At end of their federal cases, two Morgan defendants get light sentences [The Buffalo News, N.Y.]

Jul. 21—A federal prosecution that began with weighty allegations of bank fraud ended Thursday with light sentences for two of the four defendants in the Robert C. Morgan criminal case.

U.S. District Court Chief Judge Elizabeth A. Wolford ordered Frank Giacobbe, 47, and Michael Tremiti, 59, to each pay a $500 fine. She also placed Giacobbe on probation for one year and a day and ordered his participation in a drug program because he tested positive for cocaine use in April.

"The allegations in the indictment are serious but they were never tested, and you stand convicted of a misdemeanor," she told each of them. "I don't find any prison time would be appropriate."

Tremiti and Giacobbe were sentenced on their pleas to a misdemeanor charge of bank larceny of less than $1,000.

Morgan, a Rochester real estate developer, and his son Todd will be sentenced Friday by the same judge. At one time, the four individuals faced 114 counts of bank and insurance fraud charges, accused by prosecutors of participating in a wide-ranging scheme that defrauded lenders of more than $500 million. They were charged with conspiring to induce lenders to provide larger commercial mortgages than justified on apartment properties by submitting false and inflated rent rolls, financial statements, appraisals and other documents.

At Thursday's sentencing, Wolford said it was "reasonable to conclude that some of the alleged criminal activities occurred."

But the judge said the government had not demonstrated enough to warrant a higher level of sentencing. Each defendant had faced a maximum of one year in prison, a year's probation and a $100,000 fine, although the guidelines under the plea agreement called for up to six months in prison, a year of probation and a fine of up to $9,500.

Robert Morgan, who founded and owned Rochester-based Morgan Management and Morgan Communities, and Todd Morgan, a former executive of the company, pleaded guilty in April, with the younger Morgan taking the same deal as Giacobbe and Tremiti, while his father admitted to a single felony of conspiracy to commit wire fraud.

The two Morgans — along with Giacobbe, a former mortgage broker in Buffalo, and Tremiti, Morgan's former finance director — were charged in a May 2019 indictment that accused them of running a wide-ranging conspiracy to trick lenders into extending far more credit on apartment projects than justified.

Prosecutors said the defendants — and two others who previously pleaded guilty — faked rent rolls and submitted false income statements, appraisals and other financial documents to lenders and appraisers in order to deceive them about the value of the projects.

But the case bogged down in procedural motions and delays, with prosecutors so overwhelmed by the volume of evidence they had collected that they were unable to produce all the documents, computers and other material for the defense in a timely manner.

"This case was unusual, and I hope to never see a case like this again," the judge said.

She added later, "What bothers me the most is the public confidence in our criminal justice system. The way this worked is not the way it is supposed to work."

Wolford threw out the first indictment because of "speedy trial" violations, and said Thursday that she was on the verge of doing so with the second one. She said the defense had a big hill to climb in justifying its second motion to dismiss.

"Unfortunately, as we got more and more into the motions, that hill was being mounted," she said, noting the government was unable to answer her questions at a hearing.

Attorney Herbert Greenman, who represented Giacobbe, acknowledged his client "got a break here." But Giacobbe had already suffered from "a very tall fall from grace" since the indictments in 2018, Greenman said.

"His life has been altered financially," Greenman said. "He's lost every client he's ever had. No one has hired him to do any more."

Giacobbe expressed regret to the judge for "my actions that took place on this transaction and the role I had."

Giacobbe — who previously acknowledged his alcohol abuse — denied using cocaine and submitted a negative test result taken a day after the probation test. But Wolford noted the probation test detects more subtle traces of drugs, rejecting the test result he submitted.

"This is not the way the system is supposed to work," said Donald Thompson, Tremiti's attorney. "We are not a day closer to looking at the merits of the allegations than we were on the day of the indictment."

Thompson called the sentencing "a reasonable result, a just result."

"But there's a punishment to a prosecution like this," he said. "It's not nothing to be prosecuted by the federal government. This is truly a life-changing situation for Mr. Tremiti."

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