Wesley Barta, Oakland, California, Irma Galvez, Pacheco, California, Stan Kahan, Berkeley, California, and Joseph Vesce, San Francisco, four Northern California real estate investors, have agreed to plead guilty for their role in conspiracies to rig bids and commit mail fraud at public real estate foreclosure auctions in Northern California.
Felony charges were filed in the U.S. District Court for the Northern District of California in Oakland.
To date, as a result of ongoing antitrust investigations into bid rigging and fraud at public real estate foreclosure auctions in Northern California, 35 individuals, including Barta, Galvez, Kahan and Vesce, have agreed to plead or have pleaded guilty.
According to court documents, for various lengths of time between June 2008 and January 2011, Barta and Vesce conspired with others not to bid against one another, but instead designated a winning bidder to obtain selected properties at public real estate foreclosure auctions in Contra Costa County, Calif.
Barta and Vesce were also charged with a conspiracy to use the mail to carry out a scheme to fraudulently acquire title to selected Contra Costa County properties sold at public auctions, to make and receive payoffs and to divert money to co-conspirators that would have gone to mortgage holders and others by holding second, private auctions open only to members of the conspiracy. The department said that the selected properties were then awarded to the conspirators who submitted the highest bids in the second, private auctions. The private auctions often took place at or near the courthouse steps where the public auctions were held.
The same charges were brought against Galvez and Kahan for their involvement in similar conduct in Alameda County, Calif., from November 2008 through May 2010.
The primary purpose of the conspiracies was to suppress and restrain competition and to conceal payoffs in order to obtain selected real estate offered at Alameda and Contra Costa County public foreclosure auctions at non-competitive prices. When real estate properties are sold at these 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. According to court documents, 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.
A violation of the Sherman Act carries a maximum penalty of 10 years in prison and a $1 million fine for individuals. The maximum fine for a Sherman Act charge may be increased to twice the gain derived from the crime or twice the loss suffered by the victim if either amount is greater than $1 million. A count of conspiracy to commit mail fraud carries a maximum sentence of 30 years in prison and a $1 million fine. The government can also seek to forfeit the proceeds earned from participating in the conspiracy to commit mail fraud.
“The continued success of our investigation into the bid rigging conspiracies at Northern California public foreclosure auctions is evident in today’s four guilty pleas,” said David J. Johnson, FBI Special Agent in Charge of the San Francisco Field Office. “The FBI will remain focused with the Antitrust Division in holding those accountable for such illegal acts.”
“These conspirators manipulated and suppressed the competitive process through their fraudulent and collusive conduct to the detriment of lenders and distressed homeowners,” said Bill Baer, Assistant Attorney General in charge of the Department of Justice’s Antitrust Division. “The Antitrust Division will continue to pursue those responsible for these illegal activities.”