By: Kevin Oklobzija//March 26, 2019
By: Kevin Oklobzija//March 26, 2019//
A Florida-based mortgage lending firm has filed suit against Robert Morgan, his nephew Kevin Morgan and a limited liability company they created, alleging fraudulent filings with regard to a mortgage-backed apartment community in Watertown.
The suit seeks $2.5 million in damages, claiming Morgan and his management company were “unjustly enriched” because of “malicious, intentional, fraudulent and willful actions” with regard to the alleged repayment of a loan on Preserve at Autumn Ridge. There are 152 units at the apartment complex.
The Florida mortgage firm, with an address that says is occupied by Rialto Capital Management LLC in Miami, claims in papers filed in state Supreme Court in Monroe County that the Morgan company filed “a fake payoff statement.” That alleged falsification led to an inflation of the mortgage, court papers say.
Kevin Morgan pleaded guilty in December to a single count of conspiracy to commit bank fraud, the first of four defendants to accept a plea from federal prosecutors. His admission in his plea agreement “that he, at the direction of his uncle Robert Morgan, conspired to defraud financial institutions by means of false and fraudulent pretenses and representations” is cited in the lawsuit.
Patrick Ogiony, an executive with a Buffalo-area mortgage broker, entered a guilty plea last week to a similar charge. Autumn Ridge was one of 20 residential communities named by Ogiony in his plea agreement. Also on the list: eight Rochester-area communities.
The case against the two others indicted in an alleged $500 million mortgage and bank fraud scheme, Robert’s son Todd and Frank Giaccobe, principal at Aurora Capital Investors, continues in the discovery phase.
Robert Morgan has not been charged.
The LLC named in the lawsuit holds the $21 million mortgage to Autumn Ridge, R2 Mess Fund LLC.
Another Morgan-owned property, Raintree Apartments in the Buffalo suburb of Tonawanda, has been sent to a special servicer by the mortgage holder because of “imminent monetary default,” according to loan property details provided by Trepp.
While Morgan’s firm has never missed a payment on the Raintree apartment complex, there may be foreclosure proceedings on the basis of non-monetary default.
Trepp reports show that the mezzanine lender of Raintree Apartments found irregularities in accounting for 2014, 2015 and 2016. The senior lender “found discrepancies between internal and reports sent to the lender. Accordingly, the special servicer defaulted the borrower and accelerated the note.”
Raintree could be the first of many such foreclosures through non-monetary defaults on Morgan properties, according to Joe Rowley, senior advisor and managing broker at SVN Realty Performance Advisors.
Those properties, if put up for sale by the lender, would find new buyers very quickly. “There is so much capital ready to buy the properties,” Rowley said. “I think there will be a lot of people standing in line. I don’t think the banks will get hurt, unless the numbers were so far off.”
But in the wake of the indictment against the Morgans and Aurora Capital executives, Rowley predicts greater scrutiny by banks and lenders. Simply providing rent rolls won’t be good enough to approve a mortgage. “They’ll want to see bank ledgers,” Rowley said.
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