Morgan Management in process of proposing mixed-use development
By Lauren Young
Staff Writer
Morgan Management LLC, the developer of a much-debated proposed mixed-use development project in Fayetteville, has recently become an official target of an FBI investigation into bank and wire fraud.
Morgan Management is currently attempting to develop an apartment complex on 547 E. Genesee Street at the former O’Brien & Gere site, which has received some community criticism and questioning since its inception, from residents to the Fayetteville-Manlius school district.
On May 14, federal authorities raided Morgan’s Perinton office in Rochester under a court-ordered search warrant, seizing Morgan company emails on a computer server maintained by Microsoft Corp., according to the Rochester Democrat and Chronicle newspaper.
On May 10, a federal application for a search warrant was filed, requested by an agent from the Federal Housing Finance Agency’s Office of the Inspector General, alleging that two of Founder and CEO Robert C. Morgan’s relatives – son Todd and nephew Kevin – committed bank and wire fraud, violating Title 18, United States Code, Sections 1343 (Wire Fraud) and 1344 (Bank Fraud).
Kevin Morgan is vice president of Morgan Management and Todd Morgan is a project manager, both of whom have been involved in the Fayetteville project.
From 1979, Pittsford-based Morgan Communities has grown to over 140 properties and more than 34,000 units across 14 states, according to the company website.
In Onondaga County, Morgan Management has completed several projects – from the Madison Row development in Manlius completed as of late 2014, Canal Crossing in Camillus in early 2016 and The Landings at Meadowood, an approximately $66.17 million development in Baldwinsville (a project they sought an estimated $5 million in tax breaks for) completed in March 2016.
Morgan Management is still awaiting approval for its mixed-use development project in Fayetteville, which the village will conduct a SEQR (State Environmental Quality Review) for on June 18. The proposal seeks to incorporate five, three-story apartments and ten townhouses – totaling to 200 units – with two mixed-use buildings.
Just a few days ago, Fayetteville resident Jason Feulner even created an online petition to oppose the project, called fayettevilletogether.com
After only 24 hours of the site being activated, Feulner said over 150 village and town residents had already signed.
The fraud accusations, discussed in a 91-page affidavit requested by federal law enforcement officer Erik Lars Hensen, describes how the pair allegedly deceived lenders into providing larger loans for properties owned by Morgan Communities and Morgan Management, as well as inflating the value of the properties.
According to the document, the investigation alleges that both Todd and Kevin, as well as Frank Giacobbe and Patrick Ogiony of Aurora Capital Advisors LLC, “conspired to provide false information to financial institutions to overstate properties’ incomes” by reporting higher rents than what was being charged and reporting higher occupancy rates.
In emails from October 2014, Giacobbe emailed Kevin Morgan with an attached “pro forma” document listing several categories of income and expenses for Rochester Village, including $72,900 in annual income for “storage space,” with storage rentals priced at $45 per month.
The income on the pro forma would be consistent with 180 storage units.
The next day, after the property manager emailed Todd Morgan indicating that the property had only 45 storage units, Giacobbe emailed Todd and Kevin and asked, “ok, where did 72k come from on the pro forma,” to which Kevin replied, “magic.”
Additionally, income for tenant cable was reported, though cable is included for free at the complex.
“A slight change in rental income per unit, projected over time, can significantly impact the property valuation calculated by the appraiser and lender,” the affidavit stated.
Rent rolls were also allegedly falsified, as “the conspirators reported that units in one of the buildings at Rochester Village were occupied and earning rental income before the Cranberry Township Planning and Development department issued a certificate of occupancy permitting those units to be occupied.”
The investigation even revealed that Giacobbe, Kevin and Todd Morgan conspired to stage unoccupied units during inspections, leaving out radios, shoes and mats by apartments to create the illusion they were occupied. Giacobbe even allegedly arranged for a woman to stage an apartment to make it appear lived in during an inspection, telling inspectors that her boyfriend was asleep in the bedroom, which lacked a bed.
Just last November, Morgan Management was found to be under FBI investigation for its financial dealings focusing on Buffalo projects, but later extending beyond.
But will any of this have an impact on Morgan Management’s proposed mixed-use development in Fayetteville? Not until a trial proves the company guilty, said Fayetteville Mayor Mark Olson.
“They actually called us while the FBI was in their office,” said Olson, adding that the management team called to let the village know they were complying with the FBI and were still making sense of the charges.
“I give them credit for letting us know what was going on,” said Olson. “Right now we’re still moving forward because they haven’t been found guilty yet, and we feel that until something happens, we have to move forward.”
While the village and planning boards are moving forward with their joint SEQR review meeting on June 18, Olson said they are still “being cautious.”
While joint meetings are far from usual in the village, it was requested due to the amount of resident concerns for both this project and the proposed N. Burdick Street development.
Olson cited how the proposed COR Development Co. LLC project in Manlius is still moving forward, despite the indictment of two of its executives in late 2016.
Earlier this year, COR Development proposed to build a major residential development – The Woodlands at Limestone Lakes – on 129 acres across from the Towne Center shopping plaza.
In November 2016, Cor Development executives Steven Aiello and Joseph Gerardi were indicated on six felonies, including bribery and wire fraud, after former U.S Attorney Preet Bharara accused them of bribing a former top aide to Gov. Andrew Cuomo.
According to the Albany Times Union, Aiello was convicted this March on one count, while Gerardi was acquitted. Both men face charges in a second federal corruption trial slated for this June, related to an alleged bid-rigging scheme involving SUNY Polytechnic Institute projects.
“People have to understand we’re concerned too, but [Morgan Management] has legal rights, like everyone else has legal rights,” said Olson. “I have to at least give them credit for being open and honest.”
While the investigation focuses on their Rochester dealings, Olson added that Mayor Gary White of Liverpool and Mayor Richard Clarke of Baldwinsville have reported no problems with the company.
The joint village and planning board SEQR review meeting will start at 6 p.m. on June 18 at the Fayetteville Town Hall. It will not be a public hearing.
