Real Estate Investors Plead Guilty to Bid Rigging in Northern California Foreclosure Auctions

Strategic Insights -

Eight real estate investors in California have agreed to plead guilty to participating in a conspiracy to rig bids and commit mail fraud at public real estate foreclosure auctions in Northern California. The conspiracy involved refraining from bidding against one another at auctions in Contra Costa and Alameda counties, artificially driving down foreclosed home prices and lining the pockets of the colluding investors. The Antitrust Division will vigorously pursue similar collusive schemes that eliminate competition from the marketplace, according to Assistant Attorney General Christine Varney.

Key Takeaways:

  • 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 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.
  • The collusive activity occurred independently in each county, and some individuals only participated in the conspiracy in one county.
  • The conspirators used the U.S. mail to carry out their conspiracy to defraud financial institutions by paying potential competitors not to bid competitively in the public auctions for foreclosed properties.
  • Investors who conspired with others to rig bids in foreclosure auctions can face up to 10 years in prison and a $1 million fine for individuals under the Sherman Act.
  • 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.

Statistics:

  • The conspiracies took place between May 2008 and January 2011.
  • The secret, private auctions took place at or near the courthouse steps where the public auctions were held.
  • The difference between the public auction price and the price at the private auction (the group's illicit profit) was divided among the conspirators, often in cash.
  • The Antitrust Division has secured a victory in its fight against bid-rigging and anticompetitive practices in foreclosure auctions.

Sources:

  • U.S. Department of Justice (Release date: [No date provided], but the events took place between May 2008 and January 2011)
  • Quote from Christine Varney, Assistant Attorney General in charge of the Department of Justice's Antitrust Division
  • Court documents and filings in U.S. District Court for the Northern District of California