Robert Morgan was hit with multiple charges this week by both the Department of Justice and the Securities and Exchange Commission for allegedly running a Ponzi-type scheme that involves shuffling around money from investors and falsifying loan documents.
Morgan – one of the largest landlords in the country who purports to have 140 properties across 14 states – was hit with criminal charges Wednesday by the DOJ for conspiracy to commit bank fraud, wire fraud and insurance fraud, and then slapped with civil fraud charges from the SEC for siphoning and misusing investor funds.
The charges are the culmination of a cross-agency investigation that came to light in August that looked into fraud allegations involving loans backing $1.5 billion in mortgage securities issued by Fannie Mae and Freddie Mac.
That led to the indictment of four individuals for allegedly conspiring to falsify loan information in order to obtain more than $167 million in multifamily loans, and two of those individuals are related to Morgan – the owner of the properties entangled in the mortgage fraud.
Now, it seems the authorities have shifted their focus to Morgan himself.
According to the DOJ, Morgan conspired with three others over the span of 10 years to “fraudulently obtain moneys, funds, credits, assets, securities, and other property” from Fannie Mae, Freddie Mac, and other financial institutions, including Arbor Commercial Mortgage and Berkadia Commercial Mortgage.
Morgan and his associates allegedly provided false information to those entities to obtain larger loans than they would have otherwise received on multiple properties, even going as far as to submit fraudulent construction contracts and invoices that inflated contractor payments, and faking contracts for property purchases that inflated sales prices.
The DOJ alleges that Morgan and his crew kept two sets of books, one with accurate accounting, and the other thoroughly cooked for lenders that needed information for servicing and refinancing the loans.
The SEC’s complaint adds more to the heap, alleging that Morgan raised more than $110 million by promising an 11% return to investors and then diverted much of that cash to pay other investors in a Ponzi-like scheme.
The SEC said Morgan’s investors are still owed $63 million, while the DOJ says lenders are holding the bag for more than $25 million and insurers are out $3 million as a result of the scheming of Morgan and his associates.