A New Jersey company recently pleaded guilty for its role in a bid rigging scheme at municipal tax lien auctions within the state.
A felony charge was filed against Mercer S.M.E. Inc., based in Burlington, N.J., in U.S. District Court for the District of New Jersey in Newark, the Department of Justice said.
According to the charges, from at least 2003 until February 2009, Mercer worked with a nonprofit corporation and others to allocate the municipal tax liens on which each conspirator would bid. Additionally, Mercer was aware that the assigned tax liens they would acquire as part of this scam were not compliant to the law.
When the owner of real property fails to pay taxes on that property, the municipality where the asset is located may attach a lien for the amount of unpaid taxes. If the taxes remain unpaid after a waiting period, the lien may be sold at auction. New Jersey law requires that investors bid on the interest rate delinquent property owners will pay upon redemption.
By law, the bid opens at 18% interest, and, through a competitive bidding process, can be driven down to 0%. If a lien remains unpaid after a certain period of time, the investor who purchased the lien may begin foreclosure proceedings against the property to which the lien is attached.
The Department of Justice said the primary purpose of this conspiracy was to suppress and restrain competition in order to obtain selected municipal tax liens offered at public auctions at non-competitive interest rates. Therefore, eventual property owners were made to pay higher interest on their tax debts than they would have paid if the liens had been purchased in open and honest auction.
“The conspirators agreed to coordinate their bids and allocate the tax liens amongst themselves, at the expense of distressed property owners,” said Scott Hammond, deputy assistant attorney general for the Antitrust Division’s criminal enforcement program. “This guilty plea sends a message that those who profit from illegal, anti-competitive conduct will be held accountable.”
A violation of the Sherman Act carries a maximum fine of $100 million for corporations.
This marks the 11th guilty plea resulting from an ongoing investigation into
