Prosecution of Rochester developer Bob Morgan on shaky ground

The federal prosecution of developer Robert "Bob" Morgan and three business associates accused of a sweeping mortgage fraud scheme could again be on shaky ground.

Responding to new claims of government misconduct, a federal judge wants to hear from federal prosecutors and FBI agents about decision-making in the investigation and prosecution of Morgan and his co-defendants.

U.S. District Judge Elizabeth Wolford has already once dismissed a 114-count fraud indictment against Morgan and the co-defendants because of prosecutorial negligence in its handling of voluminous evidentiary materials. She did permit prosecutors to bring a new indictment should they so choose, and they did.

Morgan and his co-defendants were again indicted in March.

Prosecutors were able to again indict Morgan and his associates because Wolford determined that there had been sloppy but not intentional withholding of evidence. However, defense attorneys have since discovered other information and items they say should have been made available to them earlier in the process.

Also criminally accused with Morgan are his son, Todd, who was a project manager in Morgan's commercial and real estate companies; Frank Giacobbe, a mortgage broker who also allegedly defrauded banks while working with Morgan's company; and Morgan company former director of finance, Michael Tremiti.

Three others have pleaded guilty and agreed to cooperate with federal prosecutors.

Evidence at question

At a hearing Monday, Wolford's displeasure with federal prosecutors was apparent, as she questioned prosecutors about choices as to what evidence seized in 2018 from offices, cellphones, and computers should be revealed to the defense. Defense lawyers have requested that she now reconsider her dismissal of the original indictment.

The defense attorneys argue that Wolford, had she known of other materials not given to them, would have instead dismissed the original indictment without permitting new charges.

To let the criminal proceedings continue would be giving "the government another chance to get it wrong again," said Joel Cohen, a New York City-based attorney for Morgan.

Wolford wants to hear directly from a federal prosecutor — who no longer is involved with the case — and from investigators about why some seized materials were not thoroughly inspected or given to the defense. She ordered that affidavits be provided from them later this month and she has scheduled a January hearing.

Morgan, once one of the region's most prominent developers, and his co-defendants are accused of a massive fraud scheme in which they allegedly fabricated data to secure tens of millions in loans from banks.

The current evidentiary tussle hinges on what prosecutors were, or were not, required to hand over after the first indictment of the accused. Federal statutes dictate when and what evidence must be made available, and defense attorneys contend that prosecutors have brazenly ignored the rules.

For instance, defense lawyers say, contents from a cellphone that was seized in 2018 clearly should have been given to defense earlier, but was not until after the new indictment this year.

The cellphone contents

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

Assistant U.S. Attorney Douglas Penrose said at the hearing Monday that the FBI agent who had scoured the cellphone contents did not scrutinize the entirety of the contained audio and did not hear that conversation. Cohen said an information-technology specialist used by his firm unearthed the conversation.

More:Cellphone could decide future of criminal case against Rochester developer Bob Morgan

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

Penrose told Wolford that prosecutors still do not think they were legally bound to reveal the existence of the phone or its contents at this point in the legal proceedings.

Prosecutors say they provided information about the phone after the 2020 dismissal of the indictment because they opted to hand over more than legally mandated.

The phone's existence would have been revealed to attorneys before the trial, Penrose said. The phone was seized as part of an obstruction investigation connected with Morgan that did not lead to charges; the phone was not connected with the mortgage fraud probe, Penrose said.

Court papers show that the phone's contents included a conversation, possibly in a secretly recorded video, with a witness then helping investigators.

That witness, unidentified in court papers, alleged that she had been hired by Giacobbe to pretend to be a tenant at a Morgan apartment complex during a 2015 appraisal. Morgan and his associates are accused of creating false impressions that the apartments were at more capacity than they truly were.

That false information was then fed to banks for refinancing loans, prosecutors allege.

The server search

As well, defense attorneys and Wolford learned recently that a Morgan-connected business server seized by investigators was not completely searched for evidence. Instead, certain areas of the server were targeted for review, based on a determination that the remaining digital material would not be pertinent, prosecutors say.

Discussing earlier hearings over evidentiary issues, Wolford told Penrose, "You made representations to me that they searched the entirety of the devices."

Prosecutors say they were honest with their earlier answers, and were only discussing devices deemed germane to the mortgage fraud case.

Wolford did question defense lawyers about whether the discovery of possible new evidence would make any difference at trial. They answered that the issue is not whether a trial could be impacted by the current revelations, but whether it is instead proof that prosecutors can't be trusted going forward.

Cohen reiterated that prosecutors once told Wolford that they had revealed all of the information from seized devices, such as phones and computers.

"That was bad faith," Cohen said. "They knew the phone existed."

Contact Gary Craig at gcraig@gannett.com or at 585-258-2479. Follow him on Twitter at gcraig1.

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This article originally appeared on Rochester Democrat and Chronicle: Prosecution of Rochester NY developer Bob Morgan is on shaky ground