A federal investigation into a long-running foreclosure auction scheme in Mobile has produced its 11th guilty plea, more than a decade after the illegal scheme is believed to have gotten underway. On Sept. 2, 2015, Michael P. Barbour admitted to conspiring with other investors to fraudulently acquire title to foreclosed properties at what prosecutors described as “artificially low prices.”
The scheme first came to light publicly with the 2011 indictment of Harold H. Buchman and Allen K. French. Investigators say a larger network of investors intentionally suppressed bidding at public foreclosure auctions, allowing a single designated bidder to purchase a property without competition and at a fraction of its value. According to court documents, the group would then hold a secret, second auction limited to conspiracy members, effectively creating a private secondary market for properties that should have been sold competitively at public auction. Authorities say a cash payoff system, based on a predetermined formula agreed to by participants, was used to distribute the proceeds among conspirators.
Investigators say the scheme operated in some form from at least 2001 to 2010, though the length of involvement varied by individual and business. The scale of the fraud grew substantially after the 2007 housing market crash triggered a sharp rise in foreclosures nationwide, Mobile included. After taking office in 2008, President Barack Obama created a Financial Fraud Enforcement Task Force, directing federal agencies to pursue “aggressive, coordinated and proactive” investigations into financial crimes. Shortly afterward, the Antitrust Division of the Department of Justice and the FBI’s Mobile field office opened an investigation into the local foreclosure auction industry, working alongside the office of then-U.S. Attorney Kenyen Brown.
“When individuals knowingly defraud homeowners and financial institutions, the FBI is committed to holding them accountable in accordance with the law,” said Special Agent Robert F. Lasky of the FBI’s Mobile division, following the announcement of the most recent guilty plea. “We will continue working with our law enforcement partners to identify and stop those who line their own pockets at the expense of others.”
Statements from investigators, along with the pattern of indictments unsealed so far, suggest the case may not be finished. When asked directly, Brown deferred further comment to the DOJ’s Antitrust Division, noting that “if there is anything pending or not pending, we typically can’t comment on it per Department of Justice’s rules.” An unnamed source within the DOJ confirmed only that “the investigation is ongoing,” and described the broader context of the scheme by noting that “the conspirators capitalized on and benefited from the market conditions that resulted from the housing crisis.” It remains unclear exactly how investigators first identified the rigged bidding process in Mobile, or why it took roughly four years after the 2011 indictments to bring additional charges forward.
Along with Barbour, Buchman and French, eight other individuals have now pleaded guilty in connection with the conspiracy: Bobby Threlkeld Jr., Steven J. Cox, Lawrence B. Stacy, David R. Bradley, Ali Forouzan, Chad E. Foster, Robert M. Brannon and Jason R. Brannon. Two businesses have also entered guilty pleas — M & B Builders LLC, of which French was a part owner, pleaded guilty in 2011, and J & R Properties LLC, owned by Robert and Jason Brannon, later reached a similar plea agreement with the court.
Each defendant has been charged under the Sherman Antitrust Act, which carries a maximum penalty for individuals of 10 years in prison and a $1 million fine. Because correspondence and financial documents connected to the scheme were sent through the U.S. Postal Service, mail fraud charges were also filed in the case. Those charges carry a maximum penalty of 20 years in prison, along with a fine equal to the greatest of $250,000, twice the conspirators’ gross gain, or the gross loss suffered by victims. If the mail fraud is found to have affected a financial institution, the maximum penalty rises to 30 years in prison and fines can reach into the $1 million range. Sentences for those who have already pleaded guilty have varied depending on the specifics of each case.
“[These] guilty pleas demonstrate the Antitrust Division’s resolve to pursue those who conspire to defraud distressed homeowners and financial institutions,” said then-Assistant Attorney General Bill Baer. “The division will continue to hold accountable individuals who subvert the competitive process for their own gains.”
The Mobile case represents just one piece of a much larger nationwide effort. Obama’s Financial Fraud Enforcement Task Force has coordinated with more than 20 federal agencies and 94 U.S. attorneys’ offices, along with numerous state and local law enforcement partners, to pursue financial crime across the country. Since 2011, the Department of Justice has filed nearly 10,000 financial fraud cases against close to 15,000 defendants nationally, including more than 2,900 defendants charged specifically with mortgage fraud, underscoring how the local Mobile investigation fits into a much broader federal crackdown following the housing crisis.