Bob Morgan's son and nephew among 4 accused of multimillion dollar fraud scheme

A federal grand jury has indicted the son and nephew of Rochester real estate mogul Robert "Bob" Morgan on fraud charges.

Todd and Kevin Morgan are named in a 62-count, 32-page indictment along with business associates Frank Giacobbe and Patrick Ogiony, each of Aurora Capital Advisors LLC, a Buffalo-based mortgage broker. They are charged with conspiracy to commit wire fraud and bank fraud; wire fraud; and bank fraud.

The charges involve seven properties, including apartment complexes in Buffalo, Syracuse and Avon.

“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,” U.S. Attorney James P. Kennedy said in a news release, also including properties in the Pittsburgh, Pennsylvania area that were the subject of a recent search warrant that was mistakenly unsealed last week.

Kennedy continued: "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.”

The charges allege that the foursome — Todd Morgan, 29, of Rochester and Kevin Morgan, 42, of Pittsford, along with Giacobbe, 43, of East Amherst, and Ogiony, 34, of Buffalo — conspired to provide lenders with fraudulently altered leases and with false rent rolls and other property income information, and preventing inspectors from discovering vacant units by staging the apartments to appear occupied.

According to the U.S. Attorneys Office, the charges carry a maximum penalty of 30 years in prison and a $1,000,000 fine.

Ogiony and Giacobbe are scheduled to be arraigned in federal court at 2 p.m. Wednesday in Buffalo. No date has been set yet for the Morgans' arraignment.

Kevin Morgan is vice president of Perinton-based Morgan Communities, while Todd Morgan is a project manager. Robert Morgan is chief executive officer.

Kevin Morgan was indicted on 35 counts, while Todd Morgan was indicted on 26 counts.

The seven properties in question include:

Morgan Ellicott Apartments and Amherst Gardens in Buffalo;

Rugby Square in Syracuse;

Avon Commons in Avon, Livingston County;

Rochester Village, Southpointe, and Eden Square in suburban Pittsburgh.

Between March 2011 and June 2017, the Morgans, Ogiony, and Giacobbe allegedly defrauded financial institutions such as Arbor Commercial Mortgage LLC and Berkadia Commercial Mortgage and government-backed enterprises like the Federal Home Loan Mortgage Corporation (Freddie Mac) and the Federal National Mortgage Association (Fannie Mae).

Both Arbor and Berkadia were approved to sell and service loans on behalf of the two government-sponsored organizations.

Giacobbe and Ogiony worked on behalf of Morgan Communities, authorities said. The indictment outlines the fraud allegations for each of the seven properties. Authorities allege the Morgans received inflated loans to pay off debt that didn't exist.

Prosecutors said the four acted in a variety of manners to persuade 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."

They allegedly inflated the rent rolls, the records that showed how many people were residing in their properties, and with higher rent rates than were actually being charged.

They also allegedly "conspired to inflate income for storage units" at one of the properties. In an email, Giacobbe asked Kevin and Todd where an extra $72,000 in storage unit income came from, and Kevin replied, "Magic."

Prosecutors allege the defendants provided lenders with "fraudulently altered leases."

Morgan Communities and Morgan Management, both headed by Robert Morgan, own 140 properties and 34,000 units across 14 states, employing more than 1,300 people, according to the company website.

"This investigation is focused on stopping people from undermining the residential and commercial financing industry," Gary Loeffert, special agent-in-charge of the Buffalo division of the Federal Bureau of Investigation, said in a release. "Fraud for profit aims to misuse the mortgage lending process to steal cash."

Some of the accusations were outlined in an affidavit by a special agent for the Federal Housing Finance Agency's Office of the Inspector General that was posted online last week before being re-sealed. The affidavit outlined the desire of federal authorities to seize emails between the Morgans and Giacobbe.

More: Affidavit: 2 of Bob Morgan's relatives suspected of wire and bank fraud

The Federal Housing Finance Agency oversees Fannie Mae and Freddie Mac.

At one apartment building in Pennsylvania during a lender-required inspection for Freddie Mac in January 2015, the Morgans allegedly tried to make some of the apartments appear occupied by turning on the radio and placing mats with shoes outside the apartments.

Giacobbe also allegedly arranged for a woman to "stage an apartment" to make it appear occupied and to tell inspectors that her boyfriend was asleep in the bedroom.

Morgan Communities is responsible for many projects in Rochester. It is involved in the performing arts/mixed-use residential project proposed for Midtown's Parcel 5; Tower280 at Midtown; the Court Street apartments now under construction adjacent to Dinosaur Bar-B-Que; the purchase and planned redevelopment of the Gannett Building at 55 Exchange Blvd., and the Lincoln Alliance building redevelopment on East Main Street.

Morgan owns an additional 10 apartment buildings outside downtown Rochester, and co-owns the Hyatt Regency, The Strathallan and Radisson Rochester Riverside hotels.

The real estate magnate also has been very active in the suburbs, where his companies own at least 55 apartment and townhouse complexes.

Both the U.S. Attorney's Office and FBI stated they had no comment Tuesday night, but both are expected to brief the media Wednesday.

The city of Rochester is "paying careful attention" to the indictment and the potential ramifications they may have on "ongoing projects and investments in our city."

James Smith, the city of Rochester's communications director, said, "Morgan companies are an important corporate citizen and they provide jobs and livelihoods to many of our neighbors. ...And while we do not prematurely rush to judgment, we will nonetheless continue to exercise all necessary due diligence to protect our community’s taxpayers, just as we have in the past.”

WCLEVELAND@Gannett.com

BDSHARP@Gannett.com

COMPLETE COVERAGE:

More: Andreatta: Bob Morgan's mortgages far outweigh his assessments

More: Affidavit: 2 of Bob Morgan's relatives suspected of wire and bank fraud

More: How did court papers for Morgan-related search become public? Inquiring minds want to know

More: Emails search could be tip of the iceberg in Morgan Communities FBI investigation

More: Andreatta: What Bob Morgan knew and when in real estate probe

More: Search of Bob Morgan's office still leaves questions about FBI investigative focus

More: Who is Bob Morgan and why did the FBI raid his offices?

More: Bob Morgan: a timeline