Pleasanton real estate investor Yama Marifat pled guilty Friday March 4 to bid rigging and conspiracy to commit mail fraud. Bid rigging carries a maximum penalty of 10 years in prison and conspiracy to commit mail fraud carries a maximum penalty of 30 years in prison and a $1 million fine. Marifat will be sentenced May 20, 2011 in Sacramento.
Marifat and her co-conspirators were charged with rigging auctions on foreclosed homes in San Joaquin County from April 2009 to about October 2009. The charges were federal and part of an ongoing federal investigation into bid rigging and auction irregularities at some San Joaquin County real estate auctions.
The conspirators agreed not to bid against each other resulting in a signficantly lower auction price. They then held their own private auction among themselves to bid on the property where the highest bidder took the property and the difference between the auction price and the final sales price was then split among the conspirators.
Yama is the fifth person to plead guilty in connection in the conspiracy. On April 16, 2010 Anthony B. Ghio pleaded guilty to participating in a conspiracy to rig bids at public foreclosure auctions in San Joaquin County and on June 24, 2010 Jorn R. Vanzetti and Theodore B. Hutz pleaded guilty to participating in the conspiracy. On February 4, 2011 Richard W. Northcutt pleaded guilty to participating in the consipracy.
Benjamin B. Wagner, United States Attorney for the Eastern District of California said in a press release:
By rigging public auctions of foreclosed properties, the defendants who have pleaded guilty as a result of this investigation illegally manipulated the market for residential real estate. The Department of Justice is committed to improving the transparency and integrity of that market, and we will continue to investigate and prosecute those who would seek to undermine the market through their illegal activities.
Anyone with information concerning bid rigging or fraud in Northern California foreclosure auctions should contact the US Department of Justice's Antitrust Division in San Francisco at (415) 436-6660.
Some commentators have reported the likelihood of large scale coordinated conspiracies sometimes involving foreclosing servicers who arrange to auction foreclosed property in rigged auctions to bidders working with them who then pay the insider large kickbacks. Hopefully the deterrence of serious investigations will reduce the incidence of fraud in these auctions.
Bid rigging may have serious consequences for delinquent homeowners. Because California's anti deficiency statute does not protect homeowners who refinanced, those who did refinance face personal recourse liability on the deficiency. This often means that every dollar that a foreclosure at auction sells below what it would have otherwise may be charged to the homeowner who defaulted. This sort of fraud hurts delinquent homeowners as much as banks and it is refreshing to see the US Attorney's Office prosecuting someone for something as regards the rampant fraud swirling around all sides of the foreclosure crisis.