Three real estate investors illegally pushed down prices in Palm Beach County foreclosure auctions, federal prosecutors say.
A federal grand jury in West Palm Beach returned an indictment Thursday accusing the investors of conspiring to rig bids submitted through online foreclosure auctions.
The indictment names Avi Stern; Christopher Graeve, 36, of Palm Beach Gardens; and Stuart Hankin.
Each faces one count of conspiracy to restrain trade, a felony that carries a penalty of up to 10 years in prison and a fine of up to $1 million.
Attorneys for the defendants disputed prosecutors’ claims.
“The foreclosure auctions are done online and they are open to everyone,” said Stern’s attorney, Jeffrey Neiman. “It is impossible for anyone, especially Avi, to have controlled the market. Avi is innocent of the charge and it will be proven so.”
Said Hankin’s attorney, David Oscar Markus: “Stu is innocent. He bought properties through an online auction like eBay in which anyone in the country could bid. No one controlled the market, nor could they. These properties were sold at fair prices. Despite the inflammatory language in its press release claiming the case concerns fraud and ill-gotten gains, the indictment makes no such claim.”
From January 2012 until June 2015, the indictment says, the investors engaged in a “conspiracy to suppress and eliminate competition by rigging bids and allocating the market for properties sold during online property foreclosure auctions in Palm Beach County.”
According to the indictment, the three investors would agree not to bid against each other on certain properties or in certain neighbhorhoods.
The indictment offers no details about the number of homes the three bought, how much they paid or how much their actions might have pushed down prices.
“Real estate investors who think they can swindle the system to line their pockets with ill-gotten gains beware,” Paul Keenan of the FBI’s Miami office said in a statement. “The FBI and our law enforcement partners will vigorously investigate such schemes.”
According to a company website, Graeve and Hankin ran Prodigy Capital of Palm Beach Gardens.
“Prodigy Capital has quickly become an expert at acquiring discounted properties through every available resource in Florida but specializing in the foreclosure courthouse auctions,” the company’s site said.
The Justice Department’s Antitrust Division has prosecuted bid rigging in Alabama, California, Georgia and North Carolina, resulting in more than 100 guilty pleas and convictions. Thursday’s indictments were the first in Florida.
In 2010, Palm Beach County moved its foreclosure auctions online. They previously were conducted in-person at the courthouse cafeteria.