MOBILE, Alabama
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.
Buchman agreed to serve jail time and pay fines, while French could be eligible for probation.
The Obama administration has made prosecuting financial and real estate fraud a priority, and Acting Assistant Attorney General Sharis A. Pozen praised the investigation in a prepared statement from Washington.
“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,” Pozen stated.
Donald Briskman, who represents Buchman and M&B Builders, said he did not want to comment until the plea hearing, which likely will be scheduled for the next couple of weeks.
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.
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.
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.
After one investor would get the property cheaply, according authorities, participants would hold a secret second auction among themselves.
Lewis M. Chapman, the special agent in charge of the FBI’s Mobile office, said in his own prepared statement that the complex investigation required perseverance.
“This investigation sends the message that real estate fraud including antitrust violations will continue to be pursued in these tough economic times, no matter how intricate the scheme,” he stated.
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 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.
Neither man would have to be on supervised release after their prison terms.
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