Robert Morgan SEC Settlement Letter (122733)

Case 1:19-cv-00661-EAW Document 130 Filed 09/15/20 Page 1 of 2
September 15, 2020
By ECF
Hon. Elizabeth A. Wolford

United States District Judge
United States District Court for the Western District of New York
Kenneth B. Keating Federal Building
100 State Street
Rochester, NY 14614
Re: SEC v. Robert C. Morgan, et al., 19 Civ. 661 (EAW)
Dear Judge Wolford:
Plaintiff Securities and Exchange Commission (the “Commission”), joined by defendant
Robert C. Morgan (“Morgan”), respectfully seeks approval of the parties’ proposed consent
judgment (the “Proposed Judgment”). The Commission respectfully encloses the Proposed
Judgment and Morgan’s executed consent as Exhibits A and B to this letter. If entered, the
Proposed Judgment would implement the terms of the settlement reached by the parties (see Dkt.
No. 109) and would fully resolve the Commission’s claims in this action as to Morgan. The
Proposed Judgment would not impact the ongoing receivership in this action.
As background, the Commission filed this action on May 22, 2019, against Morgan and two
of his entities, Morgan Mezzanine Fund Manager LLC (the “Fund Manager”) and Morgan
Acquisitions LLC (“Morgan Acquisitions”). The Commission’s Complaint alleges antifraud
violations of Section 17(a) of the Securities Act of 1933 (“Securities Act”), Section 10(b) of the
Securities Exchange Act of 1934 (“Exchange Act”), and Rule 10b-5 thereunder in connection with a
series of private real estate investments funds Morgan ran. Also on May 22, 2019, the Commission
filed an application for emergency relief, including the imposition of a temporary restraining order
(“TRO”), the appointment of a receiver over the private real estate investment funds that are the
subject of the Complaint, and the completion of an accounting related to these funds. (Dkt. No. 4.)
Thereafter, the Court entered a TRO, ordered an accounting, and with the consent of Morgan,
appointed the Receiver over the Fund Manager, the “Notes Funds” managed by the Fund Manager,
and Morgan Acquisitions. (See TRO at 1–2, Dkt. No. 26; Order Appointing Receiver at 2, Dkt No.
39 (“Receiver Order”); Stipulation and Order Clarifying Definition of Morgan Acquisitions LLC at
1–2, Dkt. No. 49.)
Since the Receiver’s appointment, Morgan has caused more than $66 million to be paid to
the Receiver as a result of the voluntary liquidations of assets by Morgan and his companies.
Between July and September 2019, Morgan and his companies closed on the sales of a series of real
estate projects that resulted in payments to the Receiver totaling $18.3 million. (Decl. of Robert
Knuts at 4, Dkt. No. 77.) In October 2019, Morgan and his companies closed on a joint venture
transaction that resulted in a payment to the Receiver of approximately $48.2 million. (Id. at 5.)
Case 1:19-cv-00661-EAW Document 130 Filed 09/15/20 Page 2 of 2
September 15, 2020
Page 2
This joint venture transaction involved the sale of equity in more than 90 properties owned in whole
or in part by Morgan and his companies, the majority of which had never received loans or advances
from either the Notes Funds or Morgan Acquisitions. (See Ex. C at 2, 23–28; Affiliate Borrowers
Accounting at 4–5, Dkt. No. 88.) As a result of these transactions, which closed less than six
months after the Commission filed this action, the Receiver sought and received the Court’s
approval to return all investor principal—more than $63 million—to investors in the Notes Funds
and Morgan Acquisitions earlier this year. (See Decision and Order at 1–2, Dkt. No. 82.) The
Receiver’s motion to return an additional $3.3 million to investors remains pending. (See Motion for
an Order Authorizing Certain Distributions and a Settlement of Claims, Dkt. Nos. 117–119.)
Pursuant to the Receiver Order, the Receiver prepared and filed an accounting of any
transfers for the direct or indirect benefit of Morgan by the entities that received loans or advances
from the Notes Funds or Morgan Acquisitions (together, the “Affiliate Borrowers”). (Receiver
Order at 4; Affiliate Borrowers Accounting at 1.) Following a review of “general ledgers, accounts
payable files, journal entries, bank account statements, acquisition contracts, select emails, and
capital and loan account details,” the Receiver and his professionals identified certain payments of
management and other fees to Morgan’s management companies in the ordinary course by the
Affiliate Borrowers but did not identify any direct payments to Morgan himself. (Affiliate
Borrowers Accounting at 1, 4–5, 7.)
The Commission and Morgan have now agreed to a settlement, the terms of which are
reflected in the Proposed Judgment. The Proposed Judgment is fair and reasonable and in the
public interest. See, e.g., SEC v. Citigroup Global Markets, Inc., 752 F.3d 285 (2d Cir. 2014) (setting out
standard for reviewing proposed consent judgments in government enforcement actions). The
Proposed Judgment would permanently enjoin Morgan from further violating the Securities Act and
Exchange Act provisions the Commission’s Complaint alleges he violated, but it would not order
Morgan to pay disgorgement or a civil penalty. With respect to the Fund Manager and Morgan
Acquisitions, the Commission will file notices of voluntary dismissal without, prejudice pursuant to
Federal Rule of Civil Procedure 41(a)(1)(A)(i), following the conclusion of the receivership.1
If the Court approves the Proposed Judgment, the Commission respectfully requests that
the Court docket the executed Judgment with the enclosed consent attached.
Respectfully submitted,
/s/ Lee A. Greenwood
Lee A. Greenwood
Senior Trial Counsel
Encls.
cc: All counsel of record by ECF
1
See, e.g., General Foods Corp. v. Jay V. Zimmerman Co., No. 86 CIV. 2697 (KMW), 1990 WL
115714, at *2 & n.2 (S.D.N.Y. Aug. 7, 1990) (“The weight of authority holds that, pursuant to Fed.
R. Civ. P. 41(a)(1), a plaintiff may dismiss its claims against less than all defendants in a multi-
defendant case.”) (citing cases and explaining the Second Circuit’s later “reject[ion]” of its contrary
conclusion in Harvey Aluminum, Inc. v. American Cyanamid Co., 203 F.2d 105, 108 (2d Cir. 1953));
Greenwood Group, LLC v. Brooklands, Inc., No. 15-CV-851 (EAW), 2016 WL 3828685, at *2–3
(W.D.N.Y. July 12, 2016).
Case 1:19-cv-00661-EAW Document 130-1 Filed 09/15/20 Page 1 of 3
UNITED STATES DISTRICT COURT

WESTERN DISTRICT OF NEW YORK
SECURITIES AND EXCHANGE

COMMISSION,
Plaintiff, 19 Civ. 661 (EAW)
v.
ROBERT C. MORGAN, MORGAN

MEZZANINE FUND MANAGER LLC, and
MORGAN ACQUISITIONS LLC,
Defendants.
FINAL JUDGMENT AS TO DEFENDANT ROBERT C. MORGAN
The Securities and Exchange Commission having filed a Complaint and Defendant
Robert C. Morgan having entered a general appearance; consented to the Court’s jurisdiction
over Defendant and the subject matter of this action; consented to entry of this Final Judgment
without admitting or denying the allegations of the Complaint (except as to personal and subject
matter jurisdiction); waived findings of fact and conclusions of law; and waived any right to
appeal from this Final Judgment:
I.
IT IS HEREBY ORDERED, ADJUDGED, AND DECREED that Defendant is
permanently restrained and enjoined from violating, directly or indirectly, Section 10(b) of the
Securities Exchange Act of 1934 [15 U.S.C. § 78j(b)] and Rule 10b-5 promulgated thereunder
[17 C.F.R. § 240.10b-5], by using any means or instrumentality of interstate commerce, or of the
mails, or of any facility of any national securities exchange, in connection with the purchase or
sale of any security:
(a) to employ any device, scheme, or artifice to defraud;

(b) to make any untrue statement of a material fact or to omit to state a material fact
necessary in order to make the statements made, in the light of the circumstances
under which they were made, not misleading; or
(c) to engage in any act, practice, or course of business which operates or would
operate as a fraud or deceit upon any person.
IT IS FURTHER ORDERED, ADJUDGED, AND DECREED that, as provided in
Federal Rule of Civil Procedure 65(d)(2), the foregoing paragraph also binds the following who
receive actual notice of this Final Judgment by personal service or otherwise: (a) Defendant’s
officers, agents, servants, employees, and attorneys; and (b) other persons in active concert or
participation with Defendant or with anyone described in (a).
II.
IT IS HEREBY FURTHER ORDERED, ADJUDGED, AND DECREED that Defendant
is permanently restrained and enjoined from violating Section 17(a) of the Securities Act of 1933
[15 U.S.C. § 77q(a)] in the offer or sale of any security by the use of any means or instruments of
transportation or communication in interstate commerce or by use of the mails, directly or
indirectly:
(a) to employ any device, scheme, or artifice to defraud;
(b) to obtain money or property by means of any untrue statement of a material fact
or any omission of a material fact necessary in order to make the statements
made, in light of the circumstances under which they were made, not misleading;
or
(c) to engage in any transaction, practice, or course of business which operates or
would operate as a fraud or deceit upon the purchaser.
2
IT IS FURTHER ORDERED, ADJUDGED, AND DECREED that, as provided in
Federal Rule of Civil Procedure 65(d)(2), the foregoing paragraph also binds the following who
receive actual notice of this Final Judgment by personal service or otherwise: (a) Defendant’s
officers, agents, servants, employees, and attorneys; and (b) other persons in active concert or
participation with Defendant or with anyone described in (a).
III.
IT IS HEREBY FURTHER ORDERED, ADJUDGED, AND DECREED that this Court
shall retain jurisdiction of this matter for the purposes of enforcing the terms of this Final
Judgment.
IV.
There being no just reason for delay, pursuant to Rule 54(b) of the Federal Rules of Civil
Procedure, the Clerk is ordered to enter this Final Judgment forthwith and without further notice.
Dated: ______________, _____
____________________________________
HON. ELIZABETH A. WOLFORD
United States District Judge
3
/s/ Joel M. Cohen

Case1:18-cr-00108-EAW-HKS
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Robert Morgan SEC Settlement Letter (122733)

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Case 1:19-cv-00661-EAW Document 130 Filed 09/15/20 Page 1 of 2

September 15, 2020

Hon. Elizabeth A. Wolford

UNITED STATES DISTRICT COURT

SECURITIES AND EXCHANGE

Plaintiff, 19 Civ. 661 (EAW)

ROBERT C. MORGAN, MORGAN

FINAL JUDGMENT AS TO DEFENDANT ROBERT C. MORGAN

appeal from this Final Judgment:

IT IS HEREBY ORDERED, ADJUDGED, AND DECREED that Defendant is

sale of any security:

(a) to employ any device, scheme, or artifice to defraud;

under which they were made, not misleading; or

operate as a fraud or deceit upon any person.

IT IS FURTHER ORDERED, ADJUDGED, AND DECREED that, as provided in

participation with Defendant or with anyone described in (a).

IT IS HEREBY FURTHER ORDERED, ADJUDGED, AND DECREED that Defendant

transportation or communication in interstate commerce or by use of the mails, directly or

(a) to employ any device, scheme, or artifice to defraud;

or any omission of a material fact necessary in order to make the statements

(c) to engage in any transaction, practice, or course of business which operates or

would operate as a fraud or deceit upon the purchaser.

IT IS FURTHER ORDERED, ADJUDGED, AND DECREED that, as provided in

participation with Defendant or with anyone described in (a).

IT IS HEREBY FURTHER ORDERED, ADJUDGED, AND DECREED that this Court

Dated: ______________, _____

/s/ Joel M. Cohen

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Dated: __________, _