Bids rigged in California property auctions | Inman News

Six people, including two licensed real estate brokers, have pleaded guilty to conspiring to rig bids at public foreclosure auctions in San Joaquin County, Calif.

Prosecutors said the conspirators would designate one person to bid for them at public auctions in order to keep prices low. After the designated bidder bought a property at a public auction, the group would hold a second, private auction, where each conspirator would bid what they were actually willing to pay.

The highest bidder at the private auction won the property. The difference between the rigged bid at the public auction and the high bid at the private auction was divided among the conspirators — an “illicit profit,” prosecutors said.

The scheme ran from about September 2008 until October 2009, with more than $10 million in homes purchased at artificially low prices. The U.S. Department of Justice, the FBI and the San Joaquin County District Attorney’s Office are conducting an ongoing investigation of “fraud and bidding irregularities” at auctions in the county, prosecutors said.

Stockton, the county seat, has been a hotbed for foreclosures. Stockton real estate executive Anthony B. Ghio was the first to enter a guilty plea in the case last year.

Facing a maximum penalty of 10 years in prison and a $1 million fine, Ghio pleaded guilty to bid rigging in April and agreed to cooperate with investigators in return for a recommendation of a lighter sentence.

On June 24, licensed brokers John R. Vanzetti and Theodore B. Hutz also pleaded guilty to participating in the conspiracy.

Vanzetti agreed to cooperate with investigators and pay $271,000 in restitution and a minimum fine of $20,000. In return, federal prosecutors said they would recommend that he be sentenced to no more than 24 months in prison.

Hutz, who is also a Realtor, agreed to the terms of a plea bargain calling for him to pay $96,500 in restitution and a minimum fine of $20,000. In return, prosecutors said they would recommend the same sentence for Hutz as Vanzetti — 18 to 24 months in prison.

In February, real estate executive Richard W. Northcutt was the fourth person to enter a guilty plea, followed by real estate investors Yama Marifat of Pleasanton and Gregory L. Jackson this month.

The California Department of Real Estate still lists Vanzetti and Huntz as licensed brokers, with no record of disciplinary action.

A California Department of Real Estate spokesman, Tom Pool, said that charges against an agent or broker can’t serve as the sole basis for disciplinary action — licencees are entitled to a hearing before an administrative law judge. Even in cases where a broker has entered a guilty plea or been convicted, they may still have the right to appeal their conviction.

A recent investigation by the Sacramento Bee found dozens of California real estate professionals charged with crimes or sued for allegedly fraudulent dealings in recent years still have their licenses.