A report from the Buffalo News. "Over the course of 13 years, Robert Morgan built a real estate empire that stretches across 14 states and includes 36,000 apartments. But federal prosecutors said he did so with the help of nearly $500 million in fraudulent bank loans. Morgan is also named in a new Securities and Exchange Commission lawsuit that likens the conspiracy to a Ponzi scheme."

"'It's obviously significant,' U.S. Attorney James P. Kennedy Jr. said of the size and scope of the criminal wrongdoing. 'This type of fraud strikes at the very heart of the banking industry.'"

"In what is believed to be one of the biggest mortgage fraud cases since the Great Recession, Morgan was charged Wednesday with overseeing a criminal conspiracy from 2007 to 2019 that cheated lenders and insurers. The 114-count indictment – which builds on an earlier case against four other individuals – accuses Morgan of working with others to deceive financial institutions, as well as Fannie Mae and Freddie Mac, into providing larger mortgages on apartment properties than would otherwise have been issued."

"The indictment also claims the Rochester man used 'false and fraudulent' promises to trick lenders into thinking the properties were worth more, and then using false information to hide the lies and conceal the actual financial condition of the real estate. It also claims he and others deceived insurance companies into paying out more for damage claims than the actual cost of repairs."

"Investigators say that during the 13 years Morgan oversaw the conspiracy, it expanded and reached the point where at least a half-billion dollars of loans came under federal scrutiny. 'The breadth of the alleged fraud uncovered has grown greater and larger,' Gary Loeffert, special agent in charge of the FBI in Buffalo, said Wednesday."

"In a 20-minute arraignment before U.S. Magistrate Judge Michael J. Roemer, Morgan pleaded not guilty to the 46 charges against him, including conspiracy, bank fraud, wire fraud and money laundering. He was released on $100,000 bail. Since the investigation and indictments were unveiled, Morgan has been squeezed for financing, as Fannie Mae and Freddie Mac barred new loans to him and other lenders reined in their exposure. Some lenders have even initiated foreclosure proceedings, citing the fraud."

The Wall Street Journal. "The federal government accused one of the nation’s largest landlords of running a 'Ponzi scheme-like' effort using cash from small investors and of misleading banks to obtain bigger loans by using fake loan documents."

"The SEC said Mr. Morgan raised $110 million from more than 200 mostly small investors beginning in 2013, promising them a target return of 11%. Morgan used most of the cash as a 'fraudulent slush fund' to pay previous investors, the SEC said. In one instance, the SEC said cash was used to pay off an $11 million loan that Morgan allegedly obtained by falsifying financial information on a property in Pennsylvania."

"The Morgan case is being followed closely by the real-estate industry because many of Mr. Morgan’s apartment loans flowed through government mortgage giants Fannie Mae and Freddie Mac, which bought and repackaged them into securities purchased by investors. That has raised questions whether Fannie Mae and Freddie Mac sufficiently ensure buyers of multifamily apartment buildings aren’t misstating incomes—a common problem that plagued single-family housing before the 2008 crisis."

"'The excesses that happened in single-family are now being transferred to multifamily,' said Greg Michaud, director of real estate at Voya Investment Management in Atlanta, which lends to multifamily and other commercial properties."

"The SEC said investors are still owed $63 million, but funds through which Mr. Morgan raised money from investors have 'few if any assets' available to repay them. Mr. Morgan was personally involved in the fundraising, the SEC said. In one 2015 email exchange detailed by the SEC, Mr. Morgan told a colleague to 'push as hard as you can' and 'put the hammer down and raise more funds' from investors. In an effort to help repay investors, the agency also is seeking to freeze Mr. Morgan’s assets."