Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Twelfth Conspirator Pleads Guilty to Charges of Bid Rigging at New Jersey Municipal Tax Lien Auctions, (Apr 26, 2013)

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

Investor Norman T. Remick pled guilty yesterday to Sherman Act violations committed through his participation in an alleged conspiracy to rig bids for the sale of municipal tax liens at auctions in New Jersey, the Department of Justice has announced. The guilty plea represents the twelfth such plea in the Department of Justice’s ongoing investigation into bid rigging and fraud related to municipal tax lien auctions.

The Department of Justice filed a felony charge in the federal district court in Newark, New Jersey, alleging that, from around the beginning of 2007 until approximately February 2009, Remick participated in a conspiracy to rig municipal tax lien bids at auctions by agreeing to allocate among certain bidders the liens on which each would bid. According to the Department of Justice, Remick submitted bids in accordance with the agreements and purchased tax liens at collusive and non-competitive interest rates.

"The conspirators illegally met and engaged in anticompetitive discussions to allocate bids amongst themselves at tax lien auctions in New Jersey, depriving distressed homeowners of competitive interest rates at a time when they most needed them," said Scott D. Hammond, Deputy Assistant Attorney General for the Antitrust Division’s criminal enforcement program. "Prosecuting these types of bid-rigging schemes remains a top priority for the division."

The Justice Department said that the primary purpose of the conspiracy was to suppress and restrain competition in order to obtain selected municipal tax liens offered at public auctions at non-competitive interest rates. When the owner of real property fails to pay taxes on that property, the Department explained, the municipality in which the property is located may attach a lien for the amount of the unpaid taxes. If the taxes remain unpaid after a waiting period, the lien may be sold at auction.

New Jersey law requires that investors bid on the interest rate delinquent property owners will pay upon redemption. By law, the bid opens at 18 percent interest and, through a competitive bidding process, can be driven down to zero percent. If a lien remains unpaid after a certain period of time, the investor who purchased the lien may begin foreclosure proceedings against the property to which the lien is attached.

According to the court documents, Remick and his co-conspirators agreed not to bid against one another at municipal tax lien auctions in New Jersey. Since the arrangement permitted the conspirators to purchase tax liens with limited competition, each conspirator was able to obtain liens that earned a higher interest rate. Property owners were therefore made to pay higher interest on their tax debts than they would have paid had their liens been purchased in open and honest competition, the Antitrust Division stated.

Sherman Act violations carry 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.

Eight individuals—Isadore H. May, Richard J. Pisciotta Jr., William A. Collins, Robert W. Stein, David M. Farber, Robert E. Rothman, Stephen E. Hruby and David Butler—and three companies—DSBD LLC, Crusader Servicing Corp., and Mercer S.M.E. Inc.—have previously pleaded guilty as part of the Department of Justice’s bid rigging investigation. The Department brought the charge against Remick in coordination with the President’s Financial Fraud Enforcement Task Force.

News: Antitrust AntitrustDivisionNews