With a second defendant pleading guilty to conspiracy, it was learned that a Watertown, N.Y., apartment complex is among dozens of rental properties in that state and several others that allegedly received $500 million in fraudulent bank loans.
Buffalo, N.Y., mortgage broker Patrick Ogiony became the second defendant to plead guilty in federal court to conspiracy to commit bank fraud.
Ogiony conspired with codefendants Frank Giacobbe, Kevin Morgan, Todd Morgan and others to defraud financial institutions between March 2011 and June 2017, the U.S. attorney's office said.
They were charged with wire fraud, bank fraud and conspiracy to commit wire and bank fraud in a 62-count indictment handed up in September 2017. Autumn Ridge, in Watertown, is among 100 multifamily properties owned by Morgan Management LLC, a Rochester-area real estate management company.
Six years ago, Morgan Management built the 394-unit townhouse project on County Route 202 in reaction to the need for more rental housing for Fort Drum soldiers returning from deployment.
The four men are accused of obtaining over $500 million worth of loans connected to properties, including apartment complexes in Buffalo, Canandaigua, Syracuse and Avon in Livingston County, and in Pennsylvania, Texas, South Carolina and North Carolina.
Last December, Kevin Morgan pleaded guilty to conspiracy to commit bank fraud and is awaiting sentencing.
As the result of the second guilty plea, the company that holds the mortgage, RSSCSAIL2016C7-NY PAR LLC, Miami, has taken the first step in foreclosing on the apartment complex, according to court papers filed in the Jefferson County Clerk's office on Wednesday.
In initiating the foreclosure proceeding, the mortgage company accuses Morgan officials of providing misleading and false information about the $21.3 million loan that Morgan Management received for Autumn Ridge, according to the court papers.
Morgan Management provided a fabricated letter indicating the "fake and fictitious" $2.5 million loan was purportedly paid to the real estate company when no loan existed, according to the court papers.
Morgan Management would not have received the $21 million loan without receiving the $2.5 million payment, court papers said.
Until Ogiony pleaded guilty, it was not known publicly that Autumn Ridge was connected to the massive bank fraud scheme.
When contacted Friday, Donald C. Alexander, CEO of the Jefferson County Local Development Corp., said he was unaware that Autumn Ridge is going through foreclosure and that it was part of the case.
"I didn't realize it reached Autumn Ridge," he said.
When the $54 million townhouse project went through the town of Watertown's site plan approval process in 2011, town officials dealt with Kevin Morgan.
While considering a tax abatement program seven years ago, Alexander said he saw nothing out of the ordinary about the company's finances. He and other JCLDC officials went to Pittsford a couple of times to visit with Robert Morgan and met with Kevin Morgan a couple of times when he came here.
"At the time, they had a great reputation," Mr. Alexander said, noting that the company was one of the largest real estate companies in the state.
He learned later that Robert Morgan was shot during a robbery at the family's seafood store in 1991 and became a paraplegic.
However, Morgan then made a career in real estate development, Alexander said. Morgan has not been charged in the bank scheme.
Town officials said they, too, were unaware that Autumn Ridge was a part of the investigation.
The apartment complex is currently assessed at $11.4 million, far below the amount of the loan it received from the mortgage company.
During the course of the conspiracy, Ogiony was employed by Aurora Capital Advisors, a mortgage brokerage company owned and operated by Frank Giacobbe.
Through Aurora, Ogiony brokered mortgage loans on behalf of Morgan. Kevin Morgan was employed as a vice president at Morgan Management and his cousin, Todd Morgan, who was employed as a project manager.
In some cases, federal prosecutors said the alleged conspirators submitted fake documentation to property appraisers, convincing the appraisers that apartments were significantly more valuable than they really were. Those appraisals then became the centerpiece of loan requests, according to the charges.
The cases against Giacobbe and Todd Morgan are still pending. Ogiony will be sentenced at a later date. He could receive a maximum penalty of five years in prison and a $250,000 fine.
According to his plea agreement, Ogiony agreed to cooperate with prosecutors to provide information about any and all criminal activity, including his own and others.
The indictment is the result of an investigation by the Federal Bureau of Investigation and the Federal Housing Finance Agency.
Barbara J. Burns, a spokeswoman for the U.S. Attorney's Office in Buffalo, declined to comment, referring all requests for information about the guilty plea to a news release.
Morgan Management had planned to construct an additional 359-unit townhouse project across the street on County Route 202, but the project never materialized after enough rental housing was built in the region for returning Fort Drum soldiers.
