A federal grand jury in West Palm Beach indicted three South Florida real estate investors for allegedly conspiring to rig bids in foreclosure auctions.
Prosecutors say high-volume investors Avi Stern, Christopher Graeve and Stuart Hankin conspired to rig bids submitted for online foreclosure sales in Palm Beach County from at least January 2012 until June 2015.
“These are the first indictments related to bid rigging in foreclosure auctions filed in Florida by the Justice Department’s Antitrust Division,” the DOJ said in a release Friday.
Graeve and Hankin co-founded Prodigy Capital Inc. in Palm Beach Gardens in 2010. Graeve is chairman and Hankin is CEO, according to the company website.
Hankin hired attorney David Oscar Markus, of Markus/Moss in Miami, who has prevailed in at least three similar DOJ cases alleging bid rigging in violation of the Sherman Antitrust Act. “Stu is innocent,” Markus said. “He bought properties through an online auction like eBay in which anyone in the country could bid. No one controlled the market, nor could they.”
The investors face allegations in federal court that they worked together to control bids and prices, and ensured they submitted the winning offers.
“These charges demonstrate that the Antitrust Division will uncover and prosecute collusion by real estate investors, regardless of whether their conduct is carried out in person, or in texts, online chats or through other electronic means,” said Assistant Attorney General Makan Delrahim. “The division will continue to work closely with our law enforcement colleagues to prosecute those responsible for taking money that would otherwise have gone to mortgage holders, Palm Beach County, and in some cases, to the owners of foreclosed homes.”
Markus accused the Justice Department of using the case to bolster the Antitrust Division’s statistics, not to pursue justice.
“These properties were sold at fair prices,” he said. “Despite the inflammatory language in the prosecution’s press release claiming the case concerns fraud and ill-gotten gains, the indictment makes no such claim.”
Graeve has been in the industry for 16 years, working under his father’s mentorship, and Hankin graduated from Cornell University with a bachelor’s degree in operations research and information engineering, according to the site. Prodigy’s marketing material says the company uses a “proprietary formula” and strategic management to acquire real estate through auction for later sale.
Graeve’s attorney, Harry Dohn Williams Jr. of the Law Office of H. Dohn Williams Jr. in Fort Lauderdale and Boca Raton, said his client is one of the largest bidders on foreclosed properties in Palm Beach and came under scrutiny because of his high-volume business. But he said the charging documents lack detail.
“The indictment doesn’t give you any clue as to what properties this conduct allegedly involves,” Williams said. “It doesn’t really tell you what transactions they’re talking about. My client’s company has been on hundreds of properties during this period.”
Stern’s lawyer is Jeffrey Neiman of Marcus, Neiman & Rashbaum in Miami and Fort Lauderdale. He said his client and other investors bolstered—not hurt—the real estate sector.
“But for real estate investors like Avi, the housing market would have completely crashed,” Neiman said in an email. “The housing bubble was created by the same banks the government now claims to be victims. They could not be further from victims. The foreclosure auctions are done online and they are open to everyone. It is impossible for anyone, especially Avi, to have controlled the market. Avi is innocent of the charge and it will be proven so.”
Stern was affiliated with Florida’s Best Realty Services in Boca Raton, but he no longer works for the company, according to a person who answered the phone there Friday morning. The real estate firm’s website describes him as “a well-accomplished residential real estate investor, builder, flipper, landlord and agent” in Boca Raton, Delray Beach, Deerfield Beach and Fort Lauderdale.
Stern was the recent subject of a local television news report by WFLX Fox 29 in West Palm Beach about online foreclosure auctions in which he bid $125,400 on a distressed property.
“It’s definitely a lot more convenient,” the news report quoted Stern as saying. “I’m able to work from my office and have more information in front of me, and not have to go to the Palm Beach County Courthouse.”
The Justice Department’s Antitrust Division has brought similar bid rigging cases in Alabama, California, Georgia and North Carolina, securing more than 100 guilty pleas and convictions in those states.
“Real estate investors who think they can swindle the system to line their pockets with ill-gotten gains beware,” said Assistant Special Agent in Charge Paul Keenan of the FBI Miami’s Field Office. “The FBI and our law enforcement partners will vigorously investigate such schemes.”