Feds Breathing Heavy In Probe Into Suspected Bay Area Foreclosure Sale Bid-Rigging Scams

In Oakland, California, KTVU-TV Channel 2 reports:

• The FBI Tuesday was investigating a dark underside to the Bay Area's mortgage crisis that finds some unscrupulous investors colluding to keep prices low when foreclosed homes are sold at auction.

• Folks at the Community Realty Property Management office on Fruitvale Avenue weren't talking when KTVU tried to ask if the FBI had been there last week. One man who spoke only said he couln't confirm anything. But sources told KTVU the FBI recently raided the Community Realty Property Management office.

• FBI Spokeswoman Julie Sohn wouldn't say if the company was a target of the investigation, but did confirm that the FBI "...conducted enforcement actions throughout the Bay Area [as] part of a long-term investigation of anti-competitive practices at trustee sales of foreclosed homes."

• That means that people were suspected of violating the Sherman Act at public auctions by rigging bids. Instead of competing, individuals or groups agreed not to bid against each other to buy houses at rock-bottom prices. A Stockton real estate executive recently pled guilty to conspiring to rig bids.(1) Law enforcement sources said they expect similar indictments in the Bay Area.

• The FBI was seeking the public's help, asking anyone who may have observed so-called anti-competitive practices at foreclosure sales to call their tip line at 415-553-7400.

Source: FBI Investigating Foreclosure Auction Conspiracy In Bay Area.

See also, the San Francisco Chronicle: FBI looks into bid rigging at courthouse auctions:

• The probe is shaking up the tight-knit world of investors who bid at these auctions. The issue, sources say, is that some participants allegedly pay others to refrain from bidding on certain properties to keep their prices low.

• A real estate agent who attended some San Francisco auctions in hopes of buying investment property described what he witnessed.

• "If you start to bid, there are about five guys who work together and who box you in," said the man, who asked not to be named for fear of retribution. "One guy came up to bid who clearly was not part of that crew. The guys were bidding. At some point, (their ringleader) turned to (the outsider) and said, 'You must really like this property. It must be really important to you.' He had a piece of paper in his hand; he showed it to the guy. The guy nodded OK and then disappeared into the building."

• The man said he was positive that the outsider was being paid off not to bid, although he did not witness money changing hands.

• At Alameda County's auction Wednesday, most investors declined to discuss the issue, but some said they welcomed the FBI's interest. "This has been going on for many years," said one man who declined to give his name. "It's a closed group that doesn't always allow the properties to go up to their true value."

Go here for other posts & links on bid rigging at foreclosure and tax sale auctions.

(1) See U.S. Attorney's press release: California Real Estate Executive Pleads Guilty to Bid Rigging:

• According to court documents, after the conspirators' designated bidder bought a property at a public auction, they would hold a second auction. Then each participating conspirator in turn would bid amounts above the public auction price he or she was willing to pay. The conspirator who bid the highest amount at the end of the rounds won the property. That difference between the price at the public auction and that at the second auction was the group's illicit profit, and it was divided among the conspirators in payoffs.