Four investors, including residents of Margate and Burlington, and two companies were federally indicted Tuesday for allegedly conspiring to rig bids at public municipal tax lein auctions in New Jersey.
Joseph Wolfson, of Margate, who is part-owner of the Betty Simon Trust and Richard Simon Trust, and James Jeffers Jr., of Burlington, are charged with two others for allegedly divvying up certain municipal tax liens among themselves and agreeing not to compete with one another for their purchase during the bidding process. They allegedly did so in an illegal attempt to suppress competition and buy selected liens at non-competitive interest rates. The bid-rigging allegedly took place from 1998 through early 2009.
“The individuals and entities charged today demonstrated a blatant disregard for the competitive process by allocating the purchase of certain municipal tax liens by, from time to time, flipping a coin, drawing numbers out of a hat or drawing from a deck of cards,” Deputy Assistant Attorney General for the Antitrust Division Leslie Overton said Tuesday in a news release.
The investors are also accused of ratcheting up the interest rates associated with liens that went up for sale, which could have a number of damaging consequences.
When a property owner fails to pay real estate taxes, the municipality in which the property is located can attach a lien for the amount of unpaid taxes. If the fees remain unpaid after a waiting period, the lien can be sold at a public auction. If a lien remains unpaid after a certain period of time, the investor who bought the lien can begin foreclosure proceedings against the property.
During the bidding process, state law requires the interest rate earned by liens to open at 18 percent. That can be driven down to zero percent through competitive bidding. Because the investors allegedly limited this competition, prosecutors claim they were able to purchase liens that earned higher interest rates. Not only did that saddle the original property owners with more debt, it increased the likelihood they would be unable to pay off the taxes and penalties and that the investors could initiate foreclosure proceedings against them.
If convicted, the investors each face a maximum penalty of 10 years in prison and a $1 million fine.
Authorities said the charges handed down Tuesday are part of an ongoing investigation into municipal tax lien auction-related bid rigging and fraud. Including the indictments filed Tuesday, 20 people and entities have been charged and 14 have pleaded guilty in connection with the alleged scheme.
The investigation is being handled by the Antitrust Divisions' New York field office and the FBI's Atlantic City, N.J. office. Anyone with information about bid rigging or fraud related to municipal tax lien auctions is asked to contact the Antitrust Division in New York at 212-335-8000, or the Atlantic City Resident Agency of the FBI at 609-677-6400.