Rochester real estate magnate Robert Morgan’s multiyear saga of fighting civil and criminal mortgage fraud charges could soon be over after Morgan today pleaded guilty to a single felony charge of conspiracy to commit wire fraud.
Under an agreement reached between Morgan’s lawyers and federal prosecutors, Morgan would get no prison time but faces a possible fine of $30,000 to $250,000 and could be sentenced to some period of probation.
Federal District Judge Elizabeth Wolford set a sentencing date of July 22, the same day on which she is slated to sentence Morgan’s son Todd Morgan. The younger Morgan was charged by the government along with his father in an alleged scheme to qualify for millions of dollars in bank loans on multiple properties by knowingly lying to lenders.
In addition to Todd Morgan’s plea, the guilty plea Robert Morgan entered today follows similar pleas by Buffalo mortgage broker Frank Giacobbe and former Morgan Management director of finance Michael Tremiti, to misdemeanor charges of bank larceny of less than $1,000. Those agreements call for no jail time and a fine of up to $9,500.
In agreeing to ink the plea deal, Morgan acknowledged to Wolford that he had knowingly conspired with at least one other individual in a scheme to falsify information to obtain a loan on a Rochester property from ESL Federal Credit Union. Ultimately, the loan—to finance construction on Ellison Heights Apartments—was fully paid off, notes Morgan’s lawyer, Joel Cohen, an attorney with the New York City firm of Gibson, Dunn & Crutcher LLP.
His client’s admission of guilt today is “a far cry” from the massive fraud that government prosecutors and the Securities and Exchange Commission initially alleged, Cohen adds.
In 2019, federal prosecutors accused Morgan and other Morgan Management officials in a 114-count indictment of orchestrating a scheme to defraud lenders of some $500 million by falsely claiming inflated values for properties securing multiple loans.
In November 2020, Morgan settled civil charges brought separately by the SEC. The federal regulator had accused Morgan of securities fraud, claiming that he had misled more than 200 investors, using their money to pay off earlier investors rather than for making improvements on properties. After a receiver recovered funds to repay more than $60 million to investors, Morgan settled the case neither admitting to nor denying wrongdoing.
Questioning federal prosecutors’ handling of evidence in the criminal case, Wolford dismissed the initially filed criminal charges in October 2020. Because she found that prosecutors’ alleged withholding of evidence was sloppy but not intentional, the feds were able to refile the case and a grand jury returned a 104-count indictment in March 2021. It is that second indictment that Morgan and his associates inked plea agreements on. The deals head off a second airing of the criminal charges and of prosecutors’ handling of the case.
In 2019, Morgan Management sold roughly half of its multistate portfolio of apartment complexes, in a deal that saw 80 complexes transferred to Morgan Properties, a Pennsylvania firm unrelated to Morgan Management or to Morgan himself. After that deal closed, Morgan Management was able to pay off loans that figured in the criminal cases and settle with the SEC.
Cohen says Morgan is currently still involved in real estate ventures.
The criminal prosecutions and SEC charges “have done significant damage to (Morgan’s) business, but his business remains very strong; it’s been rebuilt notwithstanding the consequences of … the criminal action (and) the civil forfeiture,” Cohen says.
As to what the nature or extent of such ventures are, Cohen says: “I don’t know what those ventures might be.”
Wrapping up today’s hearing, Wolford cautioned that she could reject the plea deal, in which case Morgan would have the right to seek a trial. If Wolford does bless the deal, a disagreement between prosecutors and Morgan’s defense team could prolong the case beyond the July 22 sentencing.
At issue is whether a clause of the plea deal Morgan inked giving up the right to challenge the felony conviction would apply if Wolford were to sentence Morgan to some period of probation.
While they agreed to no prison time for Morgan, prosecutors maintain that under federal sentencing guidelines, Morgan could be eligible for a prison sentence of up to five years. Morgan’s attorneys maintain that guidelines would call for him to not be sentenced to any prison time. Terms of the plea agreement would allow for Wolford to sentence Morgan to probation, however.
The difficulty arises over the possibility that if Morgan were sentenced to some period of probation and if he were to violate terms of his probation, he could be sentenced to up to two years in a federal prison. Prosecutors maintain that if that were to occur, the waiver of his right to challenge the felony conviction Morgan signed under the plea deal would still apply. Morgan’s defense team claims that because of the possibility that Morgan could be imprisoned, the waiver would not apply.
When the two sides failed to reach a compromise after a roughly 40-minute recess, Wolford agreed to let the plea deal be signed. If she does hand down a sentence of probation and Morgan’s lawyers want to challenge the plea deal, a federal appeals court would need to decide the question of whether the waiver would still apply.
What fine the judge might levy against Morgan remains to be seen. In today’s proceedings, Wolford ordered Morgan to open an escrow account and to deposit in it the maximum amount he could be ordered to pay, $250,000.