By Josh Richman
Eight Bay Area Real Estate Investors Plead Guilty In Real Estate Bid-Rigging Scam
Eight Bay Area real estate investors have agreed to plead guilty for their parts in two conspiracies to rig bids and commit mail fraud at public real estate foreclosure auctions in Alameda and Contra Costa counties, the Department of Justice announced Thursday.
Felony charges were filed Thursday in federal court in Oakland against Thomas Franciose, 64, of San Francisco; William Freeborn, 44, of Alamo; Robert Kramer, 63, of Oakland; Thomas Legault, 50, of Clayton; David Margen, 53, of Berkeley; Brian McKinzie, 38, of Hayward; Jaime Wong, 42, of Dublin; and Jorge Wong, 36, of San Leandro.
Prosecutors claim they conspired to rig bids by agreeing not to bid against one another at foreclosure auctions in Alameda and Contra Costa counties — some in both counties, some only in one — between May 2008 and this January.
When real estate properties are sold at the auctions, the proceeds are used to pay off the mortgage and other debt attached to the property, with remaining proceeds, if any, paid to the homeowner. After the conspirators’ designated bidder bought a property, they would hold a secret, private auction — sometimes right near the courthouse steps at which the legitimate auction had just been held — at which each would bid the amount above the public auction price he was willing to pay. The difference between the public auction price and that at the second auction was the group’s illicit profit to be divided among the conspirators, often in cash.
The eight men also were charged with using the U.S. mail in carrying out their conspiracy, by paying potential competitors not to bid competitively in the public auctions, court filings say.
“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 news release. “The Antitrust Division will vigorously pursue these kinds of collusive schemes that eliminate competition from the marketplace.”
Franciose, Jaime Wong and Jorge Wong were charged with one count each of bid rigging to obtain selected real estate at foreclosure auctions in Alameda County and one count each of conspiracy to commit mail fraud. Freeborn and Legault were charged with one count each of bid rigging to obtain selected real estate at foreclosure auctions in Contra Costa County and one count each of conspiracy to commit mail fraud. Kramer, Margen and McKinzie were each charged with two counts of bid rigging to obtain selected real estate at foreclosure auctions in Alameda and Contra Costa Counties and two counts each of conspiracy to commit mail fraud.
Each bid-rigging count — a violation of the Sherman Antitrust Act — is punishable by up to 10 years in federal prison and a fine of up to $1 million, or either twice the gain derived from the crime or twice the loss suffered by the victim. Each mail fraud conspiracy count is punishable by up to 30 years in federal prison and a fine of up to $1 million.
Justice Department spokeswoman Gina Talamona said court dates have not yet been scheduled.
Anyone with information on bid rigging or fraud related to public real estate foreclosure auctions should call the Antitrust Division’s San Francisco Office at 415-436-6660, visit www.justice.gov/atr/contact/newcase.htm or call the FBI tip line at 415-553-7400.
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