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AG Cooper unravels Triangle real estate bid rigging scheme

Release date: 6/21/2005

Raleigh: Attorney General Roy Cooper will refund hundreds of thousands of dollars to unsuspecting homeowners and creditors now that a scheme to keep public auction prices artificially low has been uncovered and stopped.

In the past week, Cooper’s consumer protection team filed 10 lawsuits against 26 people and firms accusing them of making or accepting payments not to bid on properties being auctioned at courthouses in Wake, Durham, Orange and Johnston counties. Already, defendants in nine of the cases have agreed to repay sellers nearly $800,000 for money lost due to unfair bidding and have agreed to stop the illegal bidding.

“People lost money because bidders conspired to cheat,” said Cooper. “We’ve put a stop to several of these bid riggers and we’re putting people on notice that this practice is dishonest and illegal.”

The complaints allege that the violators conspired to fix prices and rig bids for public auctions of real estate located in Raleigh, Cary, Chapel Hill, Durham, Angier, Apex, Hillsborough and other Triangle area communities. The complaints also allege that 2 other defendants engaged in fraud related to the sale of properties. The conspiracy involved properties that were up for routine auction through county Clerks of Superior Court due to foreclosure.

A yearlong investigation by Cooper’s 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 due to the bid rigging (see attached list). 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 complete.

Cooper 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. Cooper 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.

“It’s important for consumers who need to pay off debts and for banks and other creditors who are owed money to get a reasonable price through public auctions,” said Cooper. “My office won’t stand by while people make illegal deals that undercut fair business.”


Foreclosure Auction Bid Rigging Cases

Defendant

  • Victor G. Byrd and Roger Brent Byrd d/b/a Vic Realty (Wake County)
  • Robert A. Cooper/Progress Properties, Inc.
  • Paul D. Mills/Progress Properties, Inc. (Wake County)
  • Rodney S. Daw, Jupiter Investments, LLC, RD Real Estate Services, LLC and Road Runner Investment Properties, LLC (Wake, Durham, Orange and Johnston Counties)
  • Peter J. Greijn, Referral Realty Group, Inc., Referral Realty.US, LLC, Referral Realty.Org, Inc.
  • Rodney S. Daw (Wake, Durham, Orange and Johnston Counties)
    Robert H. Walton ( for allegations of fraud/ deceptive practices)
  • Gilles J. LeMay (for allegations of fraud/ deceptive practices)
  • Robert J. Lucas, Jr. (Orange County)
  • Jimmie Ray Pennell (Wake County)
  • Darren K. Phillips and Argus ManagementGroup, Inc. (Wake County)
  • Robert C. Potts, John R. Allen, Thomas F.Howlett, and B.P. Properties, Inc. f/k/a Synergy Properties, Inc. (Orange County)
  • Asa B. Rogerson, Ace General ContractingCompany, Ace Property Holdings, LLC (Wake County)
  • John M. Schlimme (Wake County)

     

Total

Amount of Consent Decree $69,802.70

$17,518.00 $15,418.00

$229,154.75

$41,793.15 $14,952.00

$22,986.65[settlement pending] $4,300.00

$47,416.95 $91,143.22 [enforcement action, no settlement]

$136,525.60

$106,529.05

$797,540.07