Kevin Morgan, 42, Pittsford, New York, pleaded guilty today to conspiracy to commit bank fraud, which carries a maximum penalty of five years in prison and a fine of $250,000.
Between March 2011 and June 2017, the defendant, along with co-defendants Todd Morgan, Frank Giacobbe, Patrick Ogiony, and others, conspired to defraud financial institutions, including UBS Securities LLC, Arbor Commercial Mortgage LLC, and Berkadia Commercial Mortgage, LLC.
Kevin Morgan was employed as a Vice President at Morgan Management, LLC, a real estate management company that managed more than 100 multi-family properties. Todd Morgan also was employed by Morgan Management as a Project Manager. Kevin and Todd Morgan worked with Frank Giacobbe, who owned and operated Aurora Capital Advisors, LLC, a mortgage brokerage company, and Patrick Ogiony, an Aurora employee, to secure financing for properties managed by Morgan Management or certain principals of Morgan Management.
Kevin Morgan and his co-defendants provided false information to financial institutions and government sponsored enterprises that overstated incomes of properties managed by Morgan Management or certain principals of Morgan Management. This resulted in the financial institutions issuing loans for larger amounts than the financial institutions would have authorized had they been provided with truthful information.
The defendants misled the financial institutions regarding the occupancy of properties. For example, Kevin Morgan: conspired to provide false rent rolls to lenders and appraisers on a variety of dates, overstating either the number of renters in a property and/or the rent paid by occupants; conspired to provide false and inflated income statements for the properties; and worked with others to deceive inspectors into believing that unoccupied apartments were, in fact, occupied.
In one such instance, Kevin Morgan and his co-defendants provided false information to Berkadia Commercial Mortgage, LLC, in connection with Rochester Village Apartments at Park Place, a multi-family residential community owned by certain Morgan Management principals. The false information included inflated income derived from storage unit rentals, inflated reports of rental income, and reporting apartment units as occupied before certificates of occupancy were obtained for those units.
In addition, Kevin Morgan and his co-defendants made misrepresentations to conceal from the lending financial institutions that Morgan Management used a portion of the loan proceeds for purposes other than that disclosed in the loan application. Loan funding was used to maintain or improve other properties managed by Morgan Management, and to satisfy debts associated with other properties managed by Morgan Management. For example, the defendants included a fictitious $2.5 million debt in a loan application purportedly owed to a Morgan Management controlled entity and created a fabricated payoff letter for that debt to increase the amount of the loan in connection with a property known as Autumn Ridge.
U.S. Attorney James P. Kennedy, Jr. made the announcement.
“History has shown us the havoc that can be wrought when fraud takes place in the mortgage industry,” noted U.S. Attorney Kennedy. “This investigation, and today’s plea, protect that industry from fraud and those who invest in securities which are backed by mortgages.”
“From day one, our investigation has focused on protecting the residential and commercial financing industry,” said Gary Loeffert, Special Agent-in-Charge of the FBI’s Buffalo Division. “With Kevin Morgan’s plea today, we have advanced our efforts to safeguard the tens of thousands of investors who own mortgage-backed securities.”
Robert Manchak, Acting Special Agent in Charge for the Northeast Region of the Federal Housing Finance Agency, Office of Inspector General, said, “The financing of multifamily loans is a significant segment of Fannie Mae’s and Freddie Mac’s portfolio. As our commitment to this case demonstrates, FHFA-OIG will work with our partners in law enforcement to investigate and hold accountable those who subject the entities regulated by FHFA to fraud, waste, or abuse.”
Charges are pending against defendants Frank Giacobbe, Patrick Ogiony, and Todd Morgan. The fact that a defendant has been charged with a crime is merely an accusation and the defendant is presumed innocent until and unless proven guilty.
Today’s plea is the result of an investigation by the Federal Bureau of Investigation, under the direction of Special Agent-in-Charge Gary Loeffert, and the Federal Housing Finance Agency, Office of Inspector General, under the direction of Acting Special Agent-in-Charge Robert Manchak, Northeast Region.
Sentencing will be scheduled at a later date before Judge Wolford.