CRANBERRY TWP — The developer associated with the Rochester Village and Eden Square housing developments is under federal investigation in New York, federal court documents show.

According to documents filed May 10 in the U.S. District Court for the Western District of New York, a search warrant was approved giving investigators access to four email accounts associated with Morgan Communities and Morgan Management, a company owned by Robert Morgan and based in Pittsford, N.Y.

The search was undertaken after an investigation revealed Morgan’s son, Todd, and nephew, Kevin, along with mortgage brokers Frank Giacobbe and Patrick Ogiony, allegedly provided false information to financial institutions and overstated the properties’ incomes.

The alleged fraud caused lenders to issue loans for greater value than they normally would have, or issue loans they normally would have declined to offer in the first place, according to federal prosecutors.

The investigation was first reported by the Democrat & Chronicle newspaper in Rochester, N.Y., which obtained court records related to the search and the affidavit after they were apparently accidentally posted online.

The documents have since disappeared from the public website on which they were found, and remain sealed in court. A copy of the federal affidavit was provided to the Butler Eagle by the Democrat & Chronicle.

In it, Lars Hansen, special agent with the Office of the Inspector General, outlines what investigators say is proof that Todd and Kevin Morgan committed wire and bank fraud.

Specifically, the investigation focuses on three properties in Pennsylvania, including Rochester Village and Eden Square in Cranberry Township, as well as Southpointe in Canonsburg.

Cranberry plans

Rochester Village Apartments at Park Place is a community of apartment buildings with retail shops off Rochester Road. There are 228 units in the development, according to township records.

The neighborhood is part of the larger, 195-acre Park Place development off Rochester and Powell Roads that also includes town homes and single family homes built by Ryan Homes, but they are not owned by Morgan Communities.

The assessed value for all the buildings in Rochester Village development is $2.9 million, according to Butler County tax assessment records.

The development includes six three-story apartment buildings along Cross Creek Drive and two buildings with first-floor retail and second- and third-floor apartments on Kettlecreek Drive and Big Spring Drive.

The Park Place development was first approved by the township in 2005, and revised final approval for phases M-1, M-2 and M-3 was granted in April 2012. The M-1 and M-2 phases of the project dealt with the Rochester Village buildings.

Eden Square Apartments is an apartment complex off Glen Eden Road that has 240 units on 23 acres, according to township records. The development was approved by the township in June 2013.

The assessed value of the Eden Square development is $2.35 million, according to Butler County tax assessment records.

The properties are deeded to Park Place Pittsburgh LLC, which is listed as a subsidiary of and shares an address with Morgan Communities and Morgan Management.

Phantom tenants

According to the federal affidavit, investigations at Rochester Village showed, “a variety of fraudulent conduct in connection with attempts to secure loans on the property.”

From 2014-2017, the Morgans are said to have provided fraudulent rent rolls, income statements and other documents reflecting the property’s income, which is allegedly shown in emails seized by federal investigators.

Documents indicate the group reported one of the buildings at Rochester Village was occupied and earning rental income before the Cranberry Township Planning and Development department had issued an occupancy permit. This information was used in an attempt to secure a loan from Deutsche Bank.

The affidavit also indicates the group, “conspired to inflate the income for storage units at Rochester Village by reporting more units than actually existed, and greater income than the units could actually produce.”

Investigators also allege the four men conspired to stage unoccupied units during inspections by the Federal Home Loan Mortgage Corp., to give the impression the units were occupied. They did this by, “turning on radios in unoccupied apartments and placing mats and shoes outside the doors of unoccupied apartments,” documents state.

During a January 2015 inspection by potential lender Federal Home Loan Mortgage Corp., Giacobbe also allegedly arranged for a woman to stage an apartment to make it appear to be occupied, and to tell inspectors that her boyfriend was asleep in the bedroom, which was found to be lacking a bed.

The affidavit also indicates the group tried to inflate income by reporting charges to tenants for cable TV when cable was already included free in their rent. Documents indicate the group claimed $164,160 was earned from “cable income.”

The group also is said to have provided false rent rolls in 2015, showing a difference of 49 occupied units and $97,270 in total charges. An appraisal of the property earned a $64 million valuation, leading to a $45.79 million loan being issued.

In 2017, the group allegedly inflated a T12 income statement, which showed a difference of nearly $1.3 million in rental income and $1.28 million in net operating income.

Similar frauds were carried out at Southpointe, the documents state.

Eden Square

At Eden Square, the group allegedly committed fraud to pass a radon inspection. Documents state instructions were given to place a radon detection canister in a vacant unit at the top floor of the building, and to crack a window. Instructions for the test indicate the canister was to be placed on the ground floor.

Also at Eden Square, the group is said to have provided false rent rolls, with a loan issued for $42 million based on a 94.9 percent occupancy rate and $54 million appraisal. Emails allegedly show the occupancy was less than 70 percent.

Other fraudulent activity was found, “across the Morgan Management/Morgan Communities real estate portfolio.”

Morgan’s offices in Perinton, N.Y., were raided Monday, with FBI officials offering no comment. No charges have been filed in the case, and Morgan said in a statement this week that the business is fully cooperating with the investigation.