The Department of Justice said that Douglas Ditmer and Keith Slipper conspired to rig public foreclosure auctions in Contra Costa and Alameda counties beginning in June 2007 thorough January 2011.
According to DOJ, the primary purpose of the conspiracy was to restrain competition in order to obtain selected real estate offered at the auctions at noncompetitive prices.
The defendants conspired to stop bidding on certain properties in the auctions by negotiating payoffs with other conspirators in order to purchase selected assets for a low price. Following the initial auction, a second, private auction was held open only to conspirators where the property was then given to whoever submitted the highest bid for the house.
When real estate properties are sold at these public foreclosure auctions, the proceeds are used to pay off the mortgage and other debt attached to the property with any remaining money paid to the homeowner. Court documents revealed that these conspirators paid and received money that otherwise would have gone to pay off the mortgage and other holders of debt secured by the properties, and, in some cases, the defaulting homeowner.
“By agreeing not to compete with one another in the bidding process, these investors illegally profited and undermined the integrity of the real estate market,” said Scott Hammond, deputy assistant attorney general of the antitrust division’s criminal enforcement program. “The conspiracy eliminated competition and prevented lenders and distressed homeowners from getting fair market prices for their property.”
The DOJ’s investigation into bid rigging and fraud at public real estate foreclosure auctions has resulted in 24 plea agreements.
Each violation of the Sherman Act carries a maximum penalty of 10 years in prison and a $1 million fine, while the defendants also face the possibility of 30 years in prison and an additional $1 million fine for each count of mail fraud.