As previously reported in Street Sweeper, the Antitrust Division of the United States Department of Justice and the Federal Bureau of Investigation have identified a pattern of collusive schemes among real estate investors aimed at eliminating competition at real estate foreclosure auctions. Such fraud is particularly pernicious in these financially challenging times because the real estate properties sold at such auctions are intended to produceproceeds to pay off the mortgage and other debt attached to the property - with the homeowner obtaining the remaining (if any) proceeds.
Between May 2008 and January 2011, federal prosecutors allege that eight real estate investors conspired to rig bids pursuant to agreements not to bid against one another at public real estate foreclosure auctions in Contra Costa and/or Alameda counties in Northern California. The collusive activity occurred independently in each county, and some individuals only participated in the conspiracy in one county. The conspirators appeared to intend to suppress and restrain competitive bidding in order to obtain the desired realty below what would otherwise have been a bona fide public auction price.
After the conspirators' designated bidder bought a property, the conspirators held secret, private auctions (usually at or near the courthouse steps where the public auctions occurred) at which each participant bid above the public auction price, with the property then going to the highest bidder. The difference between the rigged public auction price and that at the second auction was the group's illicit profit, which was divided among the conspirators, often in cash.
SIDE BAR: To learn more about the real estate bid rigging process, read Real Estate Auction Bid-Rigging Rings Busted (Street Sweeper, February 9, 2011)
The Antitrust Division of the United States Department of Justice announced that in response to criminal charges filed on June 30, 2011, against:
that the eight defendants agreed to plead guilty for their roles in two separate conspiracies to rig bids and commit mail fraud at public real estate foreclosure auctions. The defendants were charged as follows:
Each violation of the Sherman Act carries a maximum penalty of 10 years in prison and a $1 million fine for individuals. The maximum fine for the Sherman Act charges may be increased to twice the gain derived from the crime or twice the loss suffered by the victim if either amount is greater than the $1 million statutory maximum.
Each count of conspiracy to commit mail fraud carries a maximum sentence of 30 years in prison and a $1 million fine.
SIDE BAR: If you have information concerning bid rigging or fraud related to public real estate foreclosure auctions, contact