Sacramento Feds Continue Scoring Guilty Pleas In Northern California Foreclosure Sale Bid Rigging Scams That Violate Sherman Act

From the Office of the U.S. Attorney (Sacramento, California):

• A real estate investor pleaded guilty [] in U.S. District Court in Sacramento, Calif., to conspiring to rig bids and commit mail fraud at public real estate foreclosure auctions held in San Joaquin County, Calif., Christine Varney, Assistant Attorney General of the Department of Justice’s Antitrust Division, and Benjamin B. Wagner, U.S. Attorney for the Eastern District of California, announced.



• Robert Rose, 47, of Danville, pleaded guilty to conspiring with a group of real estate speculators who agreed not to bid against each other at certain public real estate foreclosure auctions in San Joaquin County.(1)



• The primary purpose of the conspiracy was to suppress and restrain competition and to obtain selected real estate offered at San Joaquin County public foreclosure auctions at non-competitive prices, the department said in court papers.



• According to the court documents, after the conspirators’ designated bidder bought a property at a public auction, they would hold a second, private auction, at which each participating conspirator would bid the amount above the public auction price he or she was willing to pay.



• The conspirator who bid the highest amount at the end of the private auction won the property. The 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. According to his plea agreement, Rose participated in the scheme beginning in or about August 2009 until in or about October 2009.(2)

For the U.S. Attorney press release, see California Real Estate Investor Pleads Guilty To Bid Rigging At Public Foreclosure Auctions.

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

(1) According to the U.S. Attorney press release, Rose pleaded guilty to bid rigging, a violation of the Sherman Act, which carries a maximum penalty of 10 years in prison and a $1 million fine. The maximum fine may be increased to twice the gain derived from the crime or twice the loss suffered by the victims of the crime, if either of those amounts is greater than the statutory maximum fine. Rose also pleaded guilty to conspiracy to commit mail fraud, which carries a maximum sentence of 30 years in prison and a $1 million fine.

“Perpetrators of schemes like the one charged here do not compete fairly,” U.S. Attorney Wagner stated. “Instead, they muscle out honest bidders who don’t play along. Such schemes not only drive down the price of the auctioned properties, they steal equity from those homeowners trying to weather the financial storm. Rose is the eighth defendant charged in this case. Prosecutions like this one send a clear message to those who may be tempted to cheat at auction: Don’t.”

The U.S. Justice Department urges anyone with information concerning bid rigging or fraud related to real estate foreclosure auctions to contact the Antitrust Division’s San Francisco Office at 415-436-6660 or visit www.justice.gov/atr/contact/newcase.htm, the U.S. Attorney’s Office for the Eastern District of California at 916-554-2700 or the FBI’s Sacramento Division at 916-481-9110.

(2) For indications that these bid-rigging rackets at foreclosure sales appear to be pretty blatant activities all over the country that are often perpetrated with impunity, see:

• Foreclosure Auction Buyer: "Object Is To Get Cheapest Price We Can, Not To Bid Each Other Up" As Intimidation Accusations Flare Up At Courthouse Sales,
• Subtle 'Under The Radar' Foreclosure Sale Bid Rigging Racket, Or Mere Familiarity With Competitors' Business Models?,
• Mysterious lack of bidding wars plagues foreclosure auctions (Among the few bidders at county foreclosure auctions, some nab houses for a dollar more than the minimum bid).

A story earlier this year in the San Francisco Chronicle (FBI looks into bid rigging at courthouse auctions) contains this excerpt describing the observations of one individual who attended one of these auctions:

• 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."