Antitrust Law Daily Wrap Up, ANTITRUST NEWS: California real estate investor charged with conspiring to rig bids, commit mail fraud, (Oct 6, 2014)

By Jeffrey May, J.D.

A real estate investor has agreed to plead guilty to charges that he conspired to rig bids and commit mail fraud at public real estate foreclosure auctions in Northern California. The charges were filed in the federal district court in Oakland against Gernot Sebastian Zepernick on October 3 (U.S. v. Zepernick, Criminal No. 14-00512).

According to charges, Zepernick conspired with others not to bid against one another, and instead to designate a winning bidder to obtain selected properties at public real estate foreclosure auctions in California’s Contra Costa County. Zepernick also was charged with conspiring to use the mail to carry out a scheme to fraudulently acquire title to selected Contra Costa County properties sold at public auctions, to make and receive payoffs, and to divert money to co-conspirators that would have otherwise gone to mortgage holders and other beneficiaries by holding second, private auctions open only to members of the conspiracy. The alleged conduct took place between November 2008 and January 2011.

The Justice Department said that the primary purpose of the conspiracies was to suppress and eliminate competition and to conceal payoffs in order to obtain selected real estate offered at Contra Costa County public foreclosure auctions at non-competitive prices. When real estate properties are sold at these auctions, the proceeds are used to pay off the mortgage and other debt attached to the property, with remaining proceeds, if any, paid to the homeowner. These conspirators paid and received money, according to the court documents, that otherwise would have gone to pay off the mortgage and other holders of debt secured by the properties, and, in some cases, the defaulting homeowner, the government explained.

The charges against Zepernick are the latest in the ongoing investigation into bid rigging and fraud at public real estate foreclosure auctions in California's San Francisco, San Mateo, Contra Costa, and Alameda counties. To date, 47 individuals have agreed to plead or have pleaded guilty in connection with the probe since 2011, according to the government.

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