Inquiring minds are thinking, “Yeah, that’s no surprise.” to the headlines that the FBI is investigating fraud charges in the trust deed auctions on the courthouse steps:
Foreclosure auctions take place every weekday on the steps of courthouses throughout California. Now the FBI is investigating whether some real estate speculators are illegally rigging bids for these sales.
“Last week, the FBI conducted interviews and executed search warrants through the entire Bay Area as part of a long-term investigation of anti-competitive practices at trustee sales of foreclosed homes,” said bureau spokeswoman Julie Sohn.
The courthouse steps Trustee Auction has always been a small circle of friendly rivals who protect their turf:
The probe is shaking up the tight-knit world of investors who bid at these auctions. The issue, sources say, is that some participants allegedly pay others to refrain from bidding on certain properties to keep their prices low.
Such bid-rigging violates the federal Sherman Antitrust Act and can carry a maximum penalty of 10 years in prison and a $1 million fine. That maximum can be increased to twice the perpetrator’s gain or twice the victim’s loss.
“There have always been rumors of collusion at the courthouse steps,” said Sean O’Toole of ForeclosureRadar.com, a Discovery Bay company that provides detailed information on properties sold at the auctions. At a typical auction, many investors clutch clipboards with printouts from his website.
“If you have a small crowd of guys that talk to each other every day, it’s natural for them to say, ‘Why are we bidding each other up? Let’s just buy this and work it out afterward.’ ” O’Toole said. But when he speaks to real estate clubs and others, O’Toole said, “I am very clear. I say: ‘This is illegal. Don’t do it.’ “
This isn’t exactly as cut-and-dried as Mr. O’Toole makes it out to be. Much of these conversations are in his and the FBI’s head.
The market can only sustain about 7 companies in a large county. They know each other’s business because they go after each other everyday. They know each other’s sweet spot, weaknesses, geographical areas of interest, minimum profit requirements, etc.
The FBI would do well to reference Robert Nash and his economic theories of mature market competition. Anyone who can find a copy of the 80’s article in Forbes about “Swimming with the Sharks” has a great article in their hands.
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