WATERTOWN — The Miami mortgage company that has defaulted on the Autumn Ridge apartment complex also has filed a lawsuit alleging fraud.
The mortgage company, RSSCSAIL2016C7-NY PAR LLC, Miami, filed the suit last week in state Supreme Court in Monroe County, naming Robert and Kevin Morgan, principals of Morgan Management, Pittsford.
The mortgage company is the current holder of a $21.28 million mortgage of the 394-unit apartment complex that Morgan Management owns on Route 202 in the town of Watertown.
The mortgage company took the first step in foreclosing on the apartment complex after Kevin Morgan pleaded guilty in federal court in December to conspiracy to commit bank fraud, according to court papers filed last week in the Jefferson County Clerk’s office.
Autumn Ridge is among dozens of rental properties in New York and several other states that allegedly received $500 million in fraudulent bank loans.
Robert Morgan is president of Morgan Management, which owns 100 multifamily properties and grew to become one of the largest firms in the state. Kevin Morgan was the company’s vice president and is Robert Morgan’s nephew.
Robert Morgan’s son Todd Morgan and two mortgage brokers, Patrick Ogiony, 35, Buffalo, and his boss, Frank Giacobbe, also were charged in the massive bank fraud scheme which came to light in 2017.
The four men conspired to defraud financial institutions between March 2011 and June 2017, the U.S. attorney’s office said.
The four men are accused of obtaining more than $500 million worth of loans connected to properties, including apartment complexes in Buffalo, Canandaigua, Syracuse and Avon in Livingston County, and in Pennsylvania, Texas, South Carolina and North Carolina.
The lawsuit alleges that Robert and Kevin Morgan used a payment of a fictitious $2.5 million loan and supporting documents to receive more than what was needed for the Autumn Ridge project when it was built in 2013.
The alleged fictitious loan came from an entity called R2 Mezz Fund LLC, which is owned and controlled by Robert Morgan through one of his companies and shares an address with his company’s Pittsford offices, according to the lawsuit.
R2 Mezz Fund was created less than a week before the falsified loan documents were filed in a closing letter stating that Morgan Management was paid the loan when one did not exist, according to the lawsuit.
At the time he pleaded guilty, Kevin Morgan admitted that he, at the direction of his uncle, Robert Morgan, conspired to defraud financial institutions.
They “used a portion of the loan proceeds for purposes other than that disclosed in the loan application, to wit, to maintain or improve other properties managed by Morgan Management and to satisfy debts associated with other properties managed by Morgan Management,” the lawsuit states.
Morgan Management would not have received the $21 million loan without receiving the $2.5 million payment, court papers said.
Until Mr. Ogiony pleaded guilty, it was not known publicly that Autumn Ridge was connected to the massive bank fraud scheme.
Six years ago, Morgan Management built the 394-unit townhouse project on County Route 202 in reaction to the need for more rental housing for Fort Drum soldiers returning from deployment.
Morgan Management had planned to construct an additional 359-unit townhouse project across the street on County Route 202, but the project never materialized after enough rental housing was built in the region for returning Fort Drum soldiers.
Morgan Management also owns the former city fire department station at 217 Arsenal St. and a five-unit strip plaza in front of the Watertown Walmart store on outer Arsenal Street.
Kevin Morgan and Mr. Ogiony have not been sentenced yet.
The case is still pending against Todd Morgan and Mr. Giacobbe. Robert Morgan has not been charged with a crime.