NEWARK – The Federal Bureau of Investigation’s Newark office announced guilty pleas in a case where three financial investors conspired to rig bids at municipal tax lien auctions.
The charges, according to a release, were filed today in U.S. District Court in Newark against Isadore May of Margate; Richard Pisciotta Jr. of Long Beach Township; and William Collins of Medford.
According to the felony charges, from 2003 to early 2009, “the investors participated in a conspiracy to rig bids at auctions for the sale of municipal tax liens in New Jersey by agreeing to allocate among certain bidders which liens each would bid on. The investors proceeded to submit bids in accordance with their agreements and purchased tax liens at collusive and non-competitive interest rates.”
“The collusion taking place at these auctions is artificially raising the interest rates that financially distressed home and property owners must pay, and is lining the pockets of the colluding investors,” said Acting Assistant Attorney General Sharis Pozen in a press release. “The Antitrust Division will vigorously pursue these kinds of collusive schemes that eliminate competition from the marketplace.”
According to the release, the primary purpose of the conspiracy was to suppress and restrain competition to obtain selected municipal tax liens offered at public auctions at non-competitive interest rates.
When the owner of real property fails to pay taxes on that property, the municipality in which the property is located may attach a lien for the amount of the unpaid taxes. If the taxes remain unpaid after a waiting period, the lien may be sold at auction.
State law requires that investors bid on the interest rate delinquent homeowners will pay upon redemption. By law, the bid opens at 18 percent interest and, through a competitive bidding process, can be driven down to zero percent.
If a lien remains unpaid after a certain period of time, the investor who purchased the lien may begin foreclosure proceedings against the property to which the lien is attached, the AG’s office stated.
According to the court documents, May, Pisciotta, and Collins conspired with others not to bid against one another at municipal tax lien auctions. Because the conspiracy permitted the conspirators to purchase tax liens with limited competition, each conspirator was able to obtain liens which earned a higher interest rate, according to the Attorney General’s office.
Property owners were therefore made to pay higher interest on their tax debts than they would have paid had their liens been purchased in open and honest competition, the bureau said.
Each violation of the Sherman Act carries a maximum penalty of 10 years in prison and a $1 million fine for individuals. The maximum fine for a Sherman Act violation may be increased to twice the gain derived from the crime or twice the loss suffered by the victim if either amount is greater than the $1 million statutory maximum.