Bob Morgan co-defendants plead guilty in bank and mortgage fraud case

The sweeping bank fraud case against prominent local developer Robert "Bob" Morgan may have opened with a bang but could soon be ending with a government whimper.

Touted as a significant national bank fraud prosecution, prosecutors have struggled to explain multiple incidents of evidence mishandling and were readying for a hearing Monday at which defense lawyers were certain to allege prosecutorial malfeasance and misconduct. The hearing was expected to last at least a week.

Instead, after negotiations throughout the weekend, three of Robert Morgan co-defendants, including his son, Todd Morgan, on Monday took pleas to misdemeanor bank larceny — crimes with a maximum one-year prison sentence but, under plea agreements, would end with probation sentences for the three.

Pleading guilty were Todd Morgan, who was project manager for his father's commercial development company; Michael Tremiti, the company's vice-president of finance; and Frank Giacobbe, a Buffalo-based mortgage broker who helped arrange financing for Morgan properties.

To agree to the pleas, prosecutors also had to agree to drop dozens of serious felony charges against the three men. Each plea acknowledged larceny of no more than $1,000.

"They resolved this with what in state court would have been a petit larceny," said Donald Thompson, an attorney for Tremiti.

Now, only Robert Morgan, is left among those accused of fraud in a case that alleged hundreds of millions of dollars secured through duplicitous loan filings. That total represents the loan amounts, not the amount alleged to have been deceptively secured.

It's unclear if Robert Morgan also was offered a plea agreement. The hearing originally scheduled for Monday before U.S. District Judge Elizabeth Wolford has been adjourned, but could still go forward should there not be an agreement with Morgan to resolve the criminal charges.

A status conference is now scheduled for Thursday before Wolford.

The pending hearing

Lawyer David Rothenberg, who, with his son Michael Rothenberg, represented Todd Morgan, said the change-over in leadership at the U.S. Attorney's Office helped bring some resolution to the case. Trini Ross is now U.S. Attorney, confirmed to the position last fall.

"All of the problems which the defense discovered and which would have been considered in the hearing occurred in the prior administration of the U.S. Attorney's Office," David Rothenberg said. He said he and other defense lawyers appreciated the "reasonable approach" from Ross to reach the plea agreements.

Defense attorneys uncovered numerous times when evidence that they contended should have been given to the defense was instead withheld by prosecutors. Joel Cohen, the lead defense lawyer for Robert Morgan, has, along with other defense attorneys, maintained that the evidentiary lapses were purposeful and cause for the dismissal of the criminal indictment.

In October 2020, Wolford tossed out an indictment against Robert and Todd Morgan, Tremiti, and Giacobbe. That dismissal was "without prejudice," allowing prosecutors to secure a new grand jury indictment — as they did last year.

In her 2020 ruling, Wolford highlighted prosecutorial lapses with evidence.

"The Court recognizes ... that the government has mishandled discovery in this case — that fact is self-evident and cannot be reasonably disputed," Wolford wrote. "It is not clear whether the government's missteps are due to insufficient resources dedicated to the case, a lack of experience or expertise, an apathetic approach to the prosecution of this case, or perhaps a combination of all of the above.

"However, it is clear that the government's mistakes, while negligent, do not constitute willful misconduct undertaken in bad faith."

But continued prosecutorial missteps, as well as decisions that appeared to be intentional obstacles to a full airing of issues at this week's hearing, clearly had Wolford questioning the actions of the U.S. Attorney's Office.

For instance, federal prosecutors and FBI agents were among those scheduled to testify this week; the U.S. Attorney's Office invoked federal regulations to seek the testimony, creating hurdles that slowed the process.

Citing the government's decision to invoke those regulations, Wolford said in a March 28 telephonic pre-hearing conference that "I find this is strong evidence of bad faith on the part of the government.

"I never went that far and made that conclusion in connection with the prior litigation regarding the motion to dismiss the indictment, but I am getting there at this point," Wolford said.

Last week, Law360, a widely circulated legal publication, wrote of the Morgan case in a story headlined, "A $500M Fraud Case Imploded. Now A Judge Wants Answers."

Tremiti's attorney, Thompson, said he thinks the hearing and its possible revelations were the fuel for the plea agreements. Never, he said, has he been involved in a hearing with internal communications within the U.S. Attorney's Office widely on display.

The proposed exhibit list for the hearing stretches for 16 pages and includes close to 240 exhibits, many of them emails between prosecutors about the bank fraud case.

"I'm sure they were very uncomfortable about that prospect" of a hearing on the internal dialogue, Thompson said.

The evidentiary issues

Since the initial indictment, prosecutors found laptops seized during searches that were previously not identified as evidence; acknowledged that significant amounts of computerized data (also seized by investigators) had not been reviewed; and seemed to flip-flop on a decision of whether the contents of a secured cellphone had evidence that should go to the defense.

On that cellphone was a surreptitiously recorded conversation in which one individual claimed that Robert Morgan was being set up and the FBI fed unreliable information, defense lawyers said.

The information was obviously consequential, Cohen said in court hearings, yet was not revealed to defense lawyers until after the second indictment.

"What's on that phone are extraordinary leads about potential exoneration," Cohen said at a hearing.

Prosecutors said that investigators had not completely reviewed the cellphone contents and had missed that conversation.

Cohen declined to comment Monday, as did Herbert Greenman, the lawyer for Giacobbe.

Attorney Thompson said the continued fight over alleged prosecutorial malfeasance has kept the larger issue of alleged bank fraud out of the conversation. The misdemeanor pleas, he said, are a better indicator of any criminal activity than were the hundred-million dollar fraud allegations in the indictments.

"It's the right result," he said of the pleas. "We never got to the merits of this case. This has all been procedural stuff."

Giacobbe admitted to inflated information in a bank loan for a Morgan-connected mortgage; Tremiti admitted to falsifying information for a construction loan; and Todd Morgan admitted to also providing false information for that construction loan.

Originally the three, along with Robert Morgan, were accused of lies that led to the securing of almost $500 million in loans. Tremiti was not alleged to have a significant role; he faced only a handful of criminal charges while Giacobbe and Todd Morgan faced dozens.

Morgan has been one of the most prominent housing and commercial developers in western New York, and has owned apartment complexes across the Northeast and elsewhere. He has since sold a large swath of his rental empire to pay back $65 million to investors who had loaned him money to help fund his projects.

Before Monday, prosecutors had secured pleas from three men who said they were involved in falsifying information to secure bank loans for Morgan properties.

Contact Gary Craig at gcraig@gannett.com. Follow him on Twitter at gcraig1.

This article originally appeared on Rochester Democrat and Chronicle: Todd Morgan, Frank Giacobbe, Michael Tremiti plead guilty in fraud case