Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Two real estate investors plead guilty to bid rigging and fraud, (Nov 24, 2014)

By Peter Reap, J.D., LL.M.

Two Northern California real estate investors have agreed to plead guilty for their 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 today in the U.S. District Court for the Northern District of California in Oakland against Su Chu Chou “Terry” Cheng and Chung Li “George” Cheng of Walnut Creek, California.

Between May 2008 and January 2011, according to the court documents, George and Terry Cheng conspired with others not to bid against one another, and instead designated a winning bidder to obtain selected properties at public real estate foreclosure auctions in Alameda and Contra Costa counties. George and Terry Cheng were also charged with conspiring to use the mail to carry out a scheme to fraudulently acquire title to selected Alameda and Contra Costa 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 selected properties were then awarded to the conspirators who submitted the highest bids in the second, private auctions, the Justice Department said. 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 and Contra Costa County public foreclosure auctions at non-competitive prices.

“The Antitrust Division continues to vigorously pursue and prosecute those who rig bids and commit fraud at real estate foreclosure auctions,” said Brent Snyder, Deputy Assistant Attorney for the Antitrust Division’s criminal enforcement program. “The division is committed to working closely with its law enforcement partners to ensure that these real estate auctions are fair and open so that consumers will benefit from competition.”

“These charges demonstrate our continued commitment to investigate and prosecute individuals and organizations responsible for the corruption of the public foreclosure auction process,” said David J. Johnson, FBI Special Agent in Charge of the San Francisco Field Office. “The FBI is committed to work these important cases and remains unwavering in our dedication to bring the members of these illegal conspiracies to justice.”

Today’s charges are the latest filed by the department in its ongoing investigation into bid rigging and fraud at public real estate foreclosure auctions in San Francisco, San Mateo, Contra Costa, and Alameda counties, California. To date, as a result of the department’s ongoing antitrust investigations into bid rigging and fraud at public real estate foreclosure auctions in Northern California, 49 individuals have agreed to plead or have pleaded guilty. Last month, a federal grand jury in San Francisco returned an eight-count indictment against another five real estate investors for their alleged role in the bid rigging and fraud schemes.

News: Antitrust AntitrustDivisionNews