Attorney, Two Law Partners Admit To Bid-Rigging MD Real Estate Tax Lien Sales; Dodge Criminal Charges By Winning "Race To the Prosecutor's Office"

The Center for Public Integrity reports:

• A key witness in a federal probe of corruption in Maryland property tax-lien sales has stated under oath that he rigged bids for years while representing a Florida bank and other firms that bought liens at annual sales auctions, newly unsealed court records show.

• Baltimore real estate attorney John Reiff said he and two law partners helped fix bids for the purchase of “large numbers” of property tax debts, called tax liens, sold by tax assessors at auctions in Baltimore and several other Maryland counties between 2003 and 2007, according to court filings made public for the first time last month.

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• An investigation published in December by the Center for Public Integrity showed how lien buyers can tack on double-digit interest rates, legal fees and other costs that can add thousands of dollars to a homeowner’s bill. In some states, lien holders can seize homes from those who fail to pay. The bid rigging cost the city of Baltimore and surrounding counties money by artificially holding down bids, local officials say, although they could not determine how much.

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• Though the tax-lien industry has long been controversial, the Baltimore lawyer’s sworn declaration appears to be the first to mention a bank, or a tax-lien portfolio manager, in connection with allegations of criminal conduct in the bidding process.

• Reiff stated that a firm formed with his law partners acted to “suppress competition for tax liens by refraining from full competitive bidding.” [...] U.S. District Judge J. Frederick Motz in Baltimore unsealed Reiff’s declaration and some other records at the request of the Huffington Post Investigative Fund, now part of the Center for Public Integrity.

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• Reiff and his partners, Anthony DeLaurentis and Richard Turer, were one of three investment groups that participated in the five-year scheme to dominate the tax lien auctions, according to prosecutors.

• Three other participants have pleaded guilty to bid rigging in the case. In May, Baltimore County attorney Harvey M. Nusbaum, 73, was sentenced to a year-and-a-day in prison and an $800,000 fine. His partner, Jack W. Stollof, 75, was sentenced to 12 months of house arrest and an $800,000 fine. A third man, Steven L. Berman , 53, received two years probation and a $750,000 fine.

• “Bid rigging is typically a clandestine effort made to line the pockets of unscrupulous businessmen at the expense of unsuspecting consumers — in this case, at the expense of homeowners and county and city governments,” Justice Department prosecutors wrote in a sentencing memorandum about Nusbaum.

• “In principle, bid rigging is no different from any other common theft of money or property. It is criminal fraud, pure and simple.”

• The unsealed records describe in detail how the well-financed investment groups illegally dominated the process in Maryland through collusion — and how they made millions of dollars off homeowners as a result. The three groups, according to Reiff, decided in advance which liens each would bid on.

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• Reiff has been a key witness in the federal probe that has resulted in three convictions. He and his two partners cooperated with the government and were not charged.(1)

• In many cases, homeowners who owed only a few hundred dollars in taxes or municipal bills saw their debt soar into thousands because of the fees and interest. A Baltimore woman lost the home her family had owned for nearly three decades over what began as an unpaid water bill of $362, for instance.

For more, see Witness Says He Rigged Bids in Property Tax Lien Auctions in Maryland.

Go here for the recently-unsealed court filings referred to in this story.

Go here for other posts & links on bid rigging at foreclosure and other real estate-related auctions.

(1) This is another example of how scammers in criminal conspiracies can buy their way out of jail time (and, in this case, can avoid prosecution altogether) by winning the "race to the prosecutor's office" (possibly better described as the "rat-race to the prosecutor's office"), where once they learn they are the subject of a probe, they can run to the prosecutor's office (with the best criminal defense attorney they can afford in tow) and start ratting out their friends and colleagues in exchange for the best deal available. See United States v. Moody, 206 F.3d 609, 617 (6th Cir. 2000) (Wiseman, J., concurring) for one Federal judge's observation, made in the context of drug conspiracy cases, involving the so-called "race to the courthouse/prosecutor's office" which seems equally suited to other types of major, multi-defendant felony cases:

• In practical terms, drug conspiracy cases have become a race to the courthouse. When a conspiracy is exposed by an arrest or execution of search warrants, soon-to-be defendants know that the first one to "belly up" and tell what he knows receives the best deal. The pressure is to bargain and bargain early, even if an indictment has not been filed.