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.


ANTITRUST INVESTIGATING BID-RIGGING AT SO-CALLED AUCTIONS — 7 plead guilty

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EDITOR’S NOTE: Investigations are one thing, charges and convictions are quite another. It is my opinion that the so-called auctions, at least in the non-judicial states are rigged, unlawful and possibly criminal.  The person who shows up is some agent or employee of the substitute trustee who shouldn’t be in the picture anyway because they ARE in substance the pretender who makes claims to being a creditor. This person conducts an auction-like event that is not really an auction because there are no actual bids. Then the person acting for the “substitute trustee” issues a wild deed without consideration received from anyone. At that point the homeowner becomes a tenant in their own home because state law is neither followed nor enforced. If state law were enforced, there would be no substitute trustee, there would be no auction and there would be no sale nor issuance of a deed.

The person conducting the so-called auction comes there armed with instructions from undisclosed persons within the organization who hired him to go there. He is not a trustee and he is not acting in accordance with statute which requires that the trustee exercise the utmost due diligence to make up for the fact there is no judicial review in non-judicial sales under the power of sale in the deed of trust. The instructions are for this person, of dubious authority to do anything for anyone, to pretend that there is a bid from a party he/she identifies a as creditor.

But the person posing as the auctioneer has no idea where the bid came from and whether it is valid. It could only be valid if it were tendered as the debt owed to the bidder. But the bidder can’t say that because the debt is not owed to the so-called bidder. So the bidder doesn’t show up and protects itself with plausible deniability as to what happened at the auction. They will probably say that they might have been negligent in their procedures but the the sales were right and correct. Those sales are neither right, correct, legal or proper. They are not ethical either because the money the borrower owes, if any, has yet to be decided by the evidence.

SUBMITTED BY USED CAR GUY:

I guess you can tell I’m on a mission today….
I called the gal at the Wisconsin AG’s office because her e-mail quit working. Talked to her assistant and came to find out she went to work for the DOJ in Washington D.C. I think that is good news. The longer these banks go without being able to force a grant of blanket amnesty, the better. And now, for a little vindication of what we all know is going on after the homes are stolen…….

Friday August 12, 2011 SACRAMENTO, Calif. — A real estate investor pleaded guilty today in U.S. District Court in Sacramento to conspiring to rig bids and commit mail fraud at public real estate foreclosure auctions held in San Joaquin County, Sharis A. Pozen, Acting Assistant Attorney General of the Department of Justice’s Antitrust Division, and Benjamin B. Wagner, U.S. Attorney for the Eastern District of California, announced.

Walter Daniel Olmstead, 39, of Tracy, pleaded guilty to conspiring 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. According to court documents, the primary purpose of the conspiracy was to suppress and restrain competition and to obtain selected real estate offered at San Joaquin County public foreclosure auctions at noncompetitive prices.

According to the court documents, after the conspirators’ designated winning bidder bought a property at a public auction, they would hold a second, private auction, at which each participating conspirator would bid the amount above the public auction price he or she was willing to pay. The conspirator who bid the highest amount at the end of the private auction won the property. The difference between the price at the public auction and that at the second auction was the group’s illicit profit, and it was divided among the conspirators in payoffs. According to his plea agreement, Olmstead participated in the scheme beginning in or about November 2008 until in or about July 2009.

To date, seven individuals, including Olmstead, have pleaded guilty in U.S. District Court for the Eastern District of California in connection with this investigation the others being Anthony B. Ghio, John R. Vanzetti, Theodore B. Hutz, Richard W. Northcutt, Yama Marifat and Gregory L. Jackson.

“The Antitrust Division continues to vigorously pursue bid rigging conspiracies at real estate foreclosure auctions that eliminate competition in the marketplace and harm consumers,” said Sharis A. Pozen, Acting Assistant Attorney General in charge of the Department of Justice’s Antitrust Division. “The division will work with its law enforcement partners to ensure that the real estate foreclosure auction process is fair and open so that consumers will benefit from competition.”

U.S. Attorney Wagner said: “By rigging public auctions of foreclosed properties, the defendants who have pleaded guilty as a result of this investigation illegally manipulated the market for residential real estate. The Department of Justice is committed to improving the transparency and integrity of that market, and we will continue to investigate and prosecute those who would seek to undermine the market through such illegal activities.”

Olmstead pleaded guilty to 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 victims of the crime, if either of those amounts is greater than the statutory maximum fine. Olmstead also pleaded guilty to conspiracy to commit mail fraud, which carries a maximum sentence of 30 years in prison and a $1 million fine.

These charges arose from an ongoing federal antitrust investigation of fraud and bid rigging in certain real estate auctions in San Joaquin County. The investigation is being conducted by the Antitrust Division’s San Francisco Office, the U.S. Attorney’s Office for the Eastern District of California, the FBI’s Sacramento Division and the San Joaquin County District Attorney’s Office. Trial attorneys Anna Pletcher, Richard Cohen and Tai Milder from the Antitrust Division’s San Francisco Office and Assistant U.S. Attorney Russell L. Carlberg are prosecuting the case.

Today’s charges are part of efforts underway by 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 task force is the national Mortgage Fraud Working Group, co-chaired by U.S. Attorney Wagner. For more information on the task force, visit http://www.StopFraud.gov.

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, the U.S. Attorney’s Office for the Eastern District of California at 916-554-2700, or the FBI’s Sacramento Division at 916-481-9110.

Bank of America Pays $137 Million in Bid-Rigging Case

Editor’s Note: Bid Rigging is exactly what is happening at the steps of every foreclosure action involving so-called securitized loans. Here BofA admits it but not for home foreclosures. The party submitted the non-cash bid (called a credit bid) is not the creditor, and the title is transferred to yet another party who is also not a creditor. This is one of the many reasons why (1) the sales can be overturned and (2) if you go to the auction and bid and then sue to invalidate the first bidder (who might have bid the full amount claimed under the loan) you might get the property for a LOT LESS than the so-called principal due and even less than normal fair market value. It could be argued that with title clouded, the bid of $100 from you was more than sufficient.

By BEN PROTESS
Bank of America plans to begin testing new bank offerings in December.Mario Tama/Getty Images Bank of America plans to begin testing new bank offerings in December.

Bank of America agreed on Tuesday to pay federal and state authorities $137 million to settle charges that its securities group helped rig bids on municipal bond contracts, according to the Securities and Exchange Commission.

The settlement is part of a wide-ranging inquiry into the municipal derivatives markets. The investigation has centered on whether Wall Street banks improperly won investments while defrauding cities, school districts and nonprofits. Eight bankers have already pleaded guilty to charges of fraud and conspiracy, including former executives at Bank of America, UBS and JPMorgan Chase.

“This ongoing investigation has helped to expose wide-spread corruption in the municipal reinvestment industry,” Robert Khuzami, director of the S.E.C.’s Division of Enforcement, said in a statement. “The conduct was egregious — in return for business, the company repeatedly paid undisclosed gratuitous payments and kickbacks and affirmatively misrepresented that the bidding process was proper.”

Bank of America first reported its own potential wrongdoing to the Justice Department in 2007 — the only bank to do so. The conduct is believed to have taken place between 1998 and 2003.

In return, the federal government agreed not to bring criminal charges against the company, immunity that does not apply to its employees. One former executive, fired in 2002, pleaded guilty to charges of fraud and conspiracy. As part of the settlement with the S.E.C., the company neither admitted nor denied wrongdoing.

“Bank of America is pleased to put this matter behind it, and has already voluntarily undertaken numerous remediation efforts,” the company said in a statement.

The bank said it “continues to cooperate with all agencies on their inquiries into practices by various companies participating in the municipal derivatives markets during this time period.”

When towns and cities sell bonds, the municipalities generally invest the proceeds until they need to use the money. A middleman, known as a bidding agent, facilitates the process, setting up a competitive bid for those investment dollars.

In the charges against Bank of America, the S.E.C. alleged the process was not competitive because bidding agents directly steered business to the bank. Bank of America employees, investigators claimed, returned the favor, in part through kickbacks.

Besides the S.E.C., the settlement involves the Office of the Comptroller of the Currency, the Internal Revenue Service and 20 states. Bank of America agreed to pay $25 million to the I.R.S., $9 million to the O.C.C., $4.5 million to state agencies and $100 million to municipalities, nonprofits and others.

“This settlement is only a first step in an ongoing investigation aimed at recovering restitution from the nation’s biggest financial institutions for relentlessly shortchanging taxpayers and nonprofits,” Connecticut’s attorney general, Richard Blumenthal, said in a statement. “The conspiracy admitted by Bank of America deceived and defrauded municipalities and nonprofits in a web of bid-rigging and deceptive conduct, costing millions and involving several of the country’s major financial institutions.”

A.I.G. to Pay $725 Million in Ohio Case

July 16, 2010

A.I.G. to Pay $725 Million in Ohio Case

By MICHAEL POWELL and MARY WILLIAMS WALSH

The American International Group, once the nation’s largest insurance group before it nearly collapsed in 2008, has agreed to pay $725 million to three Ohio pension funds to settle six-year-old claims of accounting fraud, stock manipulation and bid-rigging.

Taken together with earlier settlements, A.I.G. will ladle out more than $1 billion to Ohio investors, money that will go to firefighters, teachers, librarians and other pensioners. The state’s attorney general, Richard Cordray, said Friday, that it was the 10th largest securities class-action settlement in United States history.

“No privileged few are entitled to play by different rules than the rest of us,” Mr. Cordray said during a news conference. “Ohio is determined to send a strong message to the marketplace that companies who don’t play by the rules will pay a steep price.”

A.I.G. disclosed the terms of the settlement in a filing with the Securities and Exchange Commission.

How A.I.G. will pay for this settlement is an open question. It has agreed to a two-step payment, in no small part to give it time to figure out how to raise the money.

Executives are well aware that taxpayers and legislators would cry foul if it paid the lawsuit with any portion of the $22 billion in federal rescue money still available from the United States Treasury.

Instead, the company intends to pay $175 million within 10 days of court approval of its settlement. It plans to raise $550 million through a stock offering in the spring of 2011. That prospect struck some market analysts as a long shot.

“There’s still a lot of question marks hanging over A.I.G.,” said Chris Whalen, a co-founder of Institutional Risk Analytics, a research firm. “How would you write a prospectus for it?

“The document,” he said, “would be quite appalling when it described the risks.”

A.I.G.’s former chief executive, Maurice R. Greenberg, and other executives agreed to pay $115 million in an earlier settlement with Ohio, which filed its lawsuit in 2004.

State attorneys general often have proved more aggressive than federal regulators in going after financial houses in the wake of the 2008 crisis. And A.I.G. could face new legal headaches. For instance New York’s attorney general, Andrew M. Cuomo, has stepped up his investigation of the company in the last few weeks, according to a person with direct knowledge of the case.

The Ohio settlement allows “A.I.G. to continue to focus its efforts on paying back taxpayers and restoring the value of our franchise,” Mark Herr, a company spokesman, said in a news release.

The Ohio case was filed on behalf of pension funds in the state that had suffered significant losses in their holdings of A.I.G. when its share price plummeted after it restated results for years before 2004. Those restatements followed an investigation by Eliot L. Spitzer, Mr. Cuomo’s predecessor, into accounting irregularities at the company and the subsequent resignation of Mr. Greenberg.

But the company faces a long and uncertain road, say Wall Street analysts.

Its stock, after adjusting for a reverse split, once traded at $1,446.80 a share; it stands now at $35.64.

A.I.G. has become the definition of turmoil. Its chairman resigned this week after a fierce feud with the chief executive, who has referred dismissively to “all those crazies down in Washington.”

Those crazies presumably include the federal government, which over the last two years gave A.I.G. the largest bailout in United States history, making $182 billion available to the company.

And the company’s proposed stock offering next year is rife with uncertainties. Such an offering would by definition dilute the value of the government’s holdings.

A.I.G. has struggled of late to sell off subsidiaries to repay the Federal Reserve Bank of New York. This year the company failed in its attempts to turn its Asian life insurance subsidiary over to Prudential of Britain. This week the company’s directors voted to proceed with an initial public offering of the same subsidiary, with the proceeds intended for the Federal Reserve.

Should the company fail to raise the $550 million, Ohio has the right to resume its litigation.

The fall of the world’s largest insurance company began in the autumn of 2008, when a sudden downgrade in its credit worthiness set off something like a bank run. It turned out that the company had sold questionable derivatives that were used to prop up the portfolios of other financial institutions.

Federal officials moved quickly to bail out the company, fearing that if A.I.G. toppled, dozens of financial institutions would quickly fall as well. Havoc seemed in the offing.

Federal investigators have since examined many aspects of the company’s behavior, even convening a grand jury in New York. But they have never brought charges against the company or its top officials.

“The states are too often the only ones to watch out for this misconduct,” Mr. Cordray said Friday. “For years, people have been asleep at the switch.”

Louise Story contributed reporting.

This article has been revised to reflect the following correction:

Correction: July 17, 2010

An earlier version of this article misidentified the New York attorney general who began the investigation into A.I.G.’s accounting irregularities. It was Eliot L. Spitzer, not Andrew M. Cuomo.

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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