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.
The properties are Morgan Ellicott Apartments and Amherst Garden, both in Buffalo, NY; Rugby Square in Syracuse, NY; Avon Commons, in Avon, NY; Rochester Village, Southpointe, and Eden Square, all in the Pittsburgh, PA area.
Legal expert Peter Pullano explained what it all could mean for the defendants moving forward.
“This begins a very long process through discovery [and] possibly motions. As you go through discovery, you begin to find out more about who did what.”
Not named in the indictment: the head of Morgan Management, Bob Morgan.
Pullano said there could be a reason for that.
“Federal prosecutors very frequently supersede the later indictments and that’s possible we may see another indictment down the road,” he said.
Some of the defendants are scheduled to be arraigned on May 23, 2018, at 2:00 p.m. before U.S Magistrate Judge H. Kenneth Schroeder.
The City of Rochester issued the following statement:
“The City of Rochester is paying careful attention to any ramifications today’s indictments may have related to ongoing projects and investments in our city. Morgan companies are an important corporate citizen and they provide jobs and livelihoods to many of our neighbors. We believe everyone deserves the right, afforded them by the US Constitution, of presumed innocence until proven guilty and this case certainly is no different. And while we do not prematurely rush to judgement, we will nonetheless continue to exercise all necessary due diligence to protect our community’s taxpayers, just as we have in the past.”