Eight real estate investors in California have agreed to make guilty pleas in relation to a scam where they rigged the bidding in auctions on foreclosed properties in San Francisco, say federal officials.
Prosecutors claim that the investors operated their scheme for a three year period up until early 2011, agreeing not to bid against each other - with money sometimes changing hands in the process. The goal was that one investor would secure the property at the lowest possible price, before reselling the property for profit at a private auction and splitting the proceeds.
"This kind of collusion at foreclosure auctions is unfairly driving house prices down at a time when we have unprecedented foreclosure rates - cheating homeowners and money lenders while the investors get to line their pockets," explained assistant attorney general Christine Varney.
The investors, named as Thomas Francoise, William Freeborn, Robert Kramer, Thomas Legault, David Margen, Brian McKinzie, Jaime Wong and Jorge Wong, appeared at the US District Court in Oakland, California, where they were each charged with felony offences in relation to the scam. Official court records did not show whether the men are currently in custody or if they have been released.
Speaking outside the court, investigators in the case said that these charges were just the latest in an ongoing investigation into investors across the country who are suspected of collusion in foreclosure sales.
Last March, another property investor named as Yama Marifat from Pleasanton, California, also pleaded guilty to similar charges in relation to bid-rigging in San Joaquin County, one of the hardest hit of all counties in California. At the time, Marifat was told he faced up to 10 years jail time for rigging auctions, plus another 30-year sentence for mail fraud, in addition to a $2 million fine.
It is not clear whether the new case is related to Marifat's.