Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Investor and his company plead guilty to DOJ’s first Georgia real estate foreclosure auction bid rigging charges, (Oct 22, 2013)

By Tobias J. Gillett, J.D., LL.M.

A Georgia real estate investor and his company pleaded guilty today to Justice Department charges that they conspired to rig bids and commit mail fraud at public real estate foreclosure auctions in Georgia, the first such charges filed in Georgia in the Justice Department’s ongoing investigation into anticompetitive conduct at real estate foreclosure auctions. Four-count felony charges were filed on September 25 in the federal district court in Atlanta against Seth D. Lynn and Penguin Properties (U.S. v. Lynn, Criminal No. 13-cr-369; U.S. v. Penguin Properties, Criminal No. 13-cr-370).

Lynn and Penguin Properties were charged with agreeing with co-conspirators to refrain from bidding on selected properties at public real estate foreclosure auctions in Georgia, and instead designating which conspirator would win the selected properties. The defendants allegedly engaged in this conduct in Fulton County from as early as February 6, 2007 until at least January 3, 2012, and in Dekalb County from at least as early as July 6, 2004 until at least January 3, 2012. The defendants also were charged with conspiring to use the mail to carry out schemes to fraudulently acquire title to selected properties sold at public auctions in the two counties, to make and receive payoffs, and to divert to conspirators money that would have otherwise gone to mortgage holders and others by holding second, private auctions in which only the members of the conspiracy participated.

When Georgia homeowners default on their mortgages, the mortgage holders, some of whom are financial institutions, can institute foreclosure proceedings through a non-judicial public real estate foreclosure auction. These public auctions typically take place at the county courthouse. At the auction, an auctioneer sells the property to the bidder offering the highest purchase price. Proceeds from the sale are then used to pay off the mortgage and other debt attached to the property. Any remaining proceeds are paid to the homeowner.

“The core of this case was about an unlevel field and one of unfairness with regard to the auction/bidding process of foreclosed properties,” said Mark F. Giuliano, Special Agent in Charge of the FBI Atlanta Field Office. ”The FBI remains committed in providing investigative resources to the U.S. Department of Justice’s Antitrust effort to address such matters.”

A charge of violating the Sherman Act carries with it a maximum penalty of 10 years in prison and a $1 million fine for individuals, or a $100 million fine for corporations, with the fine increased to twice the gain derived from the crime or twice the loss suffered by the victims if either amount is greater than $1 million or $100 million respectively. A charge of conspiracy to commit mail fraud carries with it a maximum sentence of 20 years in prison and a $250,000 fine for individuals, or a $500,000 fine for corporations, with the fine increased to twice the gross gain the conspirators derived from the crime or twice the gross loss caused to the victims of the crime if either figure is greater than the statutory maximum penalties.

Companies: Penguin Properties LLC

News: Antitrust AntitrustDivisionNews