Eight Bay Area real estate investors agreed to plead guilty to rigging
foreclosure auctions in Alameda and Contra Costa counties, the Department
of Justice said on Thursday. The investors' actions suppressed competition
for properties, keeping their prices noncompetitive, it said.
The felony charges, which result from a joint investigation by the Justice
Department and the FBI, said the investors conspired to refrain from
bidding against one another at public courthouse-steps auctions, which are
the final stage in the foreclosure process. The investors then "would hold
a secret, private auction at which each participant would bid," the
Justice Department said. The price difference between the public and
private auctions "was the group's illicit profit, and it was divided among
the conspirators, often in cash."
Foreclosures have multiplied with the housing downturn, creating a playing
field for this type of activity. In California, lenders repossess homes
that are in arrears on their mortgages by selling them at public auctions
on county courthouse steps; hundreds of such auctions occur every weekday
throughout the state. Many homes do not generate a bid and thus become the
lender's property; others are bid upon by real estate investors.
"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 Department of Justice's antitrust division, in a statement.
Gina Talamona, a spokeswoman for the DOJ antitrust division, said the
probe is ongoing.
"The antitrust division and FBI continue to investigate real estate
foreclosure auctions and will continue to look at anticompetitive conduct"
there, she said.
The investors were charged with various counts of bid rigging to obtain
selected real estate, which carries maximum penalties of 10 years in
prison and a $1 million fine, and mail fraud, which carries maximum
penalties of 30 years in prison and a $1 million fine.
Charges were filed on Thursday in U.S. District Court for the Northern
District of California in Oakland against 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, and Jorge Wong of San Leandro.
The actual pleas and sentencing would happen at a future date.
Franciose, Freeborn, Margen and Legault did not return calls for comment.
Kramer declined to comment. McKinzie, Jaime Wong and Jorge Wong could not
be reached. E-mail Carolyn Said at csaid@sfchronicle.com. ----------------------------------------------------------------------
Copyright 2011 SF Chronicle
foreclosure auctions in Alameda and Contra Costa counties, the Department
of Justice said on Thursday. The investors' actions suppressed competition
for properties, keeping their prices noncompetitive, it said.
The felony charges, which result from a joint investigation by the Justice
Department and the FBI, said the investors conspired to refrain from
bidding against one another at public courthouse-steps auctions, which are
the final stage in the foreclosure process. The investors then "would hold
a secret, private auction at which each participant would bid," the
Justice Department said. The price difference between the public and
private auctions "was the group's illicit profit, and it was divided among
the conspirators, often in cash."
Foreclosures have multiplied with the housing downturn, creating a playing
field for this type of activity. In California, lenders repossess homes
that are in arrears on their mortgages by selling them at public auctions
on county courthouse steps; hundreds of such auctions occur every weekday
throughout the state. Many homes do not generate a bid and thus become the
lender's property; others are bid upon by real estate investors.
"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 Department of Justice's antitrust division, in a statement.
Gina Talamona, a spokeswoman for the DOJ antitrust division, said the
probe is ongoing.
"The antitrust division and FBI continue to investigate real estate
foreclosure auctions and will continue to look at anticompetitive conduct"
there, she said.
The investors were charged with various counts of bid rigging to obtain
selected real estate, which carries maximum penalties of 10 years in
prison and a $1 million fine, and mail fraud, which carries maximum
penalties of 30 years in prison and a $1 million fine.
Charges were filed on Thursday in U.S. District Court for the Northern
District of California in Oakland against 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, and Jorge Wong of San Leandro.
The actual pleas and sentencing would happen at a future date.
Franciose, Freeborn, Margen and Legault did not return calls for comment.
Kramer declined to comment. McKinzie, Jaime Wong and Jorge Wong could not
be reached. E-mail Carolyn Said at csaid@sfchronicle.com. ----------------------------------------------------------------------
Copyright 2011 SF Chronicle
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