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7th Circuit affirms District Court in mortgage dispute

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The 7th Circuit Court of Appeals held that financier Morgan Stanley acted lawfully when selling a loan to another party.

In 2005, 20 limited liability companies joined together to invest in property in Indianapolis. They formed a new company – IP of A Fund Manager – and vested in that company the authority to negotiate and execute a loan on their behalf with Morgan Stanley, naming Edward Okun as the manager. Okun executed a loan, mortgage and reserve security agreement with Morgan Stanley.

The group had already secured a loan in 2004 for $7.1 million, which Morgan Stanley refinanced, lending the investors $6.1 million to refinance the property, with the additional $1 million placed into escrow accounts.

Morgan Stanley decided to sell the loan, ultimately agreeing to sell it to an Okun-controlled entity, IP of A 5201 Lender LLC. As it structured the sale, Morgan Stanley agreed to offset the purchase price of the loan by the amount of funds available in several escrow, reserve and impound accounts, in which it held a security interest and which were, under the terms of the loan with the investors, required to reimburse the investors for maintenance, taxes and other property-related expenses. IP of A 5201 Lender, now holding the loan, never re-established the escrow accounts, depriving the investors of $1,361,184.63 in which they, too, had an interest.

In 2008, Okun was convicted of wire and mail fraud, conspiracy and other crimes.

In IP of A West 86th Street 1, LLC, et al., v. Morgan Stanley Worldwide Capital Holdings, LLC, No. 11-2891, the investors alleged Morgan Stanley breached its agreement and committed conversion when it allowed Okun’s company to use escrow funds to finance the purchase of the loan. But the 7th Circuit found that nothing in the loan’s promissory note, mortgage agreement or reserve security agreement precluded Morgan Stanley from structuring the sale of the loan as it wished.

 

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  1. Future generations will be amazed that we prosecuted people for possessing a harmless plant. The New York Times came out in favor of legalization in Saturday's edition of the newspaper.

  2. Well, maybe it's because they are unelected, and, they have a tendency to strike down laws by elected officials from all over the country. When you have been taught that "Democracy" is something almost sacred, then, you will have a tendency to frown on such imperious conduct. Lawyers get acculturated in law school into thinking that this is the very essence of high minded government, but to people who are more heavily than King George ever did, they may not like it. Thanks for the information.

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  4. Excellent initiative on the part of the AG. Thankfully someone takes action against predators taking advantage of people who have already been through the wringer. Well done!

  5. Conour will never turn these funds over to his defrauded clients. He tearfully told the court, and his daughters dutifully pledged in interviews, that his first priority is to repay every dime of the money he stole from his clients. Judge Young bought it, much to the chagrin of Conour’s victims. Why would Conour need the $2,262 anyway? Taxpayers are now supporting him, paying for his housing, utilities, food, healthcare, and clothing. If Conour puts the money anywhere but in the restitution fund, he’s proved, once again, what a con artist he continues to be and that he has never had any intention of repaying his clients. Judge Young will be proven wrong... again; Conour has no remorse and the Judge is one of the many conned.

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