In Mobile, Alabama, the Press Register
- Two real estate investors from the Mobile area have agreed to plead guilty to federal bid-rigging charges accusing them of manipulating auctions of foreclosed properties. According to plea agreements filed this week in U.S. District Court in Mobile, Harold M. Buchman and the company he co-owns, M&B Builders, conspired with Allen K. French and others to suppress bids at foreclosure auctions. Prosecutors allege that the conspiracy dated to May 2001 and lasted until at least March of last year.
- “The Antitrust Division continues to vigorously pursue bid-rigging conspiracies at real estate foreclosure auctions, and will work with its law enforcement partners to ensure that the process is fair and open so that consumers will benefit from competition,” [Acting Assistant Attorney General Sharis A.] Pozen stated.(1)
- An attorney for French, Walter Honeycutt, said he expects indictments against other investors. The plea agreements for Buchman and French both reference their cooperation in the ongoing investigation.(2)
- Foreclosure auctions typically are held at the county courthouse and allow mortgage holders to recoup the money they lose when homeowners default on their loans. Prosecutors contend that Buchman, French and others who have not been charged decided among themselves who would bid on various properties, while the others agreed not to compete.
- “When it started out, it was kind of a gentlemen’s agreement,” Honeycutt said. Then someone else took over the operation and implemented a formal scheme, Honeycutt said.
- After one investor would get the property cheaply, according authorities, participants would hold a secret second auction among themselves. The winning bidder would make payoffs to other investors for not competing at the public auction, according to the allegations. The money would be paid out based on predetermined specifications. “It’s a complicated formula,” Honeycutt said.
- The plea agreement calls for M&B Builders to plead guilty to violating the Sherman Antitrust Act and attempted mail fraud conspiracy. The company will pay a $250,000 fine and restitution in the amount of $18,345.20, under the agreement.
- Buchman and French agreed to plead guilty to one count each of antitrust violations. Buchman will serve 6 months in prison and pay a fine of $21,141 and at least $30,000 in restitution. The plea document requires him to do all of his time in a minimum-security prison (ie. a 'Club Fed' facility(3)) and not home confinement or a halfway house.
- French, meanwhile, agreed to pay a $20,000 fine and at least $23,000 in restitution. Under the terms, the judge would be required to sentence him to 6 months or less in prison.(4)
For the story, see Mobile real estate investors agree to plead guilty to manipulating foreclosure auctions.
For the U.S. Department of Justice press release, see Alabama Real Estate Investors Agree to Plead Guilty to Conspiracy to Rig Bids for the Purchase of Real Estate at Public Foreclosure Auctions.
Go here for other posts & links on bid rigging at foreclosure and other real estate-related auctions.
(1) According to a U.S. Department of Justice press release, the Antitrust Division and the FBI have identified a pattern of collusive schemes among real estate investors aimed at eliminating competition at real estate foreclosure auctions, and these charges are part of the department’s ongoing effort to combat this conduct and restore competition to public auctions.
The investigation into fraud and bid rigging at certain real estate foreclosure auctions in Southern Alabama is being conducted by the Antitrust Division’s Atlanta Field Office and the FBI’s Mobile Field Office, with the assistance of the U.S. Attorney’s Office for the Southern District of Alabama. Anyone with information concerning bid rigging or fraud related to public real estate foreclosure auctions should contact the Antitrust Division’s Atlanta Field Office at 404-331-7100 or visit www.justice.gov/atr/contact/newcase.htm.
See Foreclosure Auction Buyer: "Object Is To Get Cheapest Price We Can, Not To Bid Each Other Up" As Intimidation Accusations Flare Up At Courthouse Sales for an indication that these bid-rigging rackets at foreclosure sales appear to be pretty blatant activities that are often perpetrated with impunity.
(2) Evidently, Buchman and French have concluded that there is no honor among thieves and, consequently, have decided to throw their co-conspirators under the bus by beating them in the 'race to the prosecutor's office' and agreeing to cooperate with the Feds in an effort to save their butts. This time-honored approach to saving one's own rump has been cogently articulated by at least one learned federal judge:
- "When a conspiracy is exposed by an arrest or execution of search warrants, soon-to-be defendants know that the first one to "belly up" and tell what he knows receives the best deal. The pressure is to bargain and bargain early, even if an indictment has not been filed." United States v. Moody, 206 F.3d 609, 617 (6th Cir. 2000) (Wiseman, J., concurring) (referring to the not-uncommon 'race to the courthouse' that breaks out among participants in an uncovered criminal conspiracy).
(3) Possibly something 'comfy' and nearby the Mobile area so their families can stop by and visit them often, along the lines of the prison camp formerly located at Eglin Air Force Base in Ft. Walton Beach, Florida, or maybe the one over at the Pensacola Naval Air Station, in Pensacola, Florida.
(4) As has been pointed out here in an earlier post, suspects who have been pinched on bid-rigging charges and are considering copping guilty pleas should first consider whether their alleged unlawful bid rigging racket was really nothing more than an innocent, lawful joint bidding endeavor. See Illegal Bid Rigging Racket? Or Mere Innocent 'Joint Bidding' Arrangement?