for wrongdoing in the national mortgage meltdown.
Michael Ashley pleaded guilty in 2011 to bank fraud stemming from his leadership role at Lend America, the Melville-based mortgage giant that imploded in 2009. The collapse left more than $49 million in loans unfunded, according to the Government National Mortgage Association, or Ginnie Mae, which guaranteed the loans.
The case was kept under seal until 2014. Since then, Ashley’s sentencing has been postponed 14 times, including 12 times at the request of prosecutors while Ashley provided assistance against others accused of federal crimes.
Judge Joseph Bianco, who has been hearing the case in Central Islip and was confirmed in May by the U.S. Senate to the Court of Appeals for the Second Circuit, is due to sentence Ashley.
Federal law allows for prison sentences of up to 30 years for bank fraud. However, prosecutors wrote to the judge last month, saying Ashley provided “substantial assistance” to them and indicating support for a sentence “below the applicable advisory Guidelines range.”
Ashley did not respond to Newsday's requests for comment Tuesday. A receptionist at 334 Marketing Inc. — a Melville company that describes Ashley as the "Man Behind 334 Marketing" on its website, with a link to a video of Ashley racing a car at 334 mph — told a Newsday reporter who visited Tuesday that Ashley was in a meeting and could not be reached. Contacted by phone, another company representative also said Ashley was in a meeting.
Ashley's attorney, Kevin Keating, was not available for comment Tuesday.
Ashley served as an informant against Brooklyn attorney Lydia Hills and her aunt, Faith Esimai. Hills was convicted in April in a scam that netted the two women more than $30,000 in cash, prosecutors wrote..
Three other Lend America executives have pleaded guilty and been sentenced. None have served time.
Poppi Metaxas, former head of California-based Gateway Bank, was sentenced in 2015 to 18 months in prison after she admitted striking a “sham” loan agreement with Lend America that defrauded Gateway of $1.8 million.
In 2014, federal prosecutors said in a court document that Ashley was a potential witness against Metaxas. She was released from federal custody in 2017.
Borrower cites harm
One former Long Islander who lost her home to foreclosure after obtaining a home loan from Ashley’s company said Lend America, which also operated under the name of its parent company, Ideal Mortgage Bankers Ltd., harmed her and other homeowners.
Geneva Driver, 52, applied in the mid-2000s to refinance the mortgage loan on her three-bedroom Brentwood home, to fund renovations that would enable her to open a home-based day care. Driver said her contact at Ideal Mortgage Bankers told her the interest rate would be 11 or 12 percent. At the loan closing, she and her husband learned the rate had jumped to 19 percent, but by then they had already put down deposits with contractors and felt they had no choice but to sign the papers, she said.
Their monthly mortgage payments jumped from less than $900 to $2,400 after they refinanced, she said. Ideal sued to foreclose in 2006, and the couple sold the home in 2007, records show.
“We were first-time homeowners in our family so we didn’t really know or understand,” said Driver, a mother of four who now lives in Maryland.
She said she objects to the notion that Ashley might get a lighter sentence for testifying against others. “It’s not fair because you have families that are suffering,” including many who lost their homes due to the company’s actions, she said.
Ashley’s 2011 guilty plea was the second time he has admitted to federal fraud charges. He pleaded guilty in an unrelated scam in 1993 and was sentenced to 5 years of probation and ordered to pay $30,000. In that case, although Ashley’s brokerage was not allowed to issue government-backed loans, Ashley assigned two of his sales people to work for a lender that was permitted to do so, prosecutors wrote. That lender would "surreptitiously compensate Ashley by paying Ashley's wife," Mindy, prosecutors wrote.
'Eliminate the word no'
In a 2009 civil lawsuit against Ashley and Ideal Mortgage Bankers, seeking to stop the company from issuing federally backed loans, federal prosecutors wrote that throughout his career, Ashley “has violated governing regulations, laws and industry bans. Each company he worked at has in turn come under scrutiny, causing him to repeatedly move from company to company.”
Lend America had national reach, approved to write federally backed loans in 48 states. With Ashley urging the staff to "eliminate the word 'no' from our team vocabulary," Lend America wrote more than $1 billion in mortgage loans during the 12-month period ending in September 2008, of which Ashley was entitled to a $5.375 million cut, prosecutors wrote in the 2009 lawsuit.
In November 2009, federal authorities revoked the company's authority to make federally backed loans. Lend America's ensuing collapse threw 600 employees out of work.
Ashley helped devise "the scheme by which Lend America defrauded the United States," federal prosecutors wrote when they sued the company in 2009. Ashley and others conspired to misappropriate funds from loan refinancings, prosecutors charged. The conspirators would refinance mortgages but they would not send funds to the original lenders to pay off the first mortgages, court documents show.
In a settlement agreement with federal prosecutors, court records show that Ashley was permanently banned from "participating in any way in any program concerning federally related or insured home mortgage loans."
In 2010, Ideal Mortgage Bankers was forced into bankruptcy. Workers filed claims seeking more than $30 million in unpaid wages.
As Lend America's executive vice president and chief business strategist during the mortgage boom years of the 2000s, Ashley allegedly diverted the company's cash to fund his car racing passion as well as lavish parties and travel, the bankruptcy trustee charged.
United States Bankruptcy Judge Dorothy Eisenberg wrote in 2013, in the parent company's involuntary bankruptcy case, that Ashley "diverted over $50 million of [Lend America's parent company's] money for his own benefit, and/or for the benefit of his affiliated entities or relatives."
Ashley's company 334 Marketing now shares an office suite at 201 Old Country Road in Melville, the former headquarters of Lend America, with companies called Myshortsale.com, America's Real Estate Advisors and Realty Warehouse, Inc.
Myshortsale.com and America's Real Estate Advisors are state-licensed brokerages. Ashley's wife, Mindy Ashley, filed documents with the Securities and Exchange Commission in 2012 and 2013 listing herself as chief executive of Myshortsale.com.
Lend America by the numbers
- $49.3 million: loss to Government National Mortgage Association due to Lend America's collapse
- More than 14,000: number of mortgages written from 2007 through 2009
- $1.075 billion: value of mortgage originations for the 12-month period ending Sept. 2008
- Dec. 1, 2009: Lend America announces it will cease operations, one day after the Federal Housing Administration withdraws its approval for the company to write FHA loans
Sources: Government National Mortgage Association; U.S. Department of Housing and Urban Development; U.S. Department of Justice