Some distressed homeowners in northern California may have suffered a double whammy when their homes were foreclosed the Department of Justice said as they announced the guilty plea of a local investor in a foreclosure bid rigging scheme.  Kuo Hsuan "Chuck" Chang is the 37th person to plead or be found guilty in DOL's ongoing antitrust investigations involving foreclosure auctions in the area but it was unclear from the announcement whether a relationship existed among all of the guilty parties.

Chang was charged with conspiring with others to designate a winning bidder to obtain foreclosed properties at auction in San Francisco County while others withheld their bids.  He was also charged with conspiring to use the mail to fraudulently acquire title to selected properties, to make and receive payoffs, and to divert co-conspirators' money that would have otherwise gone to mortgage holders and possibly to owners. 

The conspiracies allegedly began as early as October 2009 and continued until the following November. Felony charges were brought against Chang on October 9, 2013.

As described in the court document, the primary purpose of the conspiracies was to suppress and restrain competition and to conceal payoffs in order to obtain selected real estate offered at county public foreclosure auctions at non-competitive prices.  When real estate properties are sold at these auctions the proceeds are used to pay off the mortgage and other debt attached to the property, with remaining proceeds, if any, paid to the homeowner.  According to court documents, these conspirators paid and received money that otherwise would have gone to pay off the mortgage and other holders of debt secured by the properties, and, in some cases, the defaulting homeowner.

"The Antitrust Division will continue to vigorously prosecute anticompetitive schemes that compromise local markets and cause financial harm to consumers," said Bill Baer, Assistant Attorney General in charge of the Department of Justice's Antitrust Division.  "Collusion at foreclosure auctions harmed both lenders and distressed homeowners in an already struggling real estate market, and the conspirators must be held accountable."

A violation of the Sherman (Anti-Trust) Act carries a maximum penalty of 10 years in prison and a $1 million fine for individuals and this maximum may be increased to twice the gain derived from the crime or twice the loss suffered by the victims if either amount is greater than $1 million. A count of conspiracy to commit mail fraud carries a maximum sentence of 30 years in prison and a $1 million fine.

Other DOJ investigations into bid rigging and fraud have been initiated in San Mateo, Alameda and Contra Costa counties in addition to San Francisco.