Mastermind of San Francisco mortgage Ponzi scheme pleads gulity – NMP Skip to main content

Mastermind of San Francisco mortgage Ponzi scheme pleads gulity

Dec 21, 2009

Patricia Morgen has pleaded guilty in federal court in San Francisco to wire fraud, mail fraud and money laundering, United States Attorney Joseph P. Russoniello announced. In pleading guilty, Morgen admitted that the company she founded and controlled, Chicago Development and Planning, engaged in two fraudulent schemes: (1) a Ponzi scheme that defrauded more than 400 individual investors by falsely promising that their investment funds would be used to acquire, renovate, and re-sell real estate; and (2) a mortgage fraud scheme that defrauded a mortgage broker and various mortgage lenders by use of loan applications with fraudulent income and asset statements. Morgen admitted that the loss for the two schemes exceeded $8 million. In the plea agreement, Morgen agreed to make restitution in the amount of no less than $8,439,086. “The Department of Justice has made mortgage fraud a top priority,” U.S. Attorney Russoniello said. “We will continue to vigorously prosecute individuals who commit mortgage fraud and other financial crimes.” The Securities and Exchange Commission (SEC) began investigating Chicago Development and Planning in 2004, and ultimately obtained a default judgment against Morgen when she failed to appear in any of the civil proceedings. In pleading guilty, Morgen admitted that when she learned of the SEC’s investigation, she instructed employees to destroy documents and then fled to Mexico to avoid federal authorities. Morgen also admitted that she instructed an employee to contact a mortgage broker who had worked on Chicago Development and Planning real estate acquisitions in an attempt to convince the mortgage broker not to provide documents to the SEC. On Sept. 2, 2009, Morgen’s co-defendant, Michael Ware, pled guilty to similar charges involving Chicago Development and Planning’s mortgage fraud scheme. “This case shows that the appearance of success can be a mask for a tangled financial web of lies,” said Scott O’Briant, Special Agent in Charge, IRS-Criminal Investigation, Oakland Field office. “Ponzi schemes can thrive for a time on false claims about how the money is being invested and where the returns are coming from. But that time is gone, and as this case shows, it’s time for those responsible to face judgment.” Morgen was indicted by a federal Grand Jury on Nov. 20, 2008. She was charged with 11 counts of mail and wire fraud, in violation of 18 U.S.C. §§ 1341 and 1343, as well as a single count of money laundering, in violation of 18 U.S.C. § 1957. Under the plea agreement, Morgen pled guilty to two counts of mail fraud, two counts of wire fraud, and one count of money laundering. Morgen is currently in the custody of the Bureau of Prisons. Her sentencing is scheduled for April 7, 2010, before Judge Charles R. Breyer in San Francisco. The maximum statutory penalty for mail and wire fraud is 30 years. The maximum statutory penalty for money laundering is 10 years. However, any sentence following conviction would be imposed by the court after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553. Tracie L. Brown and Jeffrey R. Finigan are the Assistant U.S. Attorneys who are prosecuting the case with the assistance of Rayneisha Booth. The prosecution is the result of a lengthy investigation by the IRS-Criminal Investigation Division and the Federal Bureau of Investigation. For more information, visit http://sanfrancisco.fbi.gov.
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