Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Real estate investor pleads guilty to bid rigging in public real estate foreclosure auctions, (Dec 2, 2014)

By Linda O’Brien, J.D., LL.M.

A real estate investor has agreed to plead guilty for his role in conspiracies to rig bids and commit mail fraud at public real estate foreclosure auctions in Northern California, the Department of Justice announced today. Felony charges were filed in the U.S. District Court for the Northern District of California in Oakland against Garry Wan of Concord, California.

To date, 50 individuals have agreed to plead or have pleaded guilty, and 16 individuals have been indicted, as a result of the Department’s ongoing antitrust investigations into big rigging and fraud at public real estate foreclosure auctions in Northern California.

According to court documents, beginning as early as May 2008 until January 2011, Wan 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 Alameda County. Wan also was charged with conspiring to use the mail to carry out a scheme to fraudulently acquire title to selected Alameda 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 department said that the selected properties were then awarded to the conspirators who submitted the highest bids in the second, private auctions. The private auctions often took place at or near the courthouse steps where the public auctions were held.

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 Alameda County public foreclosure auctions at non-competitive prices, the Department stated. 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. According to court documents, these conspirators paid and received money that otherwise would have gone to pay off the mortgagee and other holders of debt secured by the properties and, in some cases, the defaulting homeowner.

A violation of the Sherman Act carries a maximum penalty of 10 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 can also seek to forfeit the proceeds earned from participating in the conspiracy to commit mail fraud

“While there has been a lengthy series of guilty pleas by the participants in this activity, the division’s work is not yet over,” said Brent Snyder, Deputy Assistant Attorney General for the Antitrust Division’s criminal enforcement program. “We will continue to work with our law enforcement partners to investigate and prosecute collusion at real estate foreclosure auctions, which allow the conspirators to profit from illegal payoffs at the expense of financial institutions and distressed homeowners.”

News: Antitrust AntitrustDivisionNews