A report from the Wall Street Journal. "The Morgan family of western New York built one of the country’s largest rental apartment empires, amassing more than 140 properties and more than 34,000 units across 14 states. Now the family business, Morgan Management, is beginning to shrink as it faces one of the largest mortgage fraud investigations since the financial crisis."

"Prosecutors allege that Morgan executives and their mortgage brokers obtained about $500 million of loans fraudulently by overstating their buildings’ income and occupancy levels, according to court records, mortgage records and other documents filed by the U.S. attorney’s office in Buffalo, N.Y., as part of an investigation of the business."

"That is about triple the amount of allegedly fraudulent loans identified in court papers in a 2018 indictment of two family members and two mortgage brokers who worked with the family."

"The real-estate industry is watching the case closely because the guilty pleas have raised questions about whether lenders, including Fannie Mae and Freddie Mac, sufficiently examine every tenant lease to verify that borrowers are telling the truth about income. When they don’t, that could make it easier for owners to inflate the amount of debt they borrow against the property."

"Lenders, brokers and others in the commercial real-estate industry—particularly those involved in rental apartments—have been discussing the fact that the 2010 Dodd-Frank financial overhaul required home borrowers to document their income, and home lenders to verify it, but the rule doesn’t apply to sales of multifamily housing."

"Patrick Ogiony, the mortgage broker who pleaded guilty to conspiracy to commit bank fraud in March, said 20 Morgan owned and managed apartment complexes in six states were involved in his crimes. He said abuses included providing false rent rolls to lenders, misrepresenting purchase prices and deceiving inspectors into thinking unoccupied units were occupied, according to a statement by the U.S. attorney’s office."

"Robert Morgan, the founder and longtime head of the company, hasn’t been charged. His nephew, Kevin Morgan, late last year pleaded guilty to conspiracy to commit bank fraud. Charges are pending against Robert Morgan’s son, Todd Morgan, and Frank Giacobbe, a mortgage broker who worked at the same firm as Mr. Ogiony. Lawyers for Kevin Morgan, Todd Morgan, and Messrs. Giacobbe and Ogiony declined to comment or couldn’t be reached. Mr. Giacobbe and Todd Morgan have pleaded not guilty."

"In one instance, Mr. Morgan’s nephew, son and the two mortgage brokers obtained a $45.8 million loan on an apartment complex near Pittsburgh after making vacant units appear occupied by turning on radios, placing shoes and mats outside doors, according to allegations in a federal search-warrant application."

"The family business had been seeking ways to ease cash-flow pressures, according to an affidavit filed in New York state court by Mr. Morgan’s brother, Herbert Morgan. He is Kevin Morgan’s father and co-invested with his brother on some Morgan properties, according to his affidavit. Herbert Morgan is suing Robert Morgan over the use of proceeds from some Texas property sales. He couldn’t be reached for comment."

"In his affidavit, Herbert Morgan said that his brother was eyeing property sales, savings and other measures to close a gap in operating cash flow that had grown to about $16 million by 2018. An email from Morgan’s chief financial officer, cited in the affidavit, suggested that Morgan executives 'sharpen our pencils to get to a realistic amount' of such gap-closing measures 'to get through 2018.'"

From WLOX in Mississippi. "Two Coast businesses claim thousands of dollars were not paid for services and materials provided for the construction of student housing. Friendship Oak Village opened in the fall of last year in Long Beach and is marketed as a place to live for USM Gulf Park students."

"Bill Hough with Phillips Building Supply in Gulfport said he sold materials and supplies to the builders of the complex, but said he wasn't paid in full. 'Things went along pretty well for a while, and they paid promptly. But towards the end of the job, they ceased paying us completely,' said Hough, Phillips Building Supply President."

"Now Hough is suing contractor, Encompass, in hopes of recovering $109,560.79. Skaggs Building Solutions CEO Jarrod Skaggs is also suing the contractor, saying he’s owed $71,000 for construction services performed in July 2018."

"According to Hough, not getting paid has put his small business in a bind. 'It’s really discouraging for us because we’re just a small business, and this is a terrible lick for us to take not getting paid,' said Hough. 'I haven’t lost this kind of money in ten years.'"