homesmillbrae.com » Bid Rigging

Feds crack down on foreclosure auction scams

Tue, 04 Jun 2013 18:42:24 +0000

SAN FRANCISCO — At the height of the financial crisis, bargain hunters would gather each week on county courthouse steps to bid on foreclosed properties throughout Northern and Central California. The inventory lists were long, especially in hard-hit areas such as Sacramento and Stockton. But the auctions were generally short affairs — often because real estate speculators were illegally fixing the bidding process.

In the past three years, federal prosecutors have charged 54 people and two companies in three states for bid-rigging during courthouse auctions of foreclosed properties. Most cases originated in California, the state with the highest foreclosure rate during the financial crisis. Nearly identical rings were also broken up in Raleigh, N.C., and Mobile, Ala.

Working in concert, the would-be buyers would appoint just one person to bid on each property on the auction block, thus securing the “winning” bid. Minutes after the official proceeding was over, they would then conduct an auction among themselves, often on the same courthouse steps.

That’s when a property’s true price would emerge. The conspirators would then divvy up the difference paid at the official auction and the private one.

Federal prosecutors say such schemes have operated for decades, once earning a few thousand dollars per property. But the explosion of foreclosures amid the country’s financial meltdown a few years ago upped illicit gains to millions of

dollars. The scammers took money that otherwise would have gone to banks selling the foreclosed properties or beleaguered homeowners who should have been compensated.

The bidding investigations are being driven by a special task force established at the U.S. Justice Department in the wake of the financial crisis to combat mortgage fraud. The probes aim to “stop those who engage in illegal conduct that thwarts the competitive process, and take advantage of American consumers when they are most vulnerable,” said Assistant Attorney General Bill Baer, head of DOJ’s antitrust division in Washington, D.C.

Prosecutors say the circle of conspirators gradually widened at each courthouse: First-time buyers would be brought into the conspiracy as an increasing number of speculators attended the auctions. Those not in on the schemes were often pressured not to return by verbal harassment and, in some cases, physical jostling.

In the last two years, more than 30 people have pleaded guilty to participating in a series of courthouse bid-rigging conspiracies in Northern California counties. Another 11 have been busted in Central California. Similar prosecutions have been carried out in Alabama, where eight people have pleaded guilty in Mobile in the last two years. Five others have pleaded guilty in North Carolina since 2010 to operating a bidding conspiracy around Raleigh.

For many now going to prison, this is their first brush with the law.

Father and son Robert and Jason Brannon were each sentenced to 20 months in prison this month in Mobile, Ala., after pleading guilty to participating in 17 rigged bids. The two opened a real estate investment company in 2003, after Robert Brannon sold a portion of the family farm. When they began attending auctions to acquire rental properties, they discovered that some speculators were rigging the bids and joined in the conspiracy, according to court documents.

In addition to the jail time, the Brannons were ordered to pay restitution of almost $22,000 each, their cut from the rigged auctions.

In April, real estate investor Mohammed Rezaian pleaded guilty to participating in similar scams in Northern California. He has agreed to cooperate in the prosecution of other perpetrators and pay a fine of $213,000. He also faces a little less than two years in prison when sentenced sometime next year. Neither he nor his lawyers returned phone calls.

Federal officials say they expect to charge a few more people in the coming months but that cases are expected to soon drop off now that the heated foreclosure market of late 2008 and 2009 has cooled.

Madeline Schnapp, an economist with PropertyRadar, a company that tracks foreclosures, said sales at auctions have fallen from a height of about 30,000 a month to about 5,000 a month in California as government programs and new laws have made it more difficult for banks to begin foreclosure proceedings.

“There’s not much of a supply now,” she said.

Paul Pfingst, a lawyer who represents another investor charged in participating in a Central California ring, says illegal temptation got the better of many speculators who couldn’t resist victimizing seemingly unsympathetic banks. His client, Andrew Katakis, is accused of participating along with four others in a $2.5 million conspiracy to rig bids in the Stockton area, which has led the nation in foreclosures.

“The amount of money and properties that were changing hands was staggering,” said Pfingst, who maintains his client’s innocence. “It caused many people to cross from legality to illegality.”

AP-WF-06-01-13 1941GMT

Article source: http://www.insidebayarea.com/california/ci_23379517/feds-crack-down-foreclosure-auction-scams

Concord investor will plead guilty to foreclosure fraud, authorities say

Fri, 02 Nov 2012 13:57:41 +0000

SAN FRANCISCO — A Concord man has agreed to plead guilty to a conspiracy to rig bidding at public real estate auctions in the Bay Area, authorities said.

Norman Montalvo, a real estate investor, was charged with four felonies Thursday in the U.S. District Court for the Northern District of California, according to an FBI news release. Montalvo is the 26th person who has admitted to a role in the conspiracy to rig bidding and fraud at the foreclosure auctions.

Montalvo was also charged with using the mail to fraudulently acquire title to properties sold at auctions, to send and receive payoffs, and to send money to co-conspirators. Montalvo’s role in the scheme began as early as June 2008 and lasted until about September 2010, according the FBI.

By conspiring to purchase properties at non-competitive prices, Montalvo and others were preventing mortgage holders from getting fair prices for their properties, and in some, cases, keeping money out of the hands of defaulting homeowners, according to the FBI. Montalvo is charged with bid rigging and fraud at auctions in San Francisco and San Mateo counties, but the Department of Justice’s antitrust investigation also covers auctions in Contra Costa and Alameda counties.

Montalvo faces up to 30 years in prison. He could also be fined up to $1 million or more, depending on his profit and the victims’ losses.

Contact Daniel M. Jimenez at

Article source: http://www.insidebayarea.com/news/ci_21909972/concord-investor-will-plead-guilty-foreclosure-fraud-authorities

Real estate investors plead guilty of rigging auctions

Sat, 28 Apr 2012 07:25:20 +0000

Two real estate investors who do business in San Mateo County have pleaded guilty to mail fraud and rigging public foreclosure auctions outside the Redwood City courthouse by agreeing not to bid against each other, according to the Department of Justice.

Lydia Fong and Matthew Worthing, both of San Francisco, were charged yesterday in the case, joining 20 other individuals throughout four Bay Area counties who have pleaded guilty or agreed to plead guilty in similar bid rigging and public auction fraud cases.

According to federal prosecutors, Fong and Worthing conspired with others for varied stretches between October 2009 and January 2011. Worthing is also charged with participating in a similar San Francisco County conspiracy in September 2010.

During the scheme, those involved agree not to bid against each other for foreclosed properties auctioned off outside the county courthouse. Instead, they kept the winning price low which, in turn, federal prosecutors say, damaged the real estate market and defrauded those expecting a level playing field.

“The collusion taking place at these auctions eliminated competition from the marketplace and allowed the conspirators to profit from the financial distress of others,” said Sharis A. Pozen, acting assistant attorney general Sharis A. Pozen in charge of the DOJ Antitrust Division, in a written statement.

When property is auctioned, the proceeds pay off the mortgage and debt with any remaining money going to the homeowner. Squelching competitive bids limits how much money is available for both.

Fong and Worthing used the postal service to send title documents to others in the conspiracy, make and receive payoffs and divert money, leading to the mail fraud charges.

For their roles, the investors face up to a decade in federal prison and $1 million fine for violating the antitrust law known as the Sherman Act and up to 30 years and a similar fine for each count of conspiring to commit mail fraud.

The DOJ’s antitrust division has an ongoing investigation into bid rigging and fraud at public real estate foreclosure auctions in the Bay Area. Including Fong and Worthing, a total of 22 people have settled cases in San Mateo, San Francisco, Contra Costa and Alameda counties.

Anyone with information about bid rigging or fraud related to public real estate foreclosure auctions should contact the Antitrust Division’s San Francisco Office at (415) 436-6660 or visit www.justice.gov/atr/contact/newcase.htm or call the FBI tip line at (415) 553-7400.

Michelle Durand can be reached by email: michelle@smdailyjournal.com or by phone: (650) 344-5200 ext. 102.

Article source: http://www.smdailyjournal.com/article_preview.php?id=233265&title=Real%20estate%20investors%20plead%20guilty%20of%20rigging%20auctions

Calif. investors to plead guilty in bid-rigging

Sun, 10 Jul 2011 17:16:08 +0000

SACRAMENTO, Calif. — Eight California real estate investors have agreed to plead guilty in a bid-rigging scheme to buy foreclosed real estate at public auctions in two San Francisco Bay area counties, the U.S. Department of Justice said Thursday.

The men were charged with bid-rigging and conspiracy to commit mail fraud as part of a joint investigation by the FBI and the antitrust division of the Justice Department.

Investigators say the men conspired or made payoffs from 2008 through 2011 so they would not bid against each other for properties sold at foreclosure auctions in Alameda and Contra Costa counties. After one bought a property at an artificially low price, they would hold a private auction among themselves to resell it and split the extra money paid by the winning bidder.

“While the country faces unprecedented home foreclosure rates, the collusion taking place at these auctions is artificially driving down foreclosed home prices and is lining the pockets of the colluding real estate investors,” said Christine Varney, assistant attorney general in charge of the antitrust division, in a prepared statement.

The felony charges were filed in U.S. District Court for the Northern District of California, in Oakland. Court records did not list attorneys for the defendants or indicate whether they were in custody; court personnel said the cases were newly filed and they could not provide any information about them.

The men charged were:

- Thomas Franciose, of San Francisco

- William Freeborn, of Alamo

- Robert Kramer, of Oakland

- Thomas Legault, of Clayton

- David Margen, of Berkeley

- Brian McKinzie, of Hayward

- Jaime Wong, of Dublin

- Jorge Wong, of San Leandro

No Justice Department spokesperson could be reached to clarify whether the men were in custody, when they might enter a plea, their ages or other details. An FBI spokeswoman referred questions to the Justice Department.

Investigators said in a prepared statement that the charges were part of an ongoing investigation into collusion by real estate investors in foreclosure sales, both in Northern California and elsewhere.

In March, federal prosecutors said Yama Marifat of Pleasanton had pleaded guilty to conspiring to rig bids at foreclosure auctions in San Joaquin County, about 50 miles east of the Bay Area and one of the areas hardest hit by the housing bust. The scheme described was similar to that cited in the charges filed Thursday.

At the time, investigators said Marifat was the fifth person to plead guilty in connection with the probe, and he faced up to 10 years in prison for bid rigging and 30 years for conspiracy to commit mail fraud, plus fines of as much as $2 million.

It was unclear whether the new case was related to the earlier investigation.

Article source: http://www.sacbee.com/2011/06/30/3740033/calif-investors-to-plead-guilty.html

Investors Plead Guilty to Auction Bid Rigging

Wed, 06 Jul 2011 04:21:36 +0000

Eight San Francisco Bay Area real estate investors have agreed to plead guilty for their roles in a conspiracy to rig bids at public real estate foreclosure auctions in Northern California, according to the Department of Justice.

The real estate investors took part in conspiracies to rig bids by agreeing to refrain from bidding against one another at real estate foreclosure auctions in Contra Costa and Alameda counties, according to the Justice Department. Some participants actively engaged in conspiracies in both counties, but outside bidding activity occurred independently in each area.

Federal felony charges were filed in U.S. District Court in Northern California against the eight: Thomas Franciose of San Francisco; William Freeborn of Alamo, Calif.; Robert Kramer of Oakland, Calif.; Thomas Legault of Clayton, Calif.; David Margen of Berkeley, Calif.; Brian McKinzie of Hayward, Calif.; Jaime Wong of Dublin, Calif.; and Jorge Wong of San Leandro, Calif.

The case is the first prosecution brought through a new partnership of the FBI and the Antitrust Division in efforts to battle organized widespread auction bid-rigging and anticompetitive practices at real estate auctions.

The Antitrust Division and the FBI have identified a pattern of schemes among investors intended to eliminate competition at foreclosure auctions, according to federal sources. The charges are part of the department’s effort to combat bid rigging, which goes on at various auction sites throughout the country.

The purpose of the conspiracies was to suppress competition and obtain homes and other properties at foreclosure auctions at greatly discounted prices, according to prosecutors. When real estate is sold at auction, proceeds are used to pay off the mortgage and other debts attached to the property.

Each violation carries a maximum penalty of 10 years in prison and a $1 million fine for each individual.

Article source: http://www.housingpredictor.com/2011/auction-bid-rigging.html

Calif. investors to plead guilty in bid-rigging

Sat, 02 Jul 2011 09:19:47 +0000

(06-30) 16:55 PDT Sacramento, Calif. (AP) –

Eight California real estate investors have agreed to plead guilty in a bid-rigging scheme to buy foreclosed real estate at public auctions in two San Francisco Bay area counties, the U.S. Department of Justice said Thursday.

The men were charged with bid-rigging and conspiracy to commit mail fraud as part of a joint investigation by the FBI and the antitrust division of the Justice Department.

The men charged were:

_ Thomas Franciose, of San Francisco

_ William Freeborn, of Alamo

_ Robert Kramer, of Oakland

_ Thomas Legault, of Clayton

_ David Margen, of Berkeley

_ Brian McKinzie, of Hayward

_ Jaime Wong, of Dublin

_ Jorge Wong, of San Leandro

It was unclear whether the new case was related to the earlier investigation.

Article source: http://www.sfgate.com/cgi-bin/article.cgi?f=/n/a/2011/06/30/state/n162200D51.DTL

Calif. investors to plead guilty in bid-rigging

Fri, 01 Jul 2011 15:17:15 +0000

SACRAMENTO, Calif. –
Eight California real estate investors have agreed to plead guilty in a bid-rigging scheme to buy foreclosed real estate at public auctions in two San Francisco Bay area counties, the U.S. Department of Justice said Thursday.

The men were charged with bid-rigging and conspiracy to commit mail fraud as part of a joint investigation by the FBI and the antitrust division of the Justice Department.