It’s been more than a decade since a long-running illegal scheme to cut out the middleman in foreclosure auctions began in Mobile, and since then almost a dozen people have pleaded guilty to federal charges for their roles in the conspiracy.
On Sept. 2, Michael P. Barbour was the latest to admit to conspiring with the others to fraudulently acquire title to foreclosed properties at “artificially low prices.”
The scheme, first revealed with the indictment of Harold H. Buchman and Allen K. French in 2011, involved a larger group of investors intentionally suppressing bids on foreclosed properties to allow a single bidder to purchase said property without competition.
As a result, the properties could be acquired much cheaper by the defendants at the expense of homeowners and banks overseeing the foreclosure process. According to court documents related to the case, the businesses and investors involved would create a secondary market by “conducting secret, second auctions of the rigged foreclosure properties, open only to members of the conspiracy.”
Authorities say there was also a cash payoff system set up to pay members of the conspiracy based upon a predetermined formula they all agreed to. Though the time each individual or company was involved varies, authorities say the scam in its entirety was operational from at least 2001 to 2010.
After the housing market crashed in 2007, the number of homes facing foreclosure dramatically increased across the country, and Mobile was no exception. Upon taking office in 2008, President Barack Obama established a Financial Fraud Enforcement Task Force ordered to use “aggressive, coordinated and proactive” efforts to investigate and prosecute financial crimes using the U.S. Department of Justice (DOJ). Shortly thereafter, the Antitrust Division and the FBI’s Mobile field office began conducting an investigation into Mobile’s real estate foreclosure industry with assistance from U.S. Attorney Kenyen Brown’s office.
“When individuals knowingly defraud homeowners and financial institutions, the FBI is committed to holding them accountable in accordance with the law,” Special Agent Robert F. Lasky of the FBI’s Mobile division said in a news release after the most recent indictment. “We will continue working with our law enforcement partners to identify and stop those who line their own pockets at the expense of others.”
Both Lasky’s statements and the indictments that have been unsealed suggest the investigation may not be over and more prosecutions could be forthcoming. However, when asked, Brown deferred questions to the DOJ’s Antitrust Division, noting “if there is anything pending or not pending, we typically can’t comment on it per Department of Justice’s rules.”
So far, the Antitrust Division has not granted Lagniappe an interview, but an unnamed source at the DOJ said “the investigation is ongoing.” When asked what role the 2008 housing market crisis played in the conspiracy, the source said, “The conspirators capitalized on and benefited from the market conditions that resulted from the housing crisis.”
It’s still unclear why it has taken nearly four years to bring the indictments against those involved in the conspiracy. Officials also declined to say how the rigged bidding process in Mobile was brought to their attention.
Including Barbour, Buchman and French, the eight others who have pleaded guilty to charges related to the conspiracy are Bobby Threlkeld Jr., Steven J. Cox, Lawrence B. Stacy, David R. Bradley, Ali Forouzan, Chad E. Foster, Robert M. Brannon and Jason R. Brannon.
In addition to the individual indictments, two business have been indicted. M & B Builders LLC, of which French was part owner, pleaded guilty in connection with the investigation in 2011. Additionally, J & R Properties LLC, owned by Robert and Jason Brannon, made a similar plea agreement with the court.
More information about those individual indictments accompany this story on our website, lagniappemobile.com.
The sentences each conspirator received varied depending on several factors, but each was charged under the Sherman Act — a charge carrying a maximum penalty of 10 years in prison and a $1 million fine for individuals. Because correspondence and financial documents related to the scheme were sent through the U.S. Postal Service, charges of mail fraud were also included.
Those charges carry a maximum penalty of 20 years in prison and a fine “of an amount equal to the greatest of $250,000, twice the gross gain the conspirators derived from the crime or gross loss caused to the victims of the crime.” If the mail fraud affects a financial institution, the maximum penalty is raised to 30 years in prison and the fine moves into the $1 million range.
“[These] guilty pleas demonstrate the Antitrust Division’s resolve to pursue those who conspire to defraud distressed homeowners and financial institutions,” said Assistant Attorney General Bill Baer. “The division will continue to hold accountable individuals who subvert the competitive process for their own gains.”
While there have been a significant number of arrests in Mobile, Obama’s Financial Fraud Enforcement Task Force has been active throughout the country, collaborating with more than 20 federal agencies, 94 U.S. attorneys’ offices, and state and local partners to prosecute financial crime.