A federal judge in Rochester could decide within weeks whether to allow the federal government to continue pursuing criminal mortgage fraud charges against developer Robert C. Morgan, after defense attorneys accused prosecutors in Buffalo of lying to them and the court.
Attorneys for Morgan and three other defendants want U.S. District Court Judge Elizabeth A. Wolford to reconsider her earlier decision a year ago in which she dismissed an indictment against Morgan over procedural delays but allowed prosecutors to refile the allegations less than a year later.
They want her to dismiss the original extensive charges "with prejudice," which means the government could not come back again on the same matter. That would effectively negate the newer indictment.
Defense attorneys, led by Joel M. Cohen of Gibson Dunn & Crutcher LLP in Manhattan, have argued that the stronger dismissal is justified because of what they call "outrageous" conduct by prosecutors.
They say the U.S. Attorney's Office and its investigators have not only repeatedly botched the "discovery" process in the past three years, but have also shown a flagrant disregard for the court through a series of misrepresentations and misleading statements about what evidence they have and what they've shared.
"It’s not just a matter of using adequate resources. They have misled you,” Cohen told the judge at a hearing Monday. “If Your Honor does not reverse this decision, this is going to be a serious appellate issue."
But that would be a major step, especially coming before the merits of the 104-count indictment have been heard. And it is one the judge called an "uphill battle" for the defense, and one with little or no precedent. She noted that the charges are still very serious, and that any failures to fully search or reveal information so far couldn't have affected a trial that hasn't started.
"I am concerned about some of the information that’s been brought to my attention. But the burden is not an easy one that the defense faces," Wolford said Monday. "I will give you an opportunity to try to convince me of that, but I’m not there yet."
The four defendants – Morgan; his son, Todd; his finance chief, Michael Tremiti; and Buffalo mortgage broker Frank Giacobbe – are charged with orchestrating a bank and insurance fraud scheme. They are accused of submitting falsified and inflated rent rolls, financial statements, appraisals and other documents to lenders, deceiving them into making commercial mortgage loans on apartment properties for far more than the properties were worth.
The judge has been deeply skeptical and critical of the government's arguments, questioning prosecutors' process and decision-making, their internal communication and their failure to review past conclusions. She and the defense attorneys noted that she repeatedly asked prosecutors previously if there was any more material that needed to be identified and revealed, and was told no – only to learn later of more.
"We now know that wasn’t true," Wolford said Monday. "There’s a lot of data that we now know was never processed, never even reviewed by the government."
And she blasted the U.S. Attorney's Office for not taking the case and its responsibilities seriously, putting a junior attorney new to the district in charge of discovery and other matters while his colleagues handled plea agreements.
"You tell me why I shouldn’t re-evaluate my decision that there was no bad faith, when I now know that the U.S. Attorney's Office put a brand new attorney in charge of all this stuff?" Wolford asked Monday.
Even so, she said, that's not necessarily enough to justify a dismissal with prejudice.
For their part, prosecutors acknowledge mistakes were made, but say they were not deliberate or deceitful.
"Candidly, I and our office more generally did not fully appreciate the complexities of this large amount of data that had been copied," Assistant U.S. Attorney Douglas Penrose said Monday. "But in no way, shape or form would I ever intentionally mislead, lie or shade the truth from the court or the defense counsel."
At the urging of defense attorneys, Wolford said she would schedule an evidentiary hearing in a few weeks to get more testimony before making a decision.
Three other defendants – two of whom were named in the original 2018 indictment – have already pleaded guilty to similar charges. But the case has moved slowly through the legal process.
The government was deluged with documents it obtained from computers, servers, cellphones and other sources following the execution of search warrants and a May 2018 FBI raid on Morgan's suburban Rochester offices. It has been slow to provide all of the evidence to defense attorneys as required under court rules, and has provided conflicting answers at various times about the status of its document reviews.
That was the crux of the defense argument that led to the first indictment being dismissed – that the government was violating the defendants' rights to a speedy trial and full discovery. Now they're also asserting that the government is concealing evidence it has collected, and being evasive or even deceptive with the court.
"This is one of the most serious ones I’ve ever seen in my career," Cohen said. "The amount of malfeasance, I have never seen this. The lies that have been perpetrated. They’re lies."
Specifically, Morgan's attorneys accused the government of not disclosing until recently that they possessed a cellphone belonging to Julia Besant – Giacobbe's girlfriend – that the government seized in February 2018. They say the device contains an audio recording of people talking about Morgan being framed – a conversation they insist is significant evidence for them but which prosecutors said they never knew about until a third-year associate at Morgan's law firm found it and showed her bosses.
Defense attorneys have now seized on the government's admission that it was so overwhelmed with data and information that it could not review all of the computers, servers and records it had seized within the "speedy trial" timeframe set by the court. So, instead, prosecutors provided "mirror images" of electronic evidence.