Four, including two employees of developer Bob Morgan, indicted on federal charges
Buffalo, N.Y./Rochester, N.Y. - Four men, including two employees of developer Bob Morgan, have been indicted by a federal grand jury on a number of charges, including conspiracy to commit wire fraud and bank fraud.
Kevin Morgan, Robert Morgan's nephew, and Todd Morgan, Robert Morgan's son, as well as Frank Giaccobe and Patrick Ogiony, are expected to be arraigned Wednesday.
Federal prosecutors allege the four attempted to defraud a number of financial institutions. They are accused of trying to obtain loans for residential complexes that were higher than they would have been had those institutions known the full picture of their situations.
The four are accused of conspiring to lend false rent rolls to lenders, making it appear their properties had a greater number of occupied units than they actually did, at higher rental rates. They are also accused of providing fraudulently altered leases and giving false information about other income they received from the complexes. Prosecutors said they also conspired to keep inspectors from discovering vacant units by, in some cases, turning on radios inside apartments or placing shoes and mats outside of them to make it appear they were occupied. In at least one case, according to prosecutors, someone was hired to act as if they were a tenant in a vacant apartment.
Prosecutors say, on one occasion, one of the defendants asked another where income figures for storage space came from. They say the response was, "Magic."
A search warrant application published by 13WHAM last week indicated federal investigators were targeting email accounts of the four defendants. Days prior, the FBI raided the offices of Robert Morgan on Pittsford-Victor Road.
In all, federal prosecutors say more than $167 million in loans were issued for seven different properties. Prosecutors stress that not all the defendants are tied to all seven properties.
The properties include addresses in Buffalo, Syracuse, Avon and Pittsburgh.
In a statement released Tuesday, U.S. Attorney James Kennedy said, "The defendants are charged with fraudulently obtaining over $167.5 million worth of loans relating to seven residential apartment complexes located here in New York and in Pennsylvania. Most of those loans were in turn sold to Fannie Mae or Freddie Mac, entities which were created by Congress to perform and an important role in our country’s housing finance system. As a result of the fraudulent conduct alleged in this indictment, defendants’ conduct not only unjustly enriched them but threatened to undercut the very foundations upon which our mortgage banking and investment systems are based.”
Special Agent-in-Charge of the Buffalo Division, Gary Loeffert, said, “We must protect the tens of thousands of investors who own mortgage backed securities. This investigation is focused on stopping people from undermining the residential and commercial financing industry. Fraud for profit aims to misuse the mortgage lending process to steal cash.”
If found guilty of the charges they are facing, the defendants could face a maximum penalty of 30 years in prison and a possible $1 million fine.
City of Rochester Director of Communications and Events, James Smith, released the following statement to 13WHAM in regard to the developments:
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.
This is a developing story. 13WHAM will provide updates as they become available.