Source
http://www.washingtonpost.com/sf/investigative/2013/09/09/suspicious-bidding/
Steven Berman, son of a Baltimore banker, swept into the District during the height of the housing boom, flush with money and ready to take on hundreds of bidders at the city’s high-stakes tax lien auction.
From 2005 to 2007, Berman’s companies dominated the bidding room, spending millions to buy the liens placed on properties when owners fall behind on their taxes.
He was a big player at tax lien auctions in Maryland, too, where he was caught in 2007 rigging bids at sales across the state, leading to the largest criminal conspiracy case of its kind at the time.
At the District’s auctions, no one was watching.
A Washington Post investigation found that during Berman’s spectacular spending spree in the city, his companies engaged in dozens of rounds of irregular bidding similar to what federal agents had discovered in Maryland.
All told, six companies, three owned by Berman, took turns winning hundreds of liens on real estate worth $540 million through unusual back-and-forth patterns of bidding never detected by city government.
Of hundreds of participants, only those six companies stood out for bidding that was so irregular that the odds of it happening by chance were less than 1 in 1,000, according to The Post’s analysis, which was conducted with a team of economists and antitrust experts from Boston.
Once the liens were won, the companies charted an aggressive course through the District that would shake families for years to come, pressing to foreclose on homes in every ward — often over tax debts of $500 or less.
The patterns call into question the city’s vigilance in policing tax auctions at a time when the industry is under intense scrutiny, with a dozen tax lien purchasers pleading guilty to rigging auctions across the country.
“Where is the protection for people?” said Sylvia Richins, whose ailing mother’s house in Northwest Washington was targeted for foreclosure by a Berman company. “It just doesn’t seem fair or right.”
Berman, 55, who pleaded guilty in federal court in Maryland to criminal conspiracy, declined requests for comment about his activities in the District.
Officials from the D.C. Office of Tax and Revenue said no purchasers have ever stepped forward with allegations of bid rigging and that federal agents in Maryland did not contact the District with concerns.
“There’s no evidence that they’re doing it here,” said deputy chief financial officer Stephen Cordi.
The tax office said the bidding patterns identified by The Post are not “sufficient to determine that there is collusion among bidders” or any quid pro quo.
“This information, on its own, does not inform us about any collusion activities, nor is it sufficient to reject the existence of such collusion,” the agency said in a statement.
But Berman’s lawyer revealed in court three years ago that his client had not only told investigators about suspicious activities at Maryland’s auctions, but at the District’s, too.
“There was a sincere effort on Mr. Berman’s part to help,” attorney Geoffrey Garinther said at Berman’s sentencing.
In addition, Berman admitted to federal investigators that during the District’s auction in 2007, he had talked about divvying up liens with a top competitor. A “cooperative effort,” according to an FBI report obtained by The Post.
Cordi said if bid rigging had occurred, it would not have deprived the city of money or affected property owners.
“There’s no harm to the District, and I don’t think there is any harm to the owner,” he said.
But The Post analysis showed that five of the six companies that engaged in irregular bidding have hauled hundreds of homeowners to court, with one of the firms demanding legal fees that were so high, the city’s attorney general called them “predatory” and “unlawful” and pushed to stop the company in court.
Howard Liggett, former executive director of the National Tax Lien Association, said the District had an obligation to investigate after the problems in Maryland came to light — and set up safeguards for the future.
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