Antitrust Law Daily Wrap Up, ANTITRUST NEWS: County official allegedly engaged in bid-rigging of real estate tax auctions, (Oct 20, 2014)

By Linda O’Brien, J.D., LL.M.

A county treasurer and several real estate tax purchasers conspired to artificially inflate the amounts Illinois property owners, who properties were subject to delinquent tax auctions, would have to pay to redeem their properties and conspired to illegally rig tax sales, according to a complaint filed in the federal district court in East St. Louis, Illinois (Bloyer v. St. Clair County Illinois, October 17, 2014).

Charles Suarez is the Treasurer of St. Clair County and conducts sales for properties that are subject to sale for delinquent real estate taxes. Sabre Group LLC, S.I. Securities, LLC, Empire Tax Corp., Vista Securities, Inc., VI, Inc., Land of Lincoln Securities, LLC, White Oak Securities, LLC, Algonquin Securities, LLC, and Raven Securities Inc. are investment companies that purchased properties at St. Clair County tax auctions. John Bloyer, Adrianne Bloyer, Kevin Dvorak, and Kathleen Dvorak owned property that was sold at a St. Clair County real estate tax auction and redeemed that property by paying an interest rate of 18 percent.

The complaint states that tax sales in Illinois are conducted in a manner which, as designated by statute, allows potential tax purchasers to make sequentially lower bids on the amount of penalty that would be assessed. In November 2006, Suarez agreed with each tax purchaser defendant to change the bidding process to allow each defendant to purchase delinquent properties at the maximum penalty rate of 18 percent. Although the role of an auctioneer was to foster competition in order to obtain the lowest penalty percentage, Suarez ensured that the auctioneer recognized the tax purchaser defendants as winning bidders.

In furtherance of the conspiracy, the Suarez auctioneer refused to recognize trailing lower bids from other tax purchasers who were not a part of the conspiracy. Suarez used a seating arrangement at the tax auctions that located the co-conspirators at the front of the auction room to enable the auctioneer to award bids to those co-conspirators more easily. The conspiring defendants had the winning bid on over 80 percent of the parcels sold for 2006 and over 67 percent of the parcels sold for 2007. In order to conceal the conspiracy, the conspirators allegedly agreed that other bids would be allowed for some of the less lucrative properties, the complaint alleged.

According to the complaint, since there was no competitive bidding, almost every single property was sold at the statutory maximum penalty rate of 18 percent. The conspiracy had a drastic effect on the St. Clair County tax sales. Compared to the tax sales for 2005, the average penalty rate for properties was increased by over 250 percent for 2006 and 260 percent for 2007. The conspiracy was designed to inflate the prices to be paid by homeowners to redeem their homes and ensure that substantially all of the properties would be sold to the tax purchaser defendants at the statutory maximum penalty rate of 18 percent, the plaintiffs charged.

Suarez allegedly received political campaign contributions from numerous tax purchaser defendants. In 2013 and 2014, three managers of the some tax purchaser defendant companies pleaded guilty to conspiracy charges in connection with the bribery of former Madison County Treasurer Fred Bathon in relation to Madison County tax sales. As a result of the conspiracy, the plaintiffs were forced to pay substantially higher amounts to redeem their properties that they would have absent the rigged tax sales, the complaint charged.

The plaintiffs assert claims for civil conspiracy, breach of fiduciary duty, and violations of Sections 1 and 2 of the Sherman Act and the Illinois Antitrust Act. The action seeks declaratory relief, treble damages, costs of suit, attorney fees, and any other just and proper relief.

The case is No. 3:14-cv-01119-JPG-PMF.

Attorneys: Steven C. Giacoletto (Giacoletto Law Office P.C.), John B. Barberis, Jr. (Law Office of John B. Barberis, Jr.), Aaron G. Weishaar and Boris A. Kaupp (Reinert, Weishaar & Associates, P.C.), and Nelson L. Mitten and Paul A. Grote (Riezman Berger P.C.) for John R. Bloyer, Jr., Adrianne L. Bloyer, Kevin Dvorak, and Kathleen Dvorak.

Companies: Sabre Group LLC; S.I. Securities, LLC; Empire Tax Corp.; Vista Securities, Inc.; VI, Inc.; Land of Lincoln Securities, LLC; White Oak Securities, LLC; Algonquin Securities, LLC; Raven Securities Inc.

News: Antitrust IllinoisNews