An Emeryville woman has pleaded guilty in federal court in San Francisco to charges in a mortgage fraud that cost investors and lenders more than $8 million.
U.S. Attorney Joseph Russoniello said Patricia Morgen, 62, founder of a real estate firm called Chicago Development and Planning, pleaded guilty Wednesday to five charges of mail fraud, wire fraud and money laundering.
Morgen admitted in a written plea agreement that she bilked investors and lenders out of a total of $8.4 million through two related schemes operated through the real estate company between 2000 and 2004.
One of the frauds was a Ponzi scheme in which supposed profits for investors were funded with money supplied by other investors. Morgen said in the plea that she defrauded 400 investors in this way.
She admitted that in the second scheme, a mortgage broker and lenders were defrauded through false loan applications.
As part of the plea bargain, Morgen agreed to pay $8.4 million in restitution to the two groups of victims.
Morgen is in custody and will be sentenced by U.S. District Judge Charles Breyer on April 7.
Prosecution and defense attorneys agreed in the plea document that under federal sentencing guidelines, the penalty could range from 10 to 20 years in prison, but said the guidelines are not binding on the judge.
The fraud came to light in 2004 when the U.S. Securities and Exchange Commission filed a civil lawsuit against Morgen, alleging that she falsely promised investors profits of up to 36 percent per year and diverted hundreds of thousands of dollars to her personal use.
The SEC eventually obtained a default judgment against Morgen when she failed to appear in court proceedings.
Morgen said in the plea document that when she learned of the SEC lawsuit, she instructed employees to destroy documents and then fled to Mexico.
Scott O’Briant, chief of the U.S. Internal Revenue Service’s criminal investigation field office in Oakland, said, “This case shows that the appearance of success can be a mask for a tangled financial web of lies.”
Morgen’s defense attorney was not immediately available for comment.