DOJ: Bid Rigging at Auctions: The Achilles Heal of the Securitization Scam

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Editor’s Comment and Opinion: Frankly I think bid rigging is the rule rather than the exception. The number of “investors” popping up and buying these properties at auction, and the question of whether they are getting their financing from the bank or servicer that illegally foreclosed is still open. Skyline is one of the companies of interest that I am investigating.

Livinglies is now offering investigation services from a licensed private investigator to show the connection between the “bidder” and the “beneficiary” or “mortgagee” pretending to be the creditor. Call 520-405-1688 for more details.

The biggest part of the rigging comes from the “credit bid” that the “trustee” (actually some low-paid employee supposedly “representing” the trustee) is used to create an aura of plausible deniability.

The trustee, often at an auction that doesn’t actually take place, simply sits in his office and signs papers to the effect that he received a bid from XYZ and it was accepted and then issues a deed on foreclosure that carries with it a presumption of validity — even though the “Credit bid” was not submitted by a creditor or, in many cases, where the “creditor” has not shown any evidence to the “substitute trustee” that it is owed any money from the borrower.

If you scratch the surface you will find that the bidder neither funded nor ever paid to buy the loan, so where is the receivable entitling them to submit a credit bid, according to statute?

The case below shows the kind of penalty that SHOULD apply to everyone involved in bid rigging. But if things continue to go the way they are already headed, these guys are thrown under the bus as the sacrifice and it is made to look like this is an isolated incident instead of the rule.

If drill down instead of scratching you will find in many cases that the amount of money being demanded is far higher than the amount due to any creditor, whoever they are, because of the receipt of insurance and bailouts that explicitly waive the right to go after the borrower. How the banks and Master servicers received that insurance and bailout money while the investors were taking the loss has been the subject of many previous articles.

Investor pleads guilty of bid rigging at foreclosure auctions
November 02, 2012, 05:00 AM By Michelle Durand Daily Journal Staff
A real estate investor pleaded guilty yesterday to bid rigging at public foreclosure auctions in San Mateo and San Francisco counties over a two-year span, according to the Department of Justice.Norman Montalvo, of Concord, conspired with others at the auctions, including the one held outside the Redwood City courthouse, to designate a winning bidder for selected properties rather than compete against each other, according to court documents.

Those involved kept the wining price low which, in turn, federal prosecutors say, damaged the real estate market and defrauded those expecting a level playing field.

The investors “illegally restrained competition … by falsely creating the appearance of unfettered bidding while they were secretly colluding to suppress prices,” said Scott D. Hammond, deputy assistant attorney general of the antitrust division, in an announcement of Montalvo’s plea.

Montalvo was also charged with conspiring to use the mail to carry out the scheme, make and receive payoffs and divert co-conspirators money that would have otherwise gone to mortgage holders and others.

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.

Montalvo is accused of committing bid rigging and mail fraud in San Mateo and San Francisco counties as early as June 2008 until approximately September 2010. He is the 26th person to plead guilty or agree to plead guilty as part of the DOJ’s ongoing antitrust investigation at public real estate auctions in Northern California, including those in San Mateo County.

Montalvo’s plea is proof the effort is working, said Joel Moss, acting special agent in charge of the FBI’s San Francisco division.

“Criminals who take advantage of the real estate auction process will be brought to justice,” he said in a prepared statement.

Montalvo faces 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 government can also go after the proceeds made by the fraud.

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.


Rigging the Bids at Foreclosure Sales

From Dan Edstrom:

Department of Justice Press Release

For Immediate Release
April 16, 2010 United States Attorney’s Office
Eastern District of California
Contact: (916) 554-2700
Stockton Real Estate Executive Pleads Guilty to Bid Rigging at Auctions of Foreclosed Properties

SACRAMENTO, CA—United States Attorney Benjamin B. Wagner and Assistant Attorney General Christine Varney of the Department of Justice’s Antitrust Division announced today that Anthony B. Ghio, 43, of Stockton, pleaded guilty today before United States District Judge Edward J. Garcia to conspiring to rig bids at public real estate foreclosure auctions held in San Joaquin County.

These charges arose from an ongoing federal antitrust investigation of fraud and bidding irregularities in certain real estate auctions in San Joaquin County. The investigation is being conducted by the U.S. Attorney’s Office for the Eastern District of California, the Antitrust Division’s San Francisco Office, the Federal Bureau of Investigation, and the San Joaquin County District Attorney’s Office.

According to Assistant United States Attorneys Robin R. Taylor and Russell L. Carlberg, who are prosecuting the case with assistance from Barbara Nelson and Richard Cohen of the Antitrust Division, Ghio admitted in his guilty plea that he conspired with a group of real estate speculators who agreed not to bid against each other at certain public real estate foreclosure auctions in San Joaquin County. The primary purpose of the conspiracy was to suppress and restrain competition and obtain selected real estate offered at San Joaquin County public foreclosure auctions at noncompetitive prices.

Court documents show that after the conspirators’ designated bidder bought a property at a public auction, they would hold a second private auction. Each participating conspirator would submit bids in the private auction above the public auction price. The conspirator who bid the highest amount at the end of the private auction won the property. The difference between the noncompetitive price at the public auction and the winning bid at the second auction was the group’s illicit profit, and it was divided among the conspirators in payoffs. Ghio participated in the bid-rigging scheme from April 2009 until October 2009.

Ghio is charged with bid rigging, a violation of the Sherman Act, which carries a maximum penalty of 10 years in prison and a $1 million fine. The maximum fine may be increased to twice the gain derived from the crime or twice the loss suffered by the victim of the crime, if either of those amounts is greater than the statutory maximum fine. The actual sentence, however, will be determined at the discretion of the court after consideration of any applicable statutory sentencing factors and the Federal Sentencing Guidelines, which take into account a number of variables.

The investigation is continuing. Anyone with information concerning bid rigging or fraud related to real estate foreclosure auctions should contact the Antitrust Division’s San Francisco Office at 415-436-6660 or visit http://www.justice.gov/atr/contact/newcase.htm, or the FBI’s Sacramento Division at 916-481-9110, or the U.S. Attorneys Office for the Eastern District of California at 916-554-2900.

Media inquiries to the U.S. Attorney’s Office should be directed to Lauren Horwood at 916-554-2706. Media inquiries regarding the department’s Antitrust Division should be directed to Gina Talamona at 202-514-2007.

This law enforcement action is part of President Barack Obama’s Financial Fraud Enforcement Task Force.

President Obama established the interagency Financial Fraud Enforcement Task Force to wage an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes. The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general, and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes.

One component of the FFETF is the national Mortgage Fraud Working Group, co-chaired by U.S. Attorney Wagner.

Dan Edstrom
dmedstrom@hotmail.com

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