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Two Individuals Charged in Bank Fraud Scheme

Naum Morgovsky was arraigned in federal court on Friday for his alleged role in a scheme to defraud two federally-insured banks through short sales of two rental properties in Hawaii. The arraignment took place in San Francisco and follows an indictment handed down by a federal grand jury on September 29, 2016, charging Morgovsky and his co-defendant, Mark Migdal, with conspiring to commit the alleged crimes.

According to the indictment, between June 2009 and July 2016, Morgovsky, 67, of Hillsborough, and Migdal, 71, of Portola Valley, conspired to defraud two federally-insured banks, now Bank of America and EverBank, by seeking the banks’ approval for short sales of two condominiums. A short sale is a sale in which a lender allows a property to be sold at a price less than the amount owed on the loan. The indictment alleges that in 2006, Migdal purchased condominiums is a development in Kihei, Maui. The defendants then sought the banks’ approval for short sales in the same development in which Migdal owned the other properties. According to the indictment, Morgovsky and Migdal conspired to convince the banks to alow the properties to be sold to a person who was decease, but whose identity was used to conceal the true identity of the purchaser. The conspiracy also allegedly involved submission of false statements to the bank about Migdal’s employment status and income. After the banks approved the short sales in 2009 and 2010, Migdal continued to treat the property as his own, including collecting rent, paying taxes and paying homeowner’s association dues. The properties were transferred to Migdal’s wife in April 2016.

On August 24, 2016, the United States Attorney’s Office for the Northern District of California filed a complaint against Morgovsky alleging he committed bank fraud. The indictment adds Migdal as a defendant and charges Morgovsky and Migdal each with two counts of bank fraud, in violation of 18 U.S.C. § 1344, and one count of conspiracy, in violation of 18 U.S.C. § 1349. The indictment also seeks forfeiture of the two Hawaii properties. Morgovsky made his initial appearance on August 26, 2016. He remains released from custody on a $1 million bond. Morgovsky’s next appearance is scheduled for today, October 4, 2016. Migdal appeared for his initial appearance yesterday, October 3, 2016, in San Francisco.