By Mark B. Zinman – Williams, Zinman & Parham P.C.

If you have ever been to a trustee’s sale, you have likely seen a regular group of investors and bidding companies there. There are very few laws about the sales themselves, and all of the obligations are placed upon the trustee to conduct a bona-fide sale, to a person or entity who is able to close the sale the next business day. Given the lack of rules and the familiarity of seeing the same people every day, bidders may find themselves talking to others about what homes they want. However, a new case has shown that going beyond talking about the homes, and actually plotting who will buy what homes, may violate federal law.

Several investors in Mississippi have been charged, and pleaded guilty, to conspiring to rig bids at public auctions for foreclosed homes. The U.S. Attorney’s Office, in conjunction with the FBI, alleged that the investors were engaged in violations of federal antitrust laws by “rigging” the auctions even though the acts were common knowledge. It was alleged that the investors would go to the trustee’s sales and see the same people each time. They would then talk among themselves and decide who wanted a given house, and that person would then pay a nominal fee to the other investors to get them not to bid. The investors said it was common knowledge that this was going on and even the banks that were selling the homes were aware of it. At the time, no one thought that they were doing anything wrong.

The U.S. Attorney’s Office found that this practice violated federal law regarding rigging public auctions. Several of the defendants have already pleaded guilty. Though they admit that they engaged in the behavior, they adamantly deny knowing it was wrong. Unfortunately, lack of knowledge of the law is not a defense to a criminal charge, and these people face significant sentences.

An important lesson to take from this story is something we regularly say to our clients, “just because you have done something for long time without a problem, doesn’t mean it is legal.” We regularly see this in the landlord tenant context where landlords tell us that, “for twenty years,” they have posted their non-payment of rent notices and they have never had a problem. Just because you have done something in the past and gotten away with it, doesn’t mean you will be able to do so in the future.