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Highlights of federal, SEC cases against Robert Morgan

A 114-count federal indictment unsealed Wednesday against Robert Morgan, Michael Tremiti, Todd Morgan and Frank Giacobbe alleges crimes were committed from 2007 through 2019 involving $285.65 million in mortgage loans in Buffalo, Rochester and Syracuse areas, as well as in Pennsylvania and Indiana. The charges carry a maximum penalty of 30 years in prison and fine of more than $25 million.

[Related: U.S. attorney: Morgan fraud 'strikes at very heart of the banking industry']

The U.S. attorney alleges Morgan and others:

• Conspired to defraud banks, as well as Fannie Mae and Freddie Mac, by providing false financial information and other documents to inflate property values and justify loans that lenders would not have issued if they knew the truth.

• Kept up the scheme by deceiving loan servicers conceal the actual financial condition of the properties.

• Manipulated income and expenses for properties – including by removing expenses – to meet lender requirements that the properties have enough income to cover debt payments.

• Kept two sets of books for at least 70 properties – one accurate and one manipulated for lenders.

• Inflated construction contracts and invoices to make it appear contractors were being paid more than they were.

• Overstated net income of properties.

• Falsely stated how much they already owed on properties, using false loan documents and fake purchase contracts, all to get even larger loans.

• Misled inspectors, appraisers and lenders about occupancy of the properties, including through fraudulent leases.

• Conspired to defraud insurers into paying out more for damage claims than the actual costs incurred, by submitting false and inflated contracts and invoices for repairs.

The separate lawsuit by the SEC alleges that Morgan:

• Raised more than $110 million from 2013 from investors through September 2018 to fund his real estate purchases by selling securities directly to retail investors, including at least $80 million in four sets of "purported funds" that were supposed to help him buy apartment properties and other development projects. More than 200 individuals and entities in 17 states – including in Genesee and Wyoming counties – invested in the funds, including a local electrical workers union pension plan and about three dozen people who used their retirement accounts.

• Told investors funds would be used to make unsecured loans to Morgan affiliates to buy and manage existing properties or develop new ones.

• Told investors they would receive an 11% return.

• Used the funds "as a single, fraudulent slush fund," using later funds to pay off earlier investors and bad loans or to make good on the promised returns.

The SEC seeks a court order freezing Morgan's assets, requiring a verified accounting of assets, appointing a court receiver to take over and unwind the four funds, and barring any foreclosure or bankruptcy filing against the funds.

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