Patricia Morgen, Ponzi Scheme and Mortgage Fraud Mastermind Sentenced to 15 Years, Eight Months

SAN FRANCISCO—The founder and head of Chicago Development and Planning was sentenced yesterday to 15 years and eight months in prison, and ordered to pay more than $9 million in restitution for wire fraud, mail fraud, and money laundering, U.S. Attorney Joseph P. Russoniello announced.

Patricia Morgen pleaded guilty on Dec. 16, 2009. According to the plea agreement, she admitted creating a scheme to solicit investors for a company called Chicago Development and Planning, with the promise of substantial guaranteed return profit payments. Morgen falsely promised investors that their funds would be used to purchase real property to be rented or resold for profit, and that their guaranteed returns would come from profits earned on the real estate investments. In fact, Morgen paid investors largely with money obtained from new investors, rather than from real estate-related profits. Morgen admitted that there were more than 400 victims of this Ponzi scheme.

“Patricia Morgen intentionally preyed on unsuspecting victims in order to obtain money she wasn’t entitled to,” said U.S. Attorney Russoniello. “This sentence demonstrates the legal consequences perpetrators of these schemes will face when they are caught—and they will be caught.”

In another scheme, Morgen and a co-defendant submitted fraudulent loan applications to acquire more than 20 properties, most of which were occupied, rent-free, by Chicago Development and Planning employees, including Morgen herself. The fraudulent loan applications included lies as to the borrowers’ employment and income. Morgen’s co-defendant in the mortgage fraud scheme pleaded guilty in January 2010.

Morgen, 63, most recently of Chicago, was indicted by a federal grand jury on Nov. 20, 2008. She fled to Mexico when she learned that federal authorities were investigating Chicago Development and Planning. After spending several months in Mexico, Morgen returned to the United States, but made continued efforts to avoid law enforcement: she did not have a valid driver’s license in her name, did not have a phone in her name, and she cut off contact with family members whose whereabouts were known to federal investigators. Morgen was apprehended in Chicago in June 2009, while threatening to jump from the top of a multi-story building. Morgen’s son, Shalom Gibson, has been indicted in Reno, Nev., in connection with his efforts to shred and burn documents relating to Chicago Development and Planning; his whereabouts remain unknown.

In sentencing Morgen, U.S. District Judge Charles R. Breyer commented on the devastation suffered by the unsophisticated victims, noting that Morgen victimized “people who by and large could least afford it,” and that she “ruined people’s lives.” Judge Breyer further stated his belief that a “severe punishment” was warranted because Morgen was “still a very dangerous person” who posed a substantial risk to society.

“We are pleased by the resolution of this matter,” said FBI Special Agent in Charge Stephanie Douglas. “Ms. Morgen betrayed the trust of hundreds of investors, injected bad debt into the economy, and fled the country when faced with the prospect of being held accountable for her actions. The sentence she received today underscores the severity and impact of this sort of crime on our entire community.”

“Today’s sentence sends a clear message to those committing investment fraud: Your greed will not go undetected and unpunished,” said Scott O’Briant, Special Agent in Charge, IRS-Criminal Investigation. “IRS-CI will continue to use all the tools at its disposal to investigate these types of schemes.”

The sentence was handed down by U.S. District Court Judge Breyer following a guilty plea to two counts of mail fraud, two counts of wire fraud in violation, and one count of money laundering in violation. Judge Breyer also sentenced the defendant to a five-year period of supervised release. The defendant has been in custody since June 2009.

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 an investigation by the Securities and Exchange Commission, the Internal Revenue Service - Criminal Investigation, and the Federal Bureau of Investigation.

This case is part of President Barack Obama’s Financial Fraud Enforcement Task Force (FFETF). President Obama established the interagency FFETF to wage an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes. The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general, and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets and recover proceeds for victims of financial crimes.

Further Information:

Case #: CR 08-0845 CRB

A copy of this press release may be found on the U.S. Attorney’s Office’s website at www.usdoj.gov/usao/can.

Electronic court filings and further procedural and docket information are available at ecf.cand.uscourts.gov/cgi-bin/login.pl.

Judges’ calendars with schedules for upcoming court hearings can be viewed on the court’s website at www.cand.uscourts.gov.

All press inquiries to the U.S. Attorney’s Office should be directed to Jack Gillund at (415) 436-6599 or by e-mail at Jack.Gillund@usdoj.gov.

Comments

  1. Craig Gutowsky 44 of 19 S. Mt Clair Court Cary, Illinois was charged in a Illinois Ponzi Scheme.
    The Arrest of Craig Gutowsky Cary, Illinois has shocked his bedroom community of Cary, Illinois.
    PEOPLE OF THE STATE OF ILLINOIS -VS- Craig Gutowsky
    Case Number 2010CF000225
    Craig M Gutowsky was charged with 7 felonies by a Du Page County grand jury in January 2010 involving
    THEFT BY DECEPTION WITH INTENT TO DEPRIVE – $100,000 -$500,000
    and SECURITIES VIOLATION .
    Renee Gutowsky was not yet charged in this Illinois Ponzi .Craig Gutowsky is out on $150,000 bond and is working selling cars at Elite Motors
    822 N. Lake St.Mundelein IL, 60060 and can be reached for comment at 847-949-9933.
    Phillip J Abbinanti & Judith M Abbinanti
    390 Town Place Circle Bufallo Grove illinois paid the $15000. dollars bail for Craig Gutowsky to be released from the Du Page County Illinois jail in January 2010 Why shouldn't they ? Gutowsky is married to their daughter. Craig M Gutowsky was charged with 7 felonies by a Du Page County Illinois grand jury and is out awaiting trial.

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