Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Three real estate investors agree to plead guilty to bid rigging at Northern California county foreclosure auctions, (Jan 3, 2014)

By Linda O’Brien, J.D., LL.M.

Three real estate investors have agreed to plead guilty for their roles in conspiracies to rig bids and commit mail fraud at public real estate foreclosure auctions in Northern California, the Department of Justice announced yesterday. The charges were filed in the U.S. District for the Northern District of California, in Oakland against Rudolph Silva, Thomas Bishop, and Leslie Gee (U.S. v. Silva, Criminal No. CR14-2, U.S. v. Bishop, Criminal No. CR14-1and U.S. v. Gee, Criminal No. CR14-3). A total of 43 individuals have pleaded guilty or agreed to plead guilty as a result of the DOJ’s ongoing antitrust investigations into bid rigging and fraud at public real estate foreclosure actions in Northern California.

According to court documents, Silva, Bishop, and Gee conspired with other investors, between January 2008 and January 2011, not to bid against one another. Instead, a winner bidder was designated to obtain selected properties at public real estate foreclosure auctions in Contra Costa County. Silva, Bishop, and Gee were also charged with conspiring to use the mail to carry out schemes to fraudulently acquire title to selected properties sold at public auctions, to make and receive payoffs, and to divert money to co-conspirators that would have gone to mortgage holders by holding second, private auctions. The second, private auctions frequently took place at or near the courthouse where the public auctions were held. Gee was charged with participating in similar conspiracies in Alameda County between April 2009 and November 2009.

The primary purpose of the conspiracies was to suppress and restrain competition, and to conceal payoffs in order to obtain selected real estate offered at Contra Costa and Alameda County public foreclosure auctions at non-competitive prices. Generally, when 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, the conspirators paid and received money that otherwise would have gone to pay off the mortgage and other holders of debt secured by the properties. The charges were brought in connection with the President’s Financial Fraud Enforcement Task Force.

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 for the Sherman Act charges may be 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 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.

“Today’s plea agreements are the latest step in the Antitrust Division’s efforts to hold accountable investors for their fraudulent and collusive activities at real estate foreclosure auctions,” said Bill Baer, Assistant Attorney General in charge of the Department of Justice’s Antitrust Division. “The division will continue to prosecute individuals who participated in illegal conspiracies and harmed distressed homeowners and lenders.”

“The FBI and our partners have an obligation to investigate and pursue those who disrupt a free and fair marketplace,” said David J. Johnson, FBI Special Agent in Charge of the San Francisco Field Office. “We will continue to educate the public on the criminality of bid rigging at real estate foreclosure auctions.”

News: Antitrust AntitrustDivisionNews