The FBI and DOJ Press Release Indicting 4 People with Mortgage Fraud.
The Bankers All Escaped any Internment post 2008 and indeed they now sit in Trump’s Cabinet, especially Mnuchin, Otting and Ross.
Otting is ‘Acting’ Director of FHFA yet was responsible for bilking billions from Senior Citizens by evicting them from their homes – The “Freedom” Reverse Mortgage Plan.
Richard Parker, Acting Deputy Inspector General for Investigations for the Federal Housing Finance Agency, Office of Inspector General (FHFA-OIG), said, “the financing of multifamily loans is 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 FHFA.”
Defendants Kevin Morgan and Patrick Ogiony were previously convicted of conspiracy to commit bank fraud, and defendant Scott Cresswell was previously convicted of conspiracy to commit wire fraud for their roles in the multi-million dollar fraud scheme. All three defendants are awaiting sentencing.
The superseding indictment is the result of an investigation by the Federal Bureau of Investigation, under the direction of Special Agent-in-Charge Gary Loeffert, and the Federal Housing Finance Agency, Office of Inspector
General, under the direction of Special Agent-in-Charge Robert Manchak, Northeast Region.
The fact that a defendant has been charged with a crime is merely an accusation and the defendant is presumed innocent until and unless proven guilty.
CONTACT: Barbara Burns
PHONE: (716) 843-5817
FAX #: (716) 551-3051
BUFFALO, N.Y.–U.S. Attorney James P. Kennedy, Jr. announced today that a federal grand jury has returned a 114-count superseding indictment charging Robert Morgan, Frank Giacobbe, Todd Morgan, and Michael Tremiti, with conspiracy to commit wire fraud and bank fraud for their roles in a half billion dollar mortgage fraud scheme.
The defendants each face various additional charges such as wire and bank fraud, and money laundering. Todd Morgan and Robert Morgan are also charged with wire fraud conspiracy to defraud insurance companies. The charges carry a maximum penalty of 30 years in prison and a fine in the amount of double the loss caused by the crimes, which is currently estimated to exceed $25,000,000.
These properties included:
• The Preserve at Autumn Ridge, Watertown, NY;
• The Eden Square Apartments, Cranberry Township, Pennsylvania;
• The Rochester Village Apartments at Park Place, Cranberry Township, Pennsylvania;
• The Reserve at Southpointe, Canonsburg, Pennsylvania;
• 7100 South Shore Drive Apartments, Chicago, Illinois;
• The Avon Commons Apartments, Avon, NY;
• The Morgan Bay Apartments, Houston, Texas;
• Brookwood on the Green, Syracuse, NY;
• The Creek Hill Apartments, Rochester, NY;
• Hickory Hollow, Rochester, NY;
• The Knollwood Manor Apartments, Rochester, NY;
• The Links at Centerpointe, Canandaigua, NY;
• The Nineteen North Apartments, Pittsburgh, Pennsylvania;
• The Overlook at Golden Hills, Lexington, South Carolina;
• The Penbrooke Meadows Apartments, Rochester, NY;
• The Trails of North Hills Apartments, Raleigh, North Carolina;
• The Rivers Pointe Apartments, Syracuse, NY;
• The Union Square Apartments, Rochester, NY;
• The View at MacKenzi, York, Pennsylvania; and
• The Villas of Victor, Rochester, NY.
In a rare move, one that analysts at the time called both risky and undiplomatic, Otting started an email campaign through OneWest’s website, asking bank customers and others to send form letters to regulators saying that the deal should be approved without a hearing.
To facilitate the conspiracy:
• Morgan Management provided property management, accounting, and financial reporting services for the properties owned by limited liability companies controlled by defendant Robert Morgan.
• The defendants conspired to manipulate income and expenses for properties to meet debt service coverage ratios (“DSCRs”) required by lending institutions. The manipulation included, among other things, removing expenses from information reported to lenders and keeping two sets of books for at least 70 properties, with one set of books containing true and accurate figures and a second set of books containing manipulated figures to be provided to lenders in connection with servicing and re-financing loans.
• The defendants conspired to present lending institutions with false and fraudulent inflated construction contracts and invoices that falsely reported to the lending institution that the contractor constructing a property was being paid more than the contractor was actually being paid.
• The defendants provided false information to financial institutions and government sponsored enterprises that overstated net incomes of properties and thereby induced financial institutions to: (1) issue loans (a) for greater values than financial institutions would have authorized had they been provided with truthful information; and (b) that the financial institutions would not have issued at the time of issuance had they been provided with truthful information; and (2) forgo contractual rights that would have inured to the financial institutions had the defendants and Morgan Management presented accurate financial information to the financial institutions.
• The defendants employed various mechanisms to mislead inspectors, appraisers, financial institutions and government sponsored enterprises with respect to the occupancy of properties.
• The defendants falsely inflated the amounts owed on properties, by among other things, (1) providing false documentation of obligations purportedly associated with the properties, (2) misrepresenting the actual purchase prices of properties by providing false contracts and contract prices, and (3), as set forth above, presenting false construction contracts and invoices.
In the wire fraud conspiracy to defraud insurers, Todd Morgan and Robert Morgan are accused of conspiring with Kevin Morgan and Scott Cresswell to present false and inflated contracts and invoices for repairs to insurers after damages to properties in Robert Morgan’s real estate portfolio. These properties include the Summerwood Apartments in Merrillville, Indiana; the Eden Square Apartments in Cranberry Township, Pennsylvania; and at thirty-four properties in the Rochester, New York area after a March 2017 windstorm in that area.
The defendants are also charged with money laundering conspiracy for engaging in monetary transactions in excess of $10,000 using the proceeds of wire fraud and bank fraud.
The total loss sustained by financial institutions and government sponsored enterprises throughout the mortgage fraud scheme is currently estimated to exceed $25,000,000. The loss resulting from the insurance fraud scheme is currently estimated at approximately $3,000,000.
The defendants made an initial appearance before U.S. Magistrate Judge Michael J. Roemer and were released on conditions.
“The charges announced today reflect this Office’s commitment to ensuring that those who do business with the mortgage, banking, and insurance industries act with honesty and integrity,” stated U.S. Attorney Kennedy. “The scope of the dishonesty and deceit alleged here—both in a geographic sense as well as in terms of the dollar value of the mortgages and properties involved—was expansive. This type of fraud strikes at the very heart of those industries, and I commend the FBI and the FHFA-OIG for the significant resources they devoted to this investigation in order to reveal the full scope of the illegal conduct alleged in this superseding indictment.”
“Today’s charges allege Robert Morgan-and the men he surrounded himself with in business-worked hard with a desire to creatively subvert the integrity of the financial industry,” said FBI Buffalo Special Agent-in-Charge Gary Loeffert. “In response, we worked just as hard and creatively to put a stop to it. We hope the indictment returned in this case helps to educate and protect the tens of thousands of investors who own mortgage-backed securities.”
The Justice Department announced that Financial Freedom, a OneWest subsidiary, agreed to pay $89 million to settle allegations it defrauded the Federal Housing Administration regarding reverse mortgage insurance payments from March 31, 2011 to Aug. 31, 2016.
President Trump on Tuesday nominated Joseph Otting, the former chief executive of Pasadena’s OneWest Bank and an ally of Treasury Secretary Steven Mnuchin, to a key financial regulatory position.
The move drew fire from consumer advocates and Democrats, who pointed out that Otting would be in a position of overseeing banks even though one he headed up has run into trouble with regulators.
Otting is being tapped to be the comptroller of the currency, a powerful regulator who oversees federally chartered banks, the White House announced Monday night. Those include the banking arms of some of the largest financial institutions in the country, including JP Morgan Chase & Co. and Wells Fargo & Co.
His role with OneWest, which has been criticized for its foreclosure practices, made Otting’s nomination concerning, said Sen. Sherrod Brown (D-Ohio).
“If Mr. Otting didn’t deal fairly with the customers at his own bank, it’s difficult to see why he’s the best choice to look out for the interests of customers at more than 1,400 banks and thrifts across the country,” he said.
Brown is the top Democrat on the Senate Banking Committee, which must confirm the nomination.
The Office of the Comptroller of the Currency, which is an independent bureau of the Treasury Department, was a pivotal player in the $185-million settlement last year with Wells Fargo involving its creation of unauthorized accounts.
Otting would replace Keith Noreika, a banking industry lawyer whom Trump appointed last month as acting comptroller of the currency to replace Thomas Curry after his five-year term expired.
Otting’s nomination is likely to revive Democratic criticisms of Mnuchin regarding the practices of OneWest Bank. They were a key factor in Mnuchin’s narrow 53-47 confirmation in February, the slimmest margin ever for a Treasury secretary.
In 2009, Mnuchin led a group of investors who put up about $1.6 billion to buy the failed IndyMac bank, a leading subprime mortgage lender, and renamed it OneWest. Otting was hired as OneWest’s chief executive the following year.
Mnuchin served as the bank’s chairman from 2009 to 2015. Democrats accused the bank of being “a foreclosure machine” that helped Mnuchin profit from the 2008 financial crisis, which left many homeowners unable to make their mortgage payments.
The bank was sold to CIT Group in 2015 for $3.4 billion.
Mnuchin denied the allegations, saying the bank was trying to deal with IndyMac’s poor mortgage portfolio. Nevertheless, the Office of Thrift Supervision, a savings-and-loan regulator that merged into the Office of the Comptroller of the Currency, chided the bank for its practices during Mnuchin’s ownership and Otting’s leadership.
In 2011, the agency said in a regulatory order that OneWest had engaged in robo-signing — the practice of having workers sign mortgage- and foreclosure-related documents without reviewing them or verifying they were accurate.
“The president’s choice for watchdog of America’s largest banks is someone who signed a consent order — over shady foreclosure practices — with the very agency he’s been selected to run,” Brown noted.
Last month, the Justice Department announced that Financial Freedom, a OneWest subsidiary, agreed to pay $89 million to settle allegations it defrauded the Federal Housing Administration regarding reverse mortgage insurance payments from March 31, 2011 to Aug. 31, 2016.
Like acting Comptroller Noreika, the previous five comptrollers have all been lawyers, and most have a record of public service.
Thomas Curry, whom Noreika replaced, was a state bank overseer in Massachusetts and a director of the Federal Deposit Insurance Corp. before being appointed as comptroller in 2011.
Curry’s predecessors, John Dugan and John Hawke Jr., were both attorneys who had worked in private practice as well as for the Treasury Department and for congressional committees, according to the OCC, which maintains a list of all former comptrollers.
Otting, by contrast, has no record of government service and has spent his career in commercial banking. If approved, he would be the first former top bank executive to lead the bank regulatory agency in nearly a century.
That troubles some critics, who say putting Otting atop the regulatory agency would amount to allowing banks to regulate themselves.
“Are bank regulators there to work for the banks, or are they there to ensure banks are safe and sound and not risking the economy?” said Paulina Gonzalez, executive director of the California Reinvestment Coalition and a vocal critic of OneWest. “Putting Joseph Otting in this position is risking the livelihood of everyday Americans.”
Bartlett Naylor, financial policy advocate at Public Citizen, a public interest group, said Trump showed he doesn’t care about victims of the financial crisis. And Naylor said Otting’s relationship with Mnuchin raised ethical questions.
“Will Otting be independent of political interests from the president’s Treasury secretary? Or will he reprise his role as Mnuchin’s employee?” Naylor said.
Otting butted heads with advocacy groups after CIT announced its plans to buy OneWest. The California Reinvestment Coalition and other groups said the two banks had not made enough commitments to serve low-income and minority communities and urged the OCC and the Federal Reserve to hold a hearing about the deal.
In a rare move, one that analysts at the time called both risky and undiplomatic, Otting started an email campaign through OneWest’s website, asking bank customers and others to send form letters to regulators saying that the deal should be approved without a hearing.
Otting would fit in with the Trump administration’s preference for appointees that come from the business world rather than from Washington. Mnuchin, too, lacks the inside-the-Beltway experience shared by most of his predecessors. Treasury secretaries appointed by Presidents Obama and George W. Bush all worked for the federal government at some point in their careers.
But while Mnuchin is a creature of Wall Street — he is the son of a former Goldman Sachs partner and spent 17 years at that firm — Otting is a classic main-street banker. He spent the bulk of his career in the business lending divisions of Union Bank and US Bancorp.
Lloyd Greif, a longtime L.A. investment banker, said that he’s known Otting since his days at Union Bank and that Otting’s experience makes him a shoo-in for comptroller.
“He’s been at community banks, he’s been at money center banks — he has the experience that really spans the gamut,” Greif said. “Steve [Mnuchin] is a Wall Streeter, but Joseph is a dyed-in-the-wool commercial banker.”
CIT Group fired Otting in late 2015 as it reshuffled executives following the OneWest acquisition. Otting walked away with more than $12 million in severance.
Since then, he has been spending much of his time in Las Vegas, where he is one of the co-owners of the private Southern Highlands Golf Club.
Otting, who goes by Joseph, not “Joe,” earned his undergraduate degree from the University of Northern Iowa, where he worked in a campus pool hall.
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