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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. I just wanted to point out that Congressman Jim Sensenbrenner, Senator Feinstein, former Senate majority leader Bill Frist, and former attorney general John Ashcroft are responsible for this rubbish. We need to keep a eye on these corrupt, arrogant, and incompetent fools.

  2. Well I guess our politicians have decided to give these idiot federal prosecutors unlimited power. Now if I guy bounces a fifty-dollar check, the U.S. attorney can intentionally wait for twenty-five years or so and have the check swabbed for DNA and file charges. These power hungry federal prosecutors now have unlimited power to mess with people. we can thank Wisconsin's Jim Sensenbrenner and Diane Feinstein, John Achcroft and Bill Frist for this one. Way to go, idiots.

  3. I wonder if the USSR had electronic voting machines that changed the ballot after it was cast? Oh well, at least we have a free media serving as vicious watchdog and exposing all of the rot in the system! (Insert rimshot)

  4. Jose, you are assuming those in power do not wish to be totalitarian. My experience has convinced me otherwise. Constitutionalists are nearly as rare as hens teeth among the powerbrokers "managing" us for The Glorious State. Oh, and your point is dead on, el correcta mundo. Keep the Founders’ (1791 & 1851) vision alive, my friend, even if most all others, and especially the ruling junta, chase only power and money (i.e. mammon)

  5. Hypocrisy in high places, absolute immunity handed out like Halloween treats (it is the stuff of which tyranny is made) and the belief that government agents are above the constitutions and cannot be held responsible for mere citizen is killing, perhaps has killed, The Republic. And yet those same power drunk statists just reel on down the hallway toward bureaucratic fascism.

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