Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Real Estate Investor Agrees to Plead Guilty to Bid Rigging at Foreclosure Auctions, (Nov 2, 2012)

By John W. Arden, J.D., LLM.

Real estate investor Norman Montalvo of Concord, California, is the 26th individual to agree to plead guilty to bid rigging and fraud at Northern California public real estate foreclosure auctions as a result of the U.S. Department of Justice’s ongoing antitrust investigation, the Department of Justice has announced. A four-count felony charge against Montalvo was filed today in the federal district court in San Francisco.

From June 2008 through September 2010, Montalvo conspired with others to refrain from bidding against one another and to designate a winning bidder to obtain selected properties at public real estate foreclosure auctions in San Francisco and Mateo counties, according to court documents.

He also was charged with conspiracy to use the mail to carry out a scheme to fraudulently acquire title to selected properties sold at public auction, to make and receive payoffs, and to divert to co-conspirators money that otherwise would have gone to mortgage holders and others.

The primary purpose of these conspiracies was to suppress and restrain competition and to conceal payoffs in order to obtain selected real estate offered at foreclosure auctions at non-competitive prices, the department said. The proceeds of such sales are used to pay off the mortgage and other debt attached to the property. Any remaining proceeds are paid to the homeowner. Thus, the conspirators paid and received money that otherwise would have gone to pay off the mortgage and other debt secured by the property and the defaulting homeowner, court documents stated.

The maximum penalty for a Sherman Act violation is ten years in prison and a $1 million fine for individuals. The maximum fine may be increased to twice the gain derived from the crime or twice the loss suffered by the victim if either amount is greater than $1 million. A count of conspiracy to commit mail fraud carries a maximum sentence of 30 years in prison and a $1 million fine. The government may further seek a forfeiture of proceeds earned from participation in the conspiracy to commit mail fraud.

The ongoing investigation into bid rigging is being conducted by the San Francisco offices of the Department of Justice Antitrust Division and the FBI. The charges were the result of efforts by President Obama’s Financial Fraud Enforcement Task Force, which was created in 2009, according to the Department of Justice.

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