Brookly, NY Real Estate Scheme, Predatory Lending and Short-Selling, Homeowner Beware!

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Five Guys Whose Brooklyn Real Estate Scheme Was Featured On “Million Dollar Listing New York” Just Got Arrested

The scheme, which centered on the neighborhood of Bedford-Stuyvesant, was first laid out in a BuzzFeed News investigation.

Five real estate investors whose business was the subject of a major BuzzFeed News investigation were arrested this week for allegedly defrauding lenders and taxpayers out of millions of dollars in a scheme that targeted New Yorkers at risk of foreclosure.

The US Attorney’s Office for the Eastern District of New York charged the men with conspiracy to commit wire fraud and bank fraud.

Two years ago, BuzzFeed News revealed how this group of investors turned properties on the brink of foreclosure into million-dollar listings sold on the reality TV show Million Dollar Listing New York.

Amid the lingering effects of the mortgage crisis, Iskyo “Isaac” Aronov and his four partners located homeowners in rapidly gentrifying neighborhoods who owed more than they could pay. The partners negotiated with banks to let the property go for far less than market rate, a process known as short selling. Then, with the original owners gone, the partners performed fast gut renovations, installing modern fixtures and marble counters, and resold the homes for north of a million dollars.

Prosecutors this week said Aronov and his team, which controlled every aspect of the short-selling process, traded on “false, misleading and incomplete” information, lying to the government and to lenders like Fannie Mae and Freddie Mac, failing to disclose unauthorized payments and their business relationships. BuzzFeed News linked the group to nearly 240 homes.

“As alleged, the defendants defrauded mortgage loan holders out of millions of dollars, with taxpayers saddled with much of the loss,” Richard P. Donoghue, United States attorney for the Eastern District of New York, announced.

In the process, the partners helped fuel the rapid gentrification of brownstone Brooklyn, displacing black and Latino families who in many cases had lived there for decades, and repopulating the area with young, mostly white professionals.

“What makes their alleged crimes even more egregious was their artificial devaluation of properties that, when resold or ‘flipped,’ resulted in large profits,” said Special Agent in Charge Christina Scaringi of the US Department of Housing and Urban Development’s Office of Inspector General, one of several agencies involved in the investigation. “Many of these homes were located in economically challenged areas of New York where affordable housing is at a premium.”

The indictment comes amid a larger crackdown on predatory real estate investment targeting New Yorkers who remain in foreclosure, dubbed an “epidemic of fraud” by an investigative grand jury last year. At least 20 people have been convicted in alleged scams. New York state also passed legislation this year meant to better protect homeowners who had been the target of predatory investment or fraud.

BuzzFeed News found at least 12 lawsuits in which borrowers said they had been deceived by the group.

In some cases, homeowners said the investors got them to sign over the deeds to their homes before the sales went through, claiming it was a normal part of the short-sale process. That gave the investors leverage to pay less, because no one else could buy the house — but this left some homeowners, like Denise Riera of the Bronx, on the hook for mortgages to homes they no longer owned.

Aronov appeared in court in Miami and his bond was set at $500,000, according to court papers. The four other men were arraigned in Brooklyn. Two of them also were released on bond, including Michael Herskowitz, a 40-year-old Brooklyn lawyer.

Since 2015, Herskowitz has been implicated in at least two other schemes targeting borrowers in foreclosure in Florida and Queens. He paid a $281,000 settlement in the Florida case and pleaded guilty to a disorderly conduct violation in the second.

Herskowitz’s attorney declined to comment for this story, citing the ongoing case. Neither Aronov’s attorney nor those for the three other defendants, Michael Konstantinovskiy, Tomer Dafna, and Avraham Tarshish, replied to requests for comment.

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How to Stop Scammers – from the Eyes of the Orthodox – The Yeshiva World Analysis, Interesting Read

“Sadly, immoral individuals have often applied the following 5 step method to ripping off substantial funds from members of our community for years.
  1. Give a large donation to an institution with a wealthy donor base. Do so magnanimously and genuinely try to help out that institution – showing that it is dear to your heart.
  2. Come up with a false, but effective sounding business plan or investment strategy, and casually talk about it to wealthy individuals.
  3. Name drop big company names and or people that have signed on and show false paper work that “proves” the whole scam.
  4. Take investment money from others and, at the outset, pay a hefty return on profits. Do so from other moneys that you are receiving.
  5. Give a significant donation to the cause where a well-liked Rabbinic leader stands behind the institution and develop a relationship with him. You will need to use this relationship in order to attempt to influence him or others around him into helping defend you against those people who realize that you have stolen their money.  Articles in the Jewish media can be squashed.  This will also help you gain more people in which to obtain more money from.
The above, is not a cynical view of the world.  It is, unfortunately, a scenario that has been repeated numerous times.  It is more prevalent than it should be, in this author’s view, because people are almost entirely unaware of a Torah obligation that is incumbent upon all of us.”

PREVENTING PONZI SCHEMERS

Yes, there is a Torah obligation upon all of us to prevent the proliferation of Ponzi schemers and rip-offs within our community.  It is called the obligation to be “chas al mammon yisroel” – a fulfillment of the Torah Mitzvah of “v’ahavata larayacha kamocha.”

The Gemorah in Moed Katan 27b tells us that when Jews were burying their dead in the finest clothing, Rabban Gamliel HaZakain arose and declared that enough was enough. The rising pressures, the “keeping up with the Joneses” in how to dress the deceased was causing enormous economic pressure on the living. “It must stop,” declared the rabbi, and the tachrichim, burial shrouds, we now use became the norm.

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Morgan Management, Mortgage Fraud, Robert Morgan, Ponzi Scheme-Like Operation

Rochester developer Robert C. Morgan, photographed arriving  at the Robert H. Jackson U.S. Courthouse in Buffalo Wednesday,  has been charged  with 46 counts of wire fraud, bank fraud and money laundering as part of what authorities assert was a conspiracy to defraud lenders and insurers out of hundreds of millions of dollars. Hickey/Buffalo News)

Rochester developer Robert C. Morgan, photographed arriving at the Robert H. Jackson U.S. Courthouse in Buffalo Wednesday, has been charged with 46 counts of wire fraud, bank fraud and money laundering as part of what authorities assert was a conspiracy to defraud lenders and insurers out of hundreds of millions of dollars. Hickey/Buffalo News)

Effort to freeze Morgan assets, seize apartments could impact Buffalo properties

The U.S. Attorney’s Office wants to seize two Buffalo apartment complexes as part of its criminal case against Rochester developer Robert C. Morgan and three other defendants.

The Securities and Exchange Commission wants to freeze Morgan’s assets — including an investment fund that holds a loan for Morgan’s interest in a redevelopment project at Gates Circle.

One complication: Morgan isn’t the sole owner of either apartment complex. And his interest in the Gates Circle project is a partnership with another developer.

That could impact the other owners of all three properties who are not accused in the case.

Morgan, of Pittsford, was charged Wednesday with 46 counts of wire fraud, bank fraud and money laundering as part of what authorities assert was a conspiracy to defraud lenders and insurers out of hundreds of millions of dollars. The developer has amassed more than $3 billion in loans, of which prosecutors allege $500 million was fraudulently obtained.

Morgan’s son, Todd, was also charged in the case, along with Morgan’s financial director, Michael Tremiti, and mortgage broker Frank Giacobbe.

In a related but separate action, the SEC filed an emergency lawsuit accusing Morgan of running a Ponzi scheme-like operation, which allegedly raised money from investors for new real estate projects but then siphoned off and misused the funds to repay previous investors and loans.

The SEC says there’s not enough money to repay those investors — especially after $21 million in redemption requests from several of them early this year. So the agency sought emergency action to protect them, asking the court to freeze the assets of Morgan and his companies.

Forfeitures sought

Morgan’s companies, Morgan Communities and Morgan Management, own or manage 140 apartment complexes with 36,000 apartments in 14 states — including 3,500 units in the Buffalo area.

The government is seeking the forfeiture of 12 properties in New York and Pennsylvania. They include the Morgan Ellicott Apartments on William Street and Amherst Gardens on East Amherst Street.

Morgan, however, does not have full control of either property. Morgan is a co-owner of Morgan Ellicott Apartments along with Brett Fitzpatrick, and has no current ownership of Amherst Gardens, which is owned by Fitzpatrick and Aaron Siegel.

Prosecutors say Amherst Gardens was the subject of wire and bank fraud allegedly committed by Giacobbe, the mortgage broker.

Similarly, they accuse Giacobbe and Morgan of submitting fake records to get two loans on the Morgan Ellicott apartments.

Siegel declined to comment, as did his attorney, Jonathan Schechter of Gross Shuman.

Barbara Burns, spokeswoman for the U.S. Attorney’s Office, said that even a property that is not owned by Morgan or any of the current defendants is still “subject to forfeiture because it is part of the alleged bank fraud.” However, she said, if a judge orders a seizure, property owners who are not defendants in the case can file a separate action to prevent it.

Seizure of any property would affect only the ownership, not the tenants.

SEC wants to freeze assets 

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Morgan Management CEO, Robert Morgan – “Ponzi Scheme-Like” Mortgage Scam

Morgan Management CEO Robert Morgan (Credit: Facebook and iStock)

One of the country’s largest landlords accused of “Ponzi scheme-like” scam

The Justice Department seeks $267M from defendants while lenders are ready to foreclose

The Securities and Exchanges Commission and the Justice Department are alleging that Robert Morgan, one of the largest landlords in the country, ran a “Ponzi scheme-like” scam.

The SEC filed civil charges against Morgan, who they say raised $110 million from more than 200 investors — promising returns of 11 percent — only to use that cash as a “fraudulent slush fund” to pay previous investors, the Wall Street Journal reported. Investors are still owed $63 million. Morgan, who has previously denied any wrongdoing, is also facing criminal charges from the Justice Department of conspiracy to commit bank fraud, wire fraud and money laundering.

Lenders are chomping at the bit to foreclose on the properties involved under the fraud provision most mortgages have, as in Syracuse, New York, where Bob Morgan recently lost a 208-unit apartment complex to mezzanine lender SteepRock Capital LLC.

Morgan Management says it has 140 properties and 34,000 units in 14 states. It was ranked by Yardi Matrix as the 15th largest portfolio in the U.S. earlier this year.

The SEC case could reverberate through the rest of the industry, as it raises questions about how Fannie Mae and Freddie Mac guard against multifamily apartment buildings over reporting income, a problem that afflicted single-family housing in the lead up to the 2008 crisis.

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Robert Morgan – Largest Mortgage Fraud, Insurance Fraud

Developer Robert Morgan charged in $500M fraud; Syracuse-area sites involved

 

Rochester, N.Y. — Robert Morgan, a prominent developer and property owner across Upstate New York, was charged Wednesday in a massive fraud scheme involving more than half a billion dollars in fraudulently obtained loans.

At least three of the properties used as part of the scheme are in the Syracuse area.

Losses to lenders from the fraudulent loans in the scam totaled about $25 million, prosecutors said. Insurers lost about $3 million from alleged insurance fraud.

Morgan’s business, based in the Rochester area, has been under investigation for some time and other individuals, including some of his family members, were already facing charges. Morgan himself was implicated in the crimes for the first time earlier this month.

The new 114-count indictment filed Wednesday charges Morgan, Morgan’s son Todd, former Morgan financial director Michael Tremiti and broker Frank Giacobbe with multiple crimes. Todd Morgan and Giacobbe had been charged previously

The indictment alleges bank fraud, wire fraud, money laundering, conspiracy and insurance fraud. The crimes carry a maximum penalty of 30 years in prison and millions in fines.

The scheme included properties across Upstate New York, Pennsylvania, South Carolina, North Carolina, Illinois and Texas, prosecutors said.

The Syracuse-area properties allegedly used in the fraud included the Brookwood on the Green apartment complex in Liverpool, Rivers Pointe luxury apartments in Clay and Rugby Square apartments on Dorchester Avenue in Syracuse.

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