The State Attorney General’s Office will refund hundreds of thousands of dollars to unsuspecting homeowners and creditors after a scheme to keep public auction prices artificially low was uncovered. Last week, the office’s consumer protection team filed 10 lawsuits against 26 people and companies accusing them of making or accepting payments not to bid on properties being auctioned at courthouses in Wake, Durham, Orange and Johnston counties.
Defendants in nine of the cases have agreed to repay sellers nearly $800,000 for money lost because of unfair bidding and have agreed to stop the illegal bidding. The complaints allege that the violators conspired to fix prices and rig bids for public auctions of real estate in Raleigh, Cary, Chapel Hill, Durham, Angier, Apex, Hillsborough, and other Triangle area communities. The complaints also allege that two other defendants engaged in fraud related to the sale of properties, a press release by the State Attorney General’s Office said.
The conspiracy involved properties that were up for routine auction through county Clerks of Superior Court because of foreclosure. A yearlong investigation by the Consumer Protection Division showed that some bidders on foreclosed property were paying competitors to stay out of the auctions so that the properties would sell at low prices.
For example, an owner whose property was expected to sell for $100,000 to settle a $90,000 debt would expect to make enough money through competitive bidding to pay a creditor and keep any remaining money. In a rigged auction, however, collusion among the bidders would keep bids artificially low, meaning the winning bidder might pay only $75,000 after paying a few thousand dollars to competitors to keep them away. That would cost the property seller $10,000 and the creditor $15,000.
Wake County Superior Court Judge Donald W. Stephens on Monday approved consent decrees with defendants in nine of the cases. The settling defendants will make payments of nearly $800,000 to reimburse property sellers who lost money because of the bid rigging. Payments will go to the Clerk of Superior Court in the county where the auction took place.
The Attorney General’s Office will write to property owners and creditors to tell them how to claim their share of the payments. Any payments not claimed within a year will go to the state unclaimed-property fund so that owners and creditors will be able to claim their money.
According to the consent agreements, those who settled the cases are also barred from conspiring with others about bidding. In addition, they may not communicate with other bidders about their bids or attempt to make deals to buy or sell a property from another bidder before the pending auction or sale is completed.
The Attorney General’s Office is pursuing a lawsuit against the remaining defendants who have not agreed to settle the charges, Robert C. Potts, John R. Allen, Thomas F. Howlett, and B.P. Properties, Inc. (formerly known as Synergy Properties, Inc.) of Orange County. The complaints allege that Potts conspired to rig bids on auctions for two properties in Hillsborough and Chapel Hill, and that Allen, Howlett and B.P. Properties did so for one property in Hillsborough.
The Attorney General’s Office is asking the court to permanently bar the defendants from involvement in any type of bid-rigging scheme and order them to pay refunds to property owners and to pay civil penalties.
Those charged were: Victor G. Byrd and Roger Brent Byrd, $69,803, doing business as Vic Realty (Wake County); Robert A. Cooper/Progress Properties, Inc. $17,518; Paul D. Mills/Progress Properties, Inc., $15,418 (Wake County); Rodney S. Daw, Jupiter Investments, LLC, $229,155; RD Real Estate Services, LLC and Road Runner Investment Properties, LLC (Wake, Durham, Orange and Johnston counties); Peter J. Greijn, Referral Realty Group, Inc., $41,793; Referral Realty.US, LLC, Referral Realty.Org, Inc. Rodney S. Daw, $14,952 (Wake, Durham, Orange and Johnston counties);
Also, Robert H. Walton (for allegations of fraud/ $22,986.65 deceptive practices); Gilles J. LeMay (for allegations of fraud/ [settlement pending] deceptive practices); Robert J. Lucas, Jr. (Orange County) $4,300; Jimmie Ray Pennell (Wake County) $47,417; Darren K. Phillips and Argus Management $91,143; Group, Inc. (Wake County); Robert C. Potts, John R. Allen, Thomas F. [enforcement action, no settlement] Howlett, and B.P. Properties, Inc., formerly known as Synergy Properties, Inc. (Orange County); Asa B. Rogerson, Ace General Contracting,Company, $136,526 , Ace Property Holdings, LLC (Wake County); John M. Schlimme (Wake County) $106,529.