Amongst eight Northern California real estate investors who have pleaded guilty to rigging public foreclosure auctions are Laith Salma, Patrick Campion, Keith Goodman and Craig Lipton, all of San Francisco.

The men agreed not to bid against each other for foreclosed properties auctioned off outside the county courthouse in Redwood City and in San Francisco County. Instead, they kept the winning price low which, in turn, federal prosecutors say, damaged the real estate market and defrauded those expecting a fair marketplace.

When property is auctioned, the proceeds pay off the mortgage and debt with any remaining money going to the homeowner. Squelching competitive bids limits how much money is available for both.

The men used the U.S. mail and Federal Express to send the Trustee’s Deeds Upon Sale and other title documents to others in the conspiracy, leading to the mail fraud charges.

For their roles, the investors face up to a decade in federal prison for violating the antitrust law known as the Sherman Act and up to 30 years for conspiring to commit mail fraud, the DOJ announced yesterday.

And amongst the properties purchased on the courthouse steps by Craig Lipton was 2209 9th Avenue, a property with which plugged-in readers should be rather familiar.
Investors guilty of rigging real estate auctions [smdailyjournal.com]
FBI Looks Into Auction Bid Rigging (And Shouldn’t Have To Look Far) [SocketSite]
The Full 2209 9th Avenue Scoop: Sold And…Coming Back Soon [SocketSite]
2209 9th Avenue Sports An Open Market Eight In 2011 [SocketSite]

Recent Articles

Comments from “Plugged-In” Readers

  1. Posted by A.T.

    Huh, colluding to fix prices? We really are becoming like Japan.

  2. Posted by Michael

    Wow! I know some of these guys, they were doing a ton of deals in San Francisco and making out like bandits, literally I guess…

  3. Posted by lyqwyd

    It’s definitely criminal what they did, and they should definitely be punished for it, but I do find it interesting how these guys could be doing so much time for manipulating the foreclosure sale market in one small market, but the people responsible for the historic number of foreclosures in the country and the ongoing economic crisis go unpunished.

  4. Posted by hangemhi

    exactly – i don’t condone this, but they defrauded the lenders who gamed the system like no others. there are some lawsuits now, but no jail time.
    the lesson – crime only pays if you screw the little guy

  5. Posted by lol

    These eight guys colluded to keep prices low? Contrary to spinning prices up and pricing out legitimate buyers, these guys restrained their bidding. A legitimate bidder could have put his offer in and gotten a low price as well, right? Or was there collusion to keep outsiders out as well?
    About lyqwyd’s comment,
    Yes, how about prosecuting professionals who were sometimes colluding and more often than not enabling bidding wars and “forever” 15%/year increases?
    Some professionals over-estimated property at each and every cycle, pricing in a yet-to-happen appreciation and therefore provoking said appreciation. In the mean time Joe and Jane Schmoe borrowed themselves into mortgage serfdom and are still underwater with no light at the end of the tunnel.
    A friend bought a pergraniteel-ed small house in Sunnyvale for 700K in 2007 based on rear-view-mirror comps and assurance from the agent their neighborhood was safe from the “subprime” cool-off. Sure they were paying 5%+ over asking but next year they’d be in the black. Now they could use an extra bedroom but their 30% down is all gone, freezing them into place. 10 years of savings gone in smoke and your life is put on ice.
    Millions over millions of people around the country are like this.
    And nobody’s accountable.
    That was my official Friday Afternoon Rant©

  6. Posted by marko1332

    Hose big, or go home-US financial system.
    These guys just needed better lobbyist.

  7. Posted by FormerAptBroker

    I don’t see how not bidding against each other is a crime. I own a vintage race car and every now and then I’ll spot something on eBay I want (1960’s Lotus stuff does not show up very often) and I’ll e-mail a couple friends that also have Lotus race cars to make sure we don’t end up bidding against each other. Over the years one of the guys I e-mail will tell me that they really want the part and I won’t bid against them. I wonder if the DOJ is going to come after us???

  8. Posted by anon.ed

    It wasn’t just 8 people. Many others cooperated with the FBI and/or were deemed lesser offenders. Or maybe these were the ones caught on audio? Anyway, it wasn’t just 8 people.

  9. Posted by inmycountry

    Can someone explain:
    “The men used the U.S. mail and Federal Express to send the Trustee’s Deeds Upon Sale and other title documents to others in the conspiracy, leading to the mail fraud charges”
    Why would they be sending these documents to each other?

  10. Posted by inclinejj

    They would determine who would get the property before the auction and bid up prices. Then they would all put money into the pot and buy the place at the courthouse then divvy up the prize at the end.
    Ok Bob, bids and then joins in with Tony, and they buy the property then divide it up after or when they get the deed, then deed it to someone else.
    Or the bidders pay other people to bow out or pay them to walk away.
    Often called “scratch” give me some “scratch” and I will stop bidding you up.

  11. Posted by A.T.

    FormerAptBroker, I don’t know if the DOJ will come after you, but the conduct you describe is a per se criminal violation of the Sherman Act. Now lots of people commit lots of crimes without ever being prosecuted for it, but the conduct is a crime nonetheless.
    Note also that the DOJ has an amnesty program in which one member of the cartel can come in and rat out the others and get immunity from criminal prosecution. Lots of people have ratted out hundreds of others through this program. So make sure you know and trust these other Lotus aficionados.

  12. Posted by Billyballs

    There are two angles:
    First is a collusion to keep prices low, agreeing not to bid against each other. Net effect of getting a property cheaper by eliminating unnecessary competition, simultaneously shafting the lender, and borrower. Very Roman.
    This appears unsavory, but I’m unclear as to the illegality. I’ve seen this happen openly at auction between bidders familiar with each other. It’s in their interest to do so, and not bidding is legally within their right.
    Second is a conspiracy, when necessary, to outbid bidders outside their little cabal.
    Probably had more to do with property location and investment potential than net equity position.
    Bidding up prices would net proceeds to the foreclosing lender, and in extreme cases, net proceeds to the borrower/homeowner. This would actually be a good thing, investor capital easing pain.
    Irinically, however, this is clearly illegal bid rigging. Dressed with evidence of angle one above, you have a nice case.

  13. Posted by A.T.

    “This appears unsavory, but I’m unclear as to the illegality.”
    Yes, agreeing not to bid against one another is illegal (even if it is just a tacit agreement). It’s criminal conduct, and people go to prison for it all the time. That does not mean it’s not commonplace.

  14. Posted by jimmythekid

    If you wanted to buy a property on the steps you would contact one of these guys and tell them how much you would pay for the property they would all agree to keep the price low in order to acquire the property well below the price the outside investor is willing to buy it for. They would buy it. Then they would divide the spread amongst themselves.
    If you tried to purchase the property without them they would bid the property up or otherwise make the bidding problematic.

  15. Posted by 47yo hipster

    Reasonable speculation from an unnamed source that at least some of the SF guys who plea bargained and will just get a slap on the wrist.

  16. Posted by El-D

    Why didn’t these guys just get together and form a company that bought foreclosures? It would have had the same effect and could probably have been more efficient internally, anyway.

  17. Posted by shza

    Why didn’t these guys just get together and form a company that bought foreclosures? It would have had the same effect and could probably have been more efficient internally, anyway.
    Because this is a very small market, the following two situations present quite different views to an unknowing observer/competing bidder:
    1. A room full of putative bidders either with whom you compete either (a) sit back and express zero interest in an asset (save one such bidder, who puts in a low-ish bid) (giving the impression that “the market” dislikes the asset) or (b) each, at various points, outbid you on a particular asset (giving the impression that you’re contending with numerous others who want it).
    2. There are representatives from one, single entity in the room with you. This entity bids when its representatives want to bid on the asset.

  18. Posted by inclinejj

    They would also do a second auction right after the fact and decide who bought the property.

  19. Posted by inclinejj

    Showing how much money you have during the foreclosure auction is like showing your cards during a poker game and wondering why you can not win.
    Part of bidding is being very firm on what you want to spend and don’t go over that amount.

  20. Posted by sfrenegade

    The antitrust division has an ongoing investigation into bid rigging and fraud at public real estate foreclosure auctions in the Bay Area. To date, 18 people have pleaded guilty.
    It’s definitely not just these 8, as fluj said. I actually ran across a couple of these people too. Huh.
    Here’s the DOJ’s release:
    http://www.justice.gov/atr/public/press_releases/2011/276724.htm
    The others pleading guilty are: Troy Kent of San Mateo, Henry Pessah of Burlingame, James Doherty of Hillsborough, and Gary Anderson of Saratoga.
    Lipton is a very prominent realtor in town with Maven, and I bet many of you have run across him. He was once quoted in a Chron article about the Lembis, not for doing anything wrong, just as someone knowledgeable (http://articles.sfgate.com/2011-06-19/business/29676043_1_lembi-empire-frank-lembi-loans).
    Laith Salma is a realtor with Triton Realty Group which he runs with his siblings. I’m assuming DRE will be yanking that license, and I’m assuming the feds will be monitoring Triton’s actions very carefully. Their father also owns a real estate management group.
    Kent (who funneled properties to relatives too) used Maple Street Partners, so if you see that name, you know you’re at one of those houses. There are some people who regularly do business with him that will not be happy about this because it’ll probably put scrutiny on their transactions.
    I’m pretty sure Pessah and Campion are realtors too.

  21. Posted by nonanon

    Linkedin:
    Pat Campion
    Real Estate Broker at Zephyr Real Estate

  22. Posted by bossmillion

    What kind of prison time (min.) might these felons expect?

  23. Posted by EBGuy

    Looks like http://www.criis.com is getting slammed (they serve up searches of SF County Recorder documents). Inquiring minds want to know..

  24. Posted by boggle

    Tough to say on prison time at this moment. The mail fraud charge is nothing to scoff at though. Additionally, sentencing of the eight may depend on whether these early pleaders are getting deals from the government for pleading and cooperating with testifying against several of the other big players at the court house steps that have yet to be indicted.

  25. Posted by sfrenegade

    “Tough to say on prison time at this moment. The mail fraud charge is nothing to scoff at though.”
    The max is 10 years, I believe, for the Sherman Act (although it can be enhanced if the profit gained or money lost to others is greater than $1M). The max is 30 years for mail fraud. They probably won’t get anything near that, unless the dollar amounts either gained by them or lost to others are significant, see below.
    The mail fraud thing is standard for federal prosecutors. If they can’t find anything else to charge you on, either mail fraud or wire fraud might be viable options (interstate commerce).
    By the way, the other 10 were Alameda and Contra Costa:
    2 from Alamo and San Leandro:
    http://www.housingwire.com/2011/10/04/california-investors-plead-guilty-to-foreclosure-auction-bid-rigging
    7 from all over the East Bay plus Thomas Franciose of San Francisco (of Benchmark Properties/Benchmark Investments):
    http://www.calbusinessandpropertylawyer.com/LawBlog/?p=35
    If you’d like to check out the plea agreement fro Tom Franciose, click through:
    http://www.justice.gov/atr/cases/f274800/274802.htm

    10. The United States agrees that it will make a motion, pursuant to U.S.S.G. § 3E1.1, for a downward adjustment of three levels for acceptance of responsibility due to the defendant’s timely notification of his intention to enter a guilty plea. Therefore, the ultimate Guidelines calculations result in a combined offense level of 14, for a jail term of 15 to 21 months and a fine range of $4,000 to $40,000.

    12. The Mandatory Victim Restitution Act requires the Court to order restitution to the victims of certain offenses. The government and the defendant agree to recommend that the Court order the defendant to pay restitution in the amount of $19,893, pursuant to U.S.S.G. § 5E1.1(a). The defendant understands that this Plea Agreement is voidable by the government if he fails to pay the restitution as ordered by the Court. The defendant further agrees that he will not seek to discharge any restitution obligation or any part of such obligation in any bankruptcy proceeding.

    That seems very low for restitution. As a coincidence, last year I mentioned his former house that he sold last year in a SocketSite post as a comp.

  26. Posted by inclinejj

    Not saying these guys did this but also people would pay bidders to walk away.
    Like pssssst. Here is some money don’t bid and we never saw each other today.
    Foreclosures are in the headlines so they had to make a move to make an example out of someone.
    This has been going on since the start of lending.

  27. Posted by 47yo hipster

    I heard Lipton of SF was at auctions recently, so he doesn’t seem too concerned. As I said above, early pleaders may just be getting a slap on the wrist.

  28. Posted by tc_sf

    ” As I said above, early pleaders may just be getting a slap on the wrist.”
    Isn’t this a fairly standard way they break up conspiracies?
    i.e. Create a very literal prisoner’s dilemma by holding out the best deals for the first people to flip?
    Plus this creates a deterrent by making it harder for people attempting similar things to trust their co-consprirtors in the future knowing that they’ll have a strong incentive to flip.

  29. Posted by A.T.

    It is the judge who decides on the sentence, not the DOJ, although the DOJ can agree to move for a lighter sentence which a court generally will take seriously. So nobody who has pleaded guilty can be assured of getting a “slap on the wrist.” Anyone who has pleaded guilty to mail fraud and Sherman Act violations – as these eight did – risks serious prison time.
    Note also that the victims (e.g. banks) can sue these guys for civil damages – trebled under the Clayton Act – and those who plead guilty effectively have no defense to civil claims as the pleas will be preclusive. None of these guys is likely to walk away with a “slap on the wrist.”

  30. Posted by justpc

    Mostly naive posts….
    The charges are purely political and fueled by Obama’s white collar crime expert at the DOJ looking for popular wins that turn into press releases that turn into support for Obama by those with the same mindset as the occupy Wall Street group.
    Follow the long trail from the foreclosure sale back to the banks, to Wall Street and it ends with the lawmakers in DC writing legislation that they were paid to create by lobbyists and big money donors.
    The result would have been the same had these guys formed a partnership and purchased the foreclosures for the same prices as a group. How many of you would have guessed that there was a law broken, not me.
    Taking these guys out of the economy and putting them in jail will do more harm as they are all small businessmen with employees. They are part of the economy that big government just shut down so that our elected official(s) can claim some sort of win that may be popular with the majority of the naive public.

  31. Posted by Rillion

    Well then justpc why didn’t they do that? And if they did nothing wrong then why plead guilty?

  32. Posted by A.T.

    justpc, it’s not that simple. Competitors cannot simply “form a partnership” and thus skirt the antitrust laws. The formation of the partnership itself would have been subject to the Sherman and Clayton Acts and antitrust scrutiny.

  33. Posted by sfrenegade

    I heard Lipton of SF was at auctions recently, so he doesn’t seem too concerned. As I said above, early pleaders may just be getting a slap on the wrist.
    Well, I’m assuming he’s far less aggressive on the alleged bid-rigging behaviors now. The $20K-ish fine that DOJ recommended for Franciose seems like a slap on the wrist. The 15-21 months that DOJ recommended is probably not outside the range of a first time white collar offender for Club Fed.
    The judge does decide on the sentence, although their discretion has been effectively lowered under the current highly mechanical sentencing guidelines system. The amount of damage matters too — Franciose got a +10 for >$120K damage. If any of these offenders caused more damage than that which is quite possible for the SF offenders and the San Mateo County offenders as opposed to Alameda/Contra Costa, the enhancement due to the increased damage might be greater.
    The judge also doesn’t have to accept the prosecutor’s recommendation that Franciose be bumped down 3 points. This mechanical system is truly bizarre, although I understand the preconditions that caused it. It looks like it’s easier to get more jail time under the mail fraud and larger fines under the Sherman claim, just from eye-balling the way these guidelines are working.
    Of course, as A.T. mentioned, that doesn’t include civil damages, where it’ll be open season on these guys.
    This has been going on since the start of lending.
    It surely has, and perhaps these guys are unlucky to be caught, but this is great work by DOJ, and these guys seem to deserve it. Hopefully they’ll get what they deserve. I’m sure there are more where they came from, as these guys likely have friends and relatives and professional contacts who were likely involved.
    Conspiracy is an agreement + an overt act in furtherance, so it’s one of the easier federal charges for a prosecutor, since the crime doesn’t have to be anywhere near completed. In addition, I’m not sure if a federally-backed loan is sufficient for conspiracy to defraud the United States (18 USC 371), since a GSE is technically a private corp, although perhaps not at the moment. For FHA/VA loans, it’s possible the nexus is sufficient. I would also note that the normal maximum for mail fraud is 20 years, but when it involves a financial institution, it becomes 30 years.
    Also, when you see these sorts of crimes, charges of false tax return or money laundering are often not far behind. The IRS website has a long list of mortgage-related fraud that is interesting — DOJ has been busy. You can get an idea what the types of sentences and fines people got from this list:
    http://www.irs.gov/compliance/enforcement/article/0,,id=228087,00.html

  34. Posted by 47yo hipster

    At any rate….I’d hate to be Craig Lipton.

  35. Posted by sfrenegade

    “Taking these guys out of the economy and putting them in jail will do more harm as they are all small businessmen with employees. They are part of the economy that big government just shut down so that our elected official(s) can claim some sort of win that may be popular with the majority of the naive public.”
    The ideological ranting belongs on some politics discussion board, not here. These guys are crooks who actively screwed people. Maybe you should learn something about antitrust law. What they allegedly did is most certainly not like having a partnership, and that issue has already been discussed above. More likely you’re probably one of those one-time commenters whom we’ll never hear from again, but if you do come back, answer Rillion’s question and be ready to discuss antitrust law substantively.

  36. Posted by tc_sf

    “It is the judge who decides on the sentence, not the DOJ, although the DOJ can agree to move for a lighter sentence which a court generally will take seriously.”
    Effectively though isn’t the sentencing for these types of things dependent on the dollar amount of the fraud? I think the DOJ has pretty wide latitude in calculating that dollar amount. If nothing else, just by picking how many rigged auctions you’d have to plead to.

  37. Posted by El-D

    The formation of the partnership itself would have been subject to the Sherman and Clayton Acts and antitrust scrutiny.
    It’s hard for me to believe that there are so few players in this market that consolidating a dozen of them into a single entity would get a rise out of DOJ.

  38. Posted by EBGuy

    I heard Lipton of SF was at auctions recently, so he doesn’t seem too concerned.
    One of his more recent flips was 527-29 Oak, a Maher Muhawieh foreclosure; it appears he bought for $725k on the courthouse steps in June 2009. He sold it off as TICs in March 2010 for $1.6 million.

  39. Posted by EBGuy

    And amongst the properties purchased on the courthouse steps by Craig Lipton was 2209 9th Avenue
    FWIW, I have limited access to property records, but I don’t see Lipton’s name associated with this property on the SF Recorders site. Keith Goodman, one of the other alleged conspirators, appears to have purchased it at the December auction.
    [Editor’s Note: You’ll just have to trust us on this one.]

  40. Posted by Hitman

    The little fish get caught and the big fish run free… here and in Oakland.

Add a Comment

Your email address will not be published. Required fields are marked *