by Wolf Richter, Wolf Street:
No crisis can be let go to waste.
The Foreclosure Crisis, spawned by the Financial Crisis and the Housing Bust, became a veritable money machine for some folks. And it just keeps on giving.
This one is still happening in the Bay Area of California where home prices have shot through the roof since the Foreclosure Crisis. The folks who could buy homes cheaply at auction during the Foreclosure Crisis have made a killing. And buying them cheaply was apparently very important for some folks…
Yesterday, after a week-long trial, a federal jury in Oakland, California, convicted real estate investor Glenn Guillory for “his role in a conspiracy to rig bids at public foreclosure auctions held in Contra Costa County,” according to the California Department of Justice.
The jury convicted Guillory, who worked out of an office in Walnut Creek, of “conspiring to rig bids” at auctions were banks sold foreclosed homes. The conspiracy began as early as June 2008 and lasted until about January 2011. Guillory was charged in an indictment returned by a federal grand jury in December, 2014.
The evidence at trial showed that Guillory and his co-conspirators agreed not to compete for real estate sold at foreclosure auctions in Contra Costa County. The conspirators negotiated payoffs for agreeing not to compete and held second, private auctions known as “rounds” to determine the amounts of the payoffs for the individuals who had participated in the bid suppression.
The bid-rigging conspiracy involved the purchase of hundreds of foreclosed homes sold at these auctions. It had the effect of suppressing prices obtained at auction, thus lowering the acquisition costs for the investors such as Guillory and raising their future profits. The conspiracy thereby lowered the proceeds from the auction that were used to offset the outstanding mortgage debt attached to the property. And, in the unlikely event that there would be any remaining funds, the conspiracy lowered or wiped out any amounts paid to the defaulting homeowner.
Guillory will be sentenced on August 2. The conviction carries a maximum possible sentence of 10 years in prison.
The continuing investigations into bid-rigging at public foreclosure auctions in the Bay Area counties of Alameda, Contra Costa, San Francisco, and San Mateo are conducted by the Antitrust Division’s San Francisco Office and the FBI’s San Francisco Office. And there have been some successes: by now, 65 people in the Bay Area have either pleaded guilty to bid-rigging at public foreclosure auctions or have been convicted after trial.
And it’s not over: according to the California Department of Justice, “Indictments are pending against several other real estate investors who participated in the conspiracy.”
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