Antitrust Law Daily Wrap Up, TOP STORY: Three investors plead guilty to rigging bids at Illinois tax lien auctions, (Oct 21, 2013)

By Jeffrey May, J.D.

Bid rigging charges were filed last week in the federal district court in East St. Louis, Illinois, against three investors who admitted to engaging in anticompetitive conduct at Illinois tax lien auctions. The three defendants were Barrett R. Rochman, Scott K. McLean, and John A. Vassen. All three have pleaded guilty to the charges (U.S. v. McLean, Case 3:13-cr-30223-DRH; U.S. v. Rochman, Case 3:13-cr-30222-DRH; U.S. v. Vassen, Case 3:13-cr-30221-DRH).

The U.S. Attorney for the Southern District of Illinois, Stephen R. Wigginton, announced on October 17 that these charges followed criminal charges against Fred Bathon, the former treasurer of Madison County, Illinois. Bathon structured Madison County property tax sales in a way that increased interest rates for the tax buyers in exchange for campaign contributions. In light of their donations to Bathon, the three charged investors were able to engage in price fixing by only bidding the statutory maximum interest rate of 18 percent at the auctions, it was charged. The bid opens at 18 percent and through a competitive bidding process generally can be driven as low as 0 percent, the U.S. Attorney’s Office explained.

Investors purchase a tax lien certificate that is a claim against the property until the homeowner pays the full amount of back taxes and fees plus applicable interest, or until the homeowner defaults on the debt entirely, according to the charges. The winning bidder has the right to collect the amount of the lien from the delinquent taxpayer, along with the winning interest rate, in addition to any subsequent taxes paid by the winning bidder and applicable interest and penalties. The winning bidder has the right to foreclose on the property owner’s right of redemption of the tax lien and take title to the property if the taxes owed on the property, accrued interest, or any applicable costs or penalties remain unpaid.

Sentencing for all three tax buyers has been scheduled for February 21, 2014. Bathon is scheduled for sentencing on December 6, 2013.

Investigations into bid rigging or fraud related to municipal tax lien auctions have taken place in other parts of the country over the last few years. The Department of Justice Antitrust Division has announced charges against municipal tax lien investors in Maryland and New Jersey, with more than a dozen individuals and companies charged in the New Jersey probe since 2011.

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