Four real estate professionals could face up to 30 years in prison and hefty fines after being indicted on charges related to allegedly defrauding Fannie Mae, Freddie Mac and multifamily lenders.
The 114-count superseding indictment alleges that three people associated with real estate investor Morgan Management — CEO Robert Morgan, Project Manager Todd Morgan and Director of Finance Michael Tremiti — along with loan brokerage Aurora Capital Advisors' owner Frank Giacobbe all engaged in a conspiracy to commit wire fraud and bank fraud, among other things.
The defendants allegedly overstated the incomes of properties owned by Morgan Management to manipulate debt service coverage ratios used in underwriting as they worked with lenders such as Berkadia Commercial Mortgage and Arbor Commercial Mortgage, as well as the government-sponsored enterprises.
The indictment was based on investigations by the Federal Housing Finance Agency's Office of Inspector General and the Federal Bureau of Investigation.
"The financing of multifamily loans in a significant segment of Fannie Mae's and Freddie Mac's portfolio. As these charges demonstrate, FHFA-OIG will work with our partners in law enforcement to investigate and hold accountable those who seek to victimize the entities regulated by the FHFA," Richard Parker, acting deputy inspector general for investigations for the FHFA-OIG, said in a Department of Justice press release.
The estimated losses sustained by lenders and the government-sponsored enterprises due to the fraud is more than $25 million, according to the release. The defendants fine could be double the loss caused by the crimes.
A half-billion dollars of loans and at least 70 properties in five states were allegedly involved in the scam.
All the defendants have been released from custody with conditions.