Mississippi real estate investors who agreed not to bid against each other at foreclosure auctions are now facing fines and even jail time. Last week, three more investors pled guilty to designating a winning bidder in advance of auctions and accepting payoffs from each other in exchange for agreements not to bid. At least two of those investors have steadfastly maintained they had no idea they were doing anything wrong, although they have since pled guilty to the conspiracy charges.

One of the investors, who took his story public earlier this month before finally agreeing to plead guilty last week, said that he constantly heard the question, “Who’s getting this house today?” at auctions and saw attendees receiving between $100 and $300 from other interested buyers in exchange for agreeing not to bid on the property and drive the price up. According to the FBI, these payoffs were part of a bid-rigging scheme, but the investor claims that all transactions happened “out in the open” and that mortgage company attorneys would routinely ask if the bidders had already determined who would get the house that day. He claims the attorneys told him the entire process was legal.

Investor Insight:  Don’t try to “beat the system” at auction. Behind-closed-doors agreements with other investors are usually illegal and can carry heavy penalties.

Two investor brothers also involved in the investigation pled guilty late last month. They admitted they spent “more than $1.5 million on properties and payoffs to keep others from bidding on their selections” between 2012 and 2017. Assistant attorney general Makan Delrhaim in the Department of Justice’s Antitrust Division said he believes the guilty pleas “send a strong signal that the division will prosecute and hold accountable those who conspire to corrupt the competitive process and harm the American consumer.”

Bid rigging is defined by the Federal Trade Commission (FTC) as any situation in which “business contracts are awarded by soliciting competitive bids…[and there exists] coordination among bidders that undermines the bidding process.” The FTC continues, “Bid rigging can take many forms, but one frequent form is when competitors agree in advance [which party] will win the bid. For instance, competitors may agree to take turns being the low bidder, or sit out of a bidding round, or provide unacceptable bids to cover up bid-rigging schemes.”

Categories | Article | Market & Trends
Tags | Auctions
  • Carole VanSickle Ellis

    Carole VanSickle Ellis serves as the news editor and COO of Self-Directed Investor (SDI) Society, a membership organization dedicated to the needs of self-directed investors interested in alternative investment vehicles, including real estate. Learn more at SelfDirected.org or reach Carole directly by emailing Carole@selfdirected.org.

Related Posts


Submit a Comment