California Real Estate Investors Plead Guilty to Conspiracy Charges

Eight Northern California real estate investors recently pleaded guilty for their alleged involvement in conspiracies to rig bids at foreclosure auctions and commit mail fraud. The guilty pleas came after a joint investigation by the FBI and the US Department of Justice.

According to the Daily Californian:

Charges were filed against eight men — David Margen of Berkeley, Thomas Franciose of San Francisco, William Freeborn of Alamo, Robert Kramer of Oakland, Thomas Legault of Clayton, Brian McKinzie of Hayward, Jaime Wong of Dublin and Jorge Wong of San Leandro — in U.S. District Court, Northern District of California in Oakland on June 30.

According to court documents, from around May 2008 to around January 2011, the conspirators controlled prices on certain foreclosed properties in violation of both the Sherman Antitrust Act — a piece of 1890 legislation that opposes the combination of entities to hamper business competition — and Section 1349 of the United States Code, which concerns conspiracies.

Court documents state that the real estate investors entered into a conspiracy and agreed “to suppress and restrain competition” by refraining from competitively bidding against each other, paying one another off for doing so and obtaining titles to price-rigged properties in the Contra Costa and Alameda counties.

Perhaps the most shocking thing to come out of the story is the possible jail time and financial penalties each conspirator might face. The maximum charges for violating the Sherman Antitrust Act are up to 10 years of imprisonment and a fine of $1 million or double the gross gain of the felonious transactions. For conspiracy to commit mail fraud, the maximum penalties are up to 30 years in prison and a fine of $1 million.

As the real estate market continues to turn into the Wild West, the government has shown no sense of humor when it comes to professionals gaming the system and hurting consumers. Let’s hope that these extreme consequences help the industry continue to regulate itself and show that these bad apples have no part in the marketplace.