Real Estate Investors Plead Guilty to Bid-Rigging and Mail Fraud at Public Foreclosure Auctions

Strategic Insights -

As the country faces unprecedented home foreclosure rates, a group of eight California real estate investors have agreed to plead guilty to their roles in two separate conspiracies to rig bids and commit mail fraud at public real estate foreclosure auctions in Northern California. The Department of Justice announced the charges, which were filed in U.S. District Court for the Northern District of California in Oakland. According to the felony charges, the real estate investors participated in a conspiracy to rig bids by agreeing to refrain from bidding against one another at public real estate foreclosure auctions in Contra Costa County and Alameda County, California.

Key Takeaways:

  • Eight California real estate investors, including Thomas Franciose, William Freeborn, Robert Kramer, Thomas Legault, David Margen, Brian McKinzie, Jaime Wong, and Jorge Wong, have agreed to plead guilty to their roles in two separate conspiracies to rig bids and commit mail fraud at public real estate foreclosure auctions.
  • The conspirators participated in a conspiracy to rig bids by agreeing to refrain from bidding against one another at public real estate foreclosure auctions in Contra Costa County and Alameda County, California.
  • The primary purpose of the conspiracies was to suppress and restrain competition to obtain selected real estate offered at Alameda and Contra Costa County public foreclosure auctions at noncompetitive prices.
  • The real estate investors conspired with others not to bid against one another at public real estate foreclosure auctions in Northern California, participating in a conspiracy in various lengths of time between May 2008 and January 2011.
  • The conspirators held secret, private auctions at which each participant would bid the amount above the public auction price he was willing to pay, and the highest bidder at the private auction won the property.
  • The difference between the public auction price and that at the second auction was the group's illicit profit, and it was divided among the conspirators, often in cash.

Statistics:

  • Eight real estate investors have agreed to plead guilty to their roles in bid-rigging and mail fraud at public real estate foreclosure auctions.
  • The conspirators participated in a conspiracy to rig bids at public real estate foreclosure auctions in Contra Costa County and Alameda County, California.
  • The primary purpose of the conspiracies was to suppress and restrain competition to obtain selected real estate offered at Alameda and Contra Costa County public foreclosure auctions at noncompetitive prices.
  • The real estate investors conspired with others not to bid against one another at public real estate foreclosure auctions in Northern California between May 2008 and January 2011.
  • Each count of conspiracy to commit mail fraud carries a maximum sentence of 30 years in prison and a $1 million fine.
  • 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 victim if either amount is greater than the $1 million statutory maximum.

Sources:

  • U.S. Department of Justice, Antitrust Division
  • FBI San Francisco Field Office
  • President Barack Obama's Financial Fraud Enforcement Task Force (FFETF)
  • StopFraud.gov