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Investing.com -- Two real estate investors in Georgia pleaded guilty to federal charges on Wednesday that they conspired in a comprehensive bid-rigging scheme in an effort to defraud homeowners and mortgage holders at public foreclosure auctions over a five-year period dating back to 2008.
As part of their guilty pleas, Michael Stock and Jon Stovall Jr. admitted to conspiring with other real estate investors to not bid against each other at a host of public real estate foreclosure auctions in the late 2000s. According to court documents filed in the U.S. District Court for the Northern District of Georgia, Stock admitted to participating in the conspiracy in Fulton and DeKalb counties from August 2009 through November, 2011, while Stovall admitted to participating in the scheme in Fulton County from October 2008 until January, 2012. In total, 20 defendants in Georgia have been charged in the U.S. Justice Department's multi-year investigation into the bid-rigging scheme, which has resulted in 18 guilty pleas.
Specifically, the Justice Department alleged that the two defendants made a series of payoffs to each other in exchange for promising not to bid against each other at the aforementioned auctions. The actions artificially suppressed the values of the properties being sold at the auctions and resulted in lost profits for mortgage and secured debt holders, according to court files.
"These defendants conspired to take money that rightfully belonged to homeowners and lenders,” said Principal Deputy Assistant Attorney General Renata Hesse, head of the Justice Department’s Antitrust Division. "Those homeowners and lenders have a right to expect that the properties will be sold in free and competitive auctions. The Antitrust Division will continue to partner with our colleagues at the FBI to aggressively pursue conduct designed to disrupt that process."
In February, two other real estate investors, Clifford Hill and Douglas Purdy, pleaded guilty to bid-rigging charges for their involvement in a scheme at a public auction in Forsyth County, Georgia. After successfully acquiring several properties, the defendants allegedly conducted a second auction for the homes they illegally obtained, before divvying the profits that were intended to pay off the debts from the assets.
"Foreclosure auction fraud in Georgia remains a focus for the FBI investigators and federal prosecutors within the Antitrust Division of the U.S. Department of Justice. By the very nature of this criminal act, the bank, and more importantly, the home owner in financial distress, are the victims that these federal laws were created to protect," Hesse added. "The FBI will continue to provide investigative assets toward these matters in order to keep the level playing field that the law intended regarding these auctions."