Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Bid rigging, auction collusion alleged in Miami property bankruptcy sale, (Nov 10, 2015)

By Greg Hammond, J.D.

A number of companies and individuals conspired to artificially depress the sales price of four valuable parcels of land in downtown Miami, Florida, sold during bankruptcy proceedings, according to a complaint filed in the federal district court in Miami. JAWHBS, LLC and SLS Properties Three, LLC claim that, as a result of the significantly below market value sales prices, they are owed at least $10 million (JAWHBS, LLC v. Arevalo, November 7, 2015).

JAWHBS and SLS brought this antitrust action against three groups of defendants that were comprised of various businesses and individuals, including (1) the Arevalo Group; (2) the Botero Group; and (3) the Cronig Group.

Bankruptcy trustees sought to sell the four parcels of land at issue through a bankruptcy sale. Arevalo Group and Botero Group allegedly negotiated an agreement to artificially prevent competitive bidding on the parcels and depress the sales price to $19.5 million. A resulting condominium project would then purportedly result in more than $90 million in net profits. The collusive agreement fell apart before the sale could be completed, however, and the Arevalo Group submitted its own offer of $22 million for the parcels. This bid also fell through, however, because Cronig Group—purportedly knowing that there were only a small number of potential bidders—sabotaged Arevalo Group’s bid by refusing to finance it and under-bidding Arevalo Group with an offer of $21.5 million. Due to the stifled competition and a hard deadline to prevent foreclosure, the bankruptcy trustees accepted the $21.5 million sales price, JAWHBS asserts.

The six count complaint alleges bid rigging and auction collusion in violation of Section 1 of the Sherman Act. In particular, JAWHBS claims that the parcels were sold at lower prices due to the defendants: (1) reducing the number of bidders/buyers; (2) preventing a competitive bidding and auction process; (3) concealing the identity of other bidders/buyers from the trustees and court; (4) causing a time urgency that induced the trustees to accept an artificially reduced sales price; (5) allowing an artificially low bid/offer that would have been considerably higher if a competitive process had occurred; and (6) withholding financing or sabotaging the offer of one bidder in order to alter the competitive bidding process and enter the bidding/auction and obtain property for less.

The complaint also alleged violations of the Florida Deceptive and Unfair Trade Practices Act and Bankruptcy Code Section 363(n), actual and constructive fraud, civil conspiracy, and interference with prospective economic advantage or business relationship. JAWHBS and SLS seek compensatory damages in an amount of over $10 million, treble and punitive damages, attorney fees, as well as costs of suit and expenses.

The case number is 1:15-cv-24176-DPG.

Attorneys: Jerrold A. Wish (The Wish Law Firm) for JAWHBS LLC and SLS Properties Three, LLC

Companies: JAWHBS LLC; SLS Properties Three, LLC; JA Energy Resources, LLC; SHUTTS & Bowen, LLP; Alianza Financial Services, LLC; Alianza Holdings, LLC; Crystal Tower Partners II, LLC; Crystal Tower on Brickell Plaza, LLC; Watson Investigations, LLC

News: Antitrust StateUnfairTradePractices