A 63-year-old woman accused of organizing a Ponzi scheme and mortgage fraud ring has been sentenced to nearly 16 years in prison and ordered to pay more than $9 million in restitution after pleading guilty to wire fraud, mail fraud, and money laundering.

A 63-year-old woman accused of organizing a Ponzi scheme and mortgage fraud ring has been sentenced to nearly 16 years in prison and ordered to pay more than $9 million in restitution after pleading guilty to wire fraud, mail fraud, and money laundering.

Patricia Morgen admitted that there were more than 400 victims in a Ponzi scheme that solicited investments in a company called Chicago Development and Planning, which promised to invest in real estate to be rented or resold for profit, prosecutors said.

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 U.S. Securities and Exchange Commission (SEC) began investigating Chicago Development and Planning in 2004, and Morgen was indicted by a federal grand jury on Nov. 20, 2008.

In her Dec. 16 guilty plea, Morgen admitted that when she learned of the SEC’s investigation, she instructed employees to destroy documents and fled to Mexico, prosecutors said.

Morgen was sentenced May 19 in San Francisco by U.S. District Judge Charles Breyer to 15 years and eight months in prison.

Prosecutors said Morgen was apprehended in Chicago in June 2009. Her son, Shalom Gibson, remains at large after being indicted in Reno, Nev., for his alleged connection with efforts to shred and burn documents relating to Chicago Development and Planning.

Morgen’s co-defendant, Michael Ware, pled guilty on Sept. 2 to similar charges involving Chicago Development and Planning’s mortgage fraud scheme.

The scheme relied on fraudulent loan applications that misrepresented the borrowers’ employment and income.

According to a recent report by the Office of Thrift Supervision, the FBI investigated more than 2,100 mortgage fraud cases in 2009, up 400 percent from five years ago.

Declining economic conditions, liberal underwriting, and declining housing values were to blame for the increase, the report said.

The FBI estimates that 80 percent of all mortgage fraud involves collaboration or collusion by industry insiders, and that equity stripping and property flipping are common.

The development of new technology associated with refinancing and computer-driven underwriting methods means opportunities for mortgage fraud continue to escalate, the OTS report said. Warehouse lines of credit have been particularly vulnerable because of the 90-day window for purchases of mortgages by investors, the report said.

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