Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Thirtieth Real Estate Investor Agrees to Plead Guilty to Bid Rigging at Northern California Foreclosure Auctions , (Apr 16, 2013)

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

Real estate investor Mohammed Rezaian of Novato, California is the 30th individual to plead guilty or 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 Rezaian was filed today in the federal district court in San Francisco.

Starting as early as July 2008 and continuing until about January 2011, Rezaian 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 the Northern California counties of San Francisco and Mateo, according to court documents. In addition, Rezaian 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 charges against him also included a forfeiture allegation, which includes a monetary forfeiture judgment in the amount of $213,277.

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 foreclosure sales are used to pay off the mortgage and other debt attached to the property, and 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.

"As a result of this investigation, the Antitrust Division has thus far filed charges against 30 real estate investors in Northern California for their illegal activity at foreclosure auctions," said Bill Baer, Assistant Attorney General in charge of the Department of Justice's Antitrust Division. "The division will vigorously pursue the perpetrators of these fraudulent and anticompetitive schemes."

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, 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. A charge of conspiracy to commit mail fraud carries with it a maximum sentence of 30 years in prison and a $1 million fine, as well as forfeiture of proceeds earned from participating in the conspiracy.

The San Francisco offices of the Federal Bureau of Investigation and the Antitrust Division have conducted the ongoing investigation in coordination with President Obama’s Financial Fraud Enforcement Task Force, which was created in 2009.

"Not only is bid rigging at public foreclosure auctions illegal, it also severely undermines the integrity of a fair and competitive marketplace," said David J. Johnson, Special Agent in Charge of the FBI’s San Francisco Field Office. "The FBI will continue to investigate and pursue those who commit fraudulent anticompetitive practices at foreclosure auctions and work with those who have fallen victim to such selfish crimes."

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