ROCHESTER, N.Y. (WROC) — Real estate developer Robert Morgan was fined $2,000 Friday, following a conviction of conspiracy to commit wire fraud. He had pleaded guilty to the charges. Morgan also agreed to pay $16.7 million as part of his plea agreement.
Morgan’s son, Todd, was fined $500. Both were also sentenced to time served.
The United States Attorney’s Office said that in 2016, Robert and Todd issued a fraudulent loan to ESL Federal Credit Union, which they then used to build Ellison Heights Apartments, a multi-family residential complex in Penfield.
Robert, Todd, and two other men were originally indicted in a 114-count federal fraud case related to Morgan Management. In 2019, Morgan Management held 92 development locations in New York, along with a number of other developments in nine other states.
In 2019, the SEC originally accused Morgan of running an investment fund like a “Ponzi scheme.” According to MarketWatch the SEC says Morgan was offering investors 11% return on their money. But, instead used the money as a “slush fund” to pay previous investors.
In the documents, officials write:
The Commission brings this emergency action to halt ongoing misconduct by Defendants in connection with a series of fraudulent private securities offerings, which Defendants have operated in a Ponzi scheme-like manner by using investor funds to make interest and principal redemption payments back to prior investors, and to cover up other mortgage fraud-related conduct.
In the criminal indictment, Bob Morgan faces 45 counts including wire fraud, conspiracy to commit wire and bank fraud, and money laundering conspiracy.
Federal prosecutors say members of the group lied to financial institutions about the company’s debt, construction costs, company income and expenses, and building occupancy to get larger loans and additional financial while pocketing the extra cash.
Among other accusations, members of the group are accused of lying on documents for loans for the following properties:
- Morgan Ellicott
- Rugby Square
- Avon Commons
- Rochester Village (located in Pennsylvania)
- Eden Square
- Villas of Victor
- Park Place of South Park
- Ellison Heights
- Union Square
- Links at Centerpointe
Along with the mortgage fraud scheme, prosecutors say Bob and Todd Morgan are accused of rigging an insurance fraud scheme. Investigators say the father and son worked to inflate repair bills for insurance claims to two different companies.
In 2021, a new set of criminal charges were filed against Rochester developer Bob Morgan.
The 104-count indictment accuses Morgan and his son Todd — along with Frank Giacobbe and Michael Tremiti — of mortgage fraud, insurance fraud, and conspiracy. They were arraigned on those charges Thursday.
The indictment follows the dismissal of a list of similar charges last year based on technical issues. The judge in that instance told prosecutors they could seek charges again.
Morgan’s counsel Joel M. Cohen and Lee Dunst sent News 8 a statement Thursday saying:
“As he has since May 2019, Mr. Morgan will continue to vigorously defend himself, and remains confident that the truth will once again prevail in court against the government’s meritless allegations and improper tactics in its investigation and prosecution.”
If convicted, the defendants face up to 30 years in prison and fines.
More on Todd & Kevin Morgan’s indictments in 2018:
One week after the FBI raided the offices of Morgan Management, Todd and Kevin Morgan and two business associates have been indicted on 62-counts of fraud.
U.S. Attorney James P. Kennedy, Jr. announced that a federal grand jury has returned a 62-count indictment charging Kevin Morgan, 42, of Pittsford, Todd Morgan, 29, of Rochester, Frank Giacobbe, 43, of East Amherst, and Patrick Ogiony, 34, of Buffalo, with conspiracy to commit wire fraud and bank fraud, and substantive wire fraud and bank fraud charges.
The charges carry a maximum penalty of 30 years in prison and a $1,000,000 fine.
According to the indictment, between March 2011 and June 2017, the defendants conspired to defraud financial institutions, such as Arbor Commercial Mortgage, LLC and Berkadia Commericial Mortgage, LLC, and government-sponsored enterprises, including Federal Home Loan Mortgage Corporation (Freddie Mac), and the Federal National Mortgage Association (Fannie Mae).
The indictment alleges that the defendants conspired to engage in a variety of conduct to induce mortgage lenders to issue loans for residential apartment complexes for greater amounts than they would have issued had they known the truth, and that the lenders would not have issued at the time of issuance had they known the truth.
The defendants are accused of:
- Conspiring to provide lending institutions with false rent rolls suggesting that properties had more occupied units, at higher rental rates, and generated more income than they, in fact, did;
- Conspiring to provide false information about other income received at the complexes. On one occasion, when one defendant asked another where storage space income figures came from, another defendant replied, “Magic;”
- Conspiring to provide lenders with fraudulently altered leases; and
- Conspiring to prevent inspectors touring the properties from discovering vacant units by, among other things, turning on radios inside vacant units, placing mats and shoes outside apartment doors, and, on at least one occasion, hiring someone to stage an apartment as lived in and pretend to be a tenant of an inspected unit.
The indictment alleges fraud at seven different properties, not all of which involved all charged defendants, but which resulted in total loans issued of $167,591,000.