Fraud at the San Diego Auction by the auctioneer


#1

02/05/201

To Whom it May Concern

On February 3, 2011 I attended the auction on the courthouse steps @ 220 W. Broadway, San Diego Ca 92101. This is a regular event for me and my partners and we have been attending the sale and purchasing properties for years, for myself it has been about 5 yrs. While I have seen some questionable tactics used by the auctioneer in order to direct properties to certain parties I have never before witnessed the blatant fraud that the auctioneer perpetrated just a few days ago.

I along with several others were intending to bid on a property referenced below;

2/3/2011 10:00:00 AM
20100128599
7780 PARKWAY DR. #1504
LA MESA
CA
91942
San Diego
464-680-03-60
Sold 02/03/2011
$0.00
$94,491.39
$94,492.39
At the South entrance to the County Courthouse, 220 West Broadway, San Diego, CA 92101
Recon Trust Company N.A.
(800)281-8219
3850465

This property (a condominium) has a value in excess of $225,000 in my opinion. In addition to an investor I am also a California Real Estate Broker with many years experience placing a value on properties in this geographical area just as one must be competent at doing in order to maintain any degree of success at Trustee Sales. Furthermore, this is a condominium, it is not a unique property where the value may be argued as more subjective or being “in the eyes of the beholder”. This condominium is worth an amount very close to what similar condominiums are selling for in the same or neighboring complexes, less perhaps the cost of carpet and paint or other interior renovations. That said if it were in terrible condition an experienced “rehabber” can “do” that condo including a new kitchen for $15,000 or less and that is of course assuming it is in need of a total makeover.

As a R.E. Broker I am also a member of the San Diego MLS. As such I can tell you that in the MLS there is an identical unit (MLS# 100007379) 7780 Parkway Dr. #1102 which is currently pending @ $220,000 as a short sale. (Let us assume that anyone reading this is versed on real estate terms) Now anyone familiar with listing practices on a short sale knows it is all too common for the listing agent to enter a price lower than the actual value of the property in order to motivate potential buyers. Not just motivate buyers to submit offers but to wait for what sometimes is a very lengthy process of the short sale.

However, for the sake of this argument let’s assume that the actual value of the property that is currently listed is in fact $220,000.00. Now lets look at the property that sold at auction downtown. That property sold for one dollar over the opening bid price of $94,491.39. So consider the following;

On any given day there are 40-70 participants at the auction. They tend to be very aggressive in bidding up a property in effect “squeezing” the profit margin to the point where the winner may make a 10-20% profit in general on their properties. This of course can and does vary but my point is that no one ever lets a $220,000 condo sell to another person for $94,492.39.

It fly’s in the face of common sense that market participants as a whole would “pass” on a potential $100,000 profit after costs of sale on this or any other property. That being said how is it that this property sold for a dollar over the opening bid?

The actual winner of the bid was not at the auction. That is correct, the winner of the bid was not actually in attendance and this is where the fraud comes into play.

The auctioneer always (with the exception of this property) opens the bidding by making the disclosures about there being no warranties and such. Then he may say that he is bidding on behalf of the beneficiary. On this particular sale he opened the bidding by saying that he WOULD be bidding on this property. He went on to say that his high bid was $180,000 and asked if anyone wanted to bid over that. Now typically he would say going once, twice, third and final, and announce the property sold to the highest bidder. On this particular property after announcing that he was going to bid up to $180,000 and asking if anyone else wanted to bid (as I was about to inform him that I would bid one hundred dollars over that $180,000 bid price) he gave the file back to his assistant and told her to “put it down for a dollar over”.

At a bid price of $180,000 I wasn’t excited about the potential profit but it was a large condo in a sought after location so I was willing to accept my anticipated position of a sales price of 225K and hopefully net about 20K after costs. Nevertheless, as the auctioneer had never announced “going once, twice, ect” I was about to raise my hand and bid but that is when he gave the file to his assistant and told her to put it down for a dollar over the opening bid. The auctioneer then immediately stopped the auction saying he had to go and call his client. Presumably the person(s) on whose behalf he was bidding. Perhaps he just went into the men’s room in the courthouse so he didn’t attract attention as he rejoiced his seemingly successful fraud?

I considered the peculiar behavior he exhibited during the sale and the sequence of events including never announcing the property sold but didn’t think much of it until the next day when another regular at the auction with whom I am acquainted called me and asked how I (or anyone) could possibly let this property go to another party without so much as a bid? It was then that I began to associate the inconsistencies of that particular sale and realized that it was in all likelihood a fraudulent sale.

So, to summarize;

The auctioneer announced he was bidding on the property. He announced that his high bid was $180,0000. He asked if anyone wanted to bid over that. (So he didn’t actually open the bidding by placing a bid…he just announced that he WOULD bid…but didn’t. Then he failed to acknowledge interested parties approaching him to bid and he gave the file back to his assistant (without ever announcing the property sold) then I specifically heard him tell his assistant to “put it down for a dollar over”, this being another of the peculiarities of which I had taken note but assumed there was a reasonable explanation…which of course there was…he was perpetrating a fraudulent sale by influencing the bidding, never placing a bid, and “taking” the property for one dollar over the amount designated by the beneficiary as the opening bid.

Lets assume that the cameras outside the courthouse (let’s first assume that there are cameras) caught this event on tape with sound. That would leave us with no doubt as to what transpired during that sale. But then assuming there are no cameras how is it that a person not even in attendance is able to acquire this or any property with nothing less than a what would be considered a spectacular profit margin given the circumstances of the auction which I’ve already mentioned i.e. aggressive knowledgeable bidders willing to anticipate a 10-20% profit margin? (Anyone with a foreclosure tracking service such as ForeclosureRadar and access to the MLS can track these sales as I do so these are not numbers I am pulling out of the air or my opinion, they are verifiable.) How could that possibly happen? Simply put without the auctioneer manipulating the sale it does not happen…not on a condo in La Mesa.

So who is it that was damaged? Well certainly the company for whom the auctioneer is either an agent or employee. The beneficiary got their money but they have a responsibility to the mortgagee for a fair and legal foreclosure action. One must understand that any monies bid over the “opening bid” go to pay back the debt to the foreclosing beneficiary on the property first and the balance goes to the mortgagee or the estate thereof. So do I as a bidder have an actionable cause…perhaps. But I and the other bidders might only have “damages” in the amount of the anticipated profit which in my case might be extrapolated from the last ten properties I have purchased and the profit earned. However, there was never a guarantee that I would have been the successful bidder so it is questionable (in my layperson opinion) that I have standing to pursue the matter in the courts and if do have standing my damages (anticipated profit from the sale as evidenced by my historical average?) probably is not such that I would want to pay a retainer and contest the issue. Rather, a fair playing ground is my goal.

No, amongst all those who were damaged by the auctioneers actions were primarily the mortgagee or owner of the condo (Frank Gordon) or his estate. I have focused on verifiable facts up to this point but if the owner was a senior citizen then this could possibly be construed as elder abuse as well. Nevertheless, the condo opens for $94,491.23 and gets bid up to $180,000. The difference between what was owed to the beneficiary and the sales price would have been sent to the previous owner.

Remember, the auctioneer never bid on the property. He announced that he WOULD bid up to a price that would have been rather high for the property but then he asked if anyone wanted to bid OVER that amount and then immediately gave the “file” to his girlfriend and said “put it down for a dollar over”. So where was the bid?..that’s the fraud…there wasn’t a bid and the auctioneer “stole” the property along with whomever’s name was on the cashiers checks the auctioneer used to pay for the property.

I am sending this e-mail to the City Attorney’s Office, The District Attorney’s Office, the auction company, and an attorney of my choosing along with several local TV stations.

At this time I choose keep my identity confidential lest no action is taken against the auctioneer and he suddenly stops “hearing” me when I bid…another of his tricks to manipulate the auction to his chosen outcome.

Feel free to contact me via this e-mail address.

onemadbidder@hotmail.com


#2

onemadbidder,
I looked up the property auction you’ve detailed in your post and the only thing close is a condo in the same complex (same address, same unit size) that sold on 2/3/2011 to a 3rd party investor for the price you’ve noted ($94,492 winning bid). But it’s not the APN you noted and its a different unit (#1302).

I did find the condo you’ve identified (#1504) for sale (short sale) @ $190K on Redfin > http://www.redfin.com/CA/La-Mesa/7780-Parkway-Dr-91942/unit-1504/home/5454191

The only party allowed to bid through the auctioneer would be a deed holder (e.g. a bank/lender) yet this property shows as being sold to a 3rd party. Hmmm? If it truly went back to a lender (as the auctioneer implied) then it should show as an bank-owned on Foreclosure Radar.

I know it gets very frustrating when you find that you’re bidding against the bank (via the auctioneer). It has happened to me. And getting to the final price can be an excruciating process (you bid only to get bid up by $100 or so by the bank and this can take 20 minutes or more). I believe protocol requires that the auctioneer NOT disclose the final bid level (high bid) that they will go to ahead of time. BUT I have personally witnessed instances when they have done so. The auctioneers most likely do so to speed the process up.

I’m not saying something improper didn’t happen on 2/3/2011 in San Diego … you were there I wasn’t. But I can’t find a record of the sale as you’ve outlined.

Finally, I have no doubt that shenanigans can/do occur at the steps. Although it’s the exception, not the rule. If you believe some collusion occurred, the FBI recently expressed interest in “bid chilling” activities at the steps. Give 'em a call > http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2011/01/20/MN491HBP8L.DTL#ixzz1Bgid4fdr


#3

It didn’t go back to the bank…the auctioneer was bidding on behalf of a third party…it’s on Fidelity’s website as going to a third party…it did not go back to the bank…it went to whomever the auctioneer was working with.

I don’t believe you are correct about the auctioneer only being able to bid for the beneficiary…how could that be the case when the property did not go back to the “benny” and the buyer was not there…it’s all in the post and it’s all public record.


#4

Right off Fidelity ASAP website http://www.lpsasap.com/ts.aspx

2/3/2011 10:00:00 AM 20100128599 7780 PARKWAY DR. #1504 LA MESA CA 91942 San Diego 464-680-03-60 Sold 02/03/2011 $0.00 $94,491.39 $94,492.39 At the South entrance to the County Courthouse, 220 West Broadway, San Diego, CA 92101 Recon Trust Company N.A. (800)281-8219 3850465


#5

This from the MLS…not hard to get the facts correct Sir if you just look

All Other Attached Status: Pending LP: $220,000 Sales MLS #: 100007379 Orig.Price: $220,000 Price: MT: 10 APN: 464-680-03-42


#6

onemadbidder,

Maybe Sean or someone more knowledgeable can correct my understanding … but I’ve been told that the ONLY parties allowed to bid through the auctioneer, conducting the auction in question, would be a deed holder on the property being auctioned. I have seen auctions where another known auctioneer (not conducting the auction in question) has been hired by a 3rd party to bid on a property going to sale at the steps. BUT I have never seen an auction wherein the auctioneer conducting the auction is allowed to bid on behalf of a 3rd party (NOT a deed holder).

Again, I am not saying you did not witness something afoul at the steps on 2/3/2011 in San Diego. Moreover, if you did witness something inappropriate, then you should be applauded for bringing this to everyone’s attention!


#7

Well then you should have been there so as to save you the speculation and guesswork.


#8

The FBI encourages anyone with knowledge of anti-competitive practices at foreclosure auctions to call its tip line at (415) 553-7400 or the agency?s anti-trust division at 415-436-6660.


#9

I understand your frustration, I’ve been in the same position. One question - did you go up to the auctioneer or his assistant and inquire as to what happened, and ask him to reopen the bidding? If not, then you should at least consider the possibility he just got rushed or distracted and honestly thought no one wanted to bid. Your story of him being distracted and running off to the bathroom reminded me of a bout of stomach flu I had a couple weeks back - not pretty.
Also to be clear, I’m not aware of any law that prevents the auctioneer from bidding for a 3rd party. In fact it was common practice back in the day when there was still equity that they would bid on behalf of the 2nd mortgages (the reason we say 3rd party rather than investor is that the party used to often be a junior lienholder). I just looked quickly at this property and it appears there is a second, so this was likely the case in this instance. Many posting and publishing co’s even advertise this bidding service - though its my understanding they typically only do it for junior bene’s, just to avoid these sorts of accusations. Should be real easy to verify that it was the junior bene once the trustees deed is recorded, and I’d give him the benefit of the doubt until then. Especially if no one stepped forward and said anything at the time of the sale – which you really should have done if you didn’t.
As for the high-low bid where the auctioneer pre-announces the max bid, this too has been common practice. While I understand they do it in order to save time, I frankly have never liked it. Always felt to me like the bank was getting over on some one. Telling people you are going to bid to x, so you can get it for a dollar over just doesn’t feel right. But in a non-recourse state like CA, it is hard for me to see who is really hurt… maybe taxpayers if the bank gets some sort of write off?
Clearly the issue of bid rigging has been in the news lately, so everyone is more sensitive to this now then ever. That’s a good thing! With all the new faces at the auction, and the transparency that services like ours and others have brought to the market, I’m frankly amazed that it is reportedly still happening. Hopefully the latest FBI investigations will finally clean it up completely.


#10

It wasn’t a hi-low bid and he said he was bidding on behalf of “his” client not a lienholder.

No I did not question him at the time because at the time I did not “connect the dots” so to speak as I mentioned in my original post.

Lastly…he never opened the bidding…again as I mentioned…he just asked if anyone would be inclined to bid over $180K and then just gave the file back to his assistant and told her to put it down for a dollar over…again as I stated in my original post.

I have thoroughly considered all that has been said here…if this…if that…I have knews for you guys…we are not newcommers to the game and we know (presumably along with the others that were chattering about this sale) that this was bid rigging on the part of the auctioneer.


#11

Is obvious One mad bidder that YOU dont know what your doing.
Maybe that might bite you in the end. We ALL know what assuming does…


#12

I spoke to the auctioneer in question, and while I’m not an attorney, I’m concerned that onemadbidder’s claims could be considered slanderous. As such, I’ve edited his post to remove the auctioneers name as a courtesy.


#13

Note, that we appreciate DannyB’s continued participation in the forums, and the whole point of these forums is to solicit others views, opinions… and yes even speculation.


#14

Sorry, but I don’t understand your gripe. Why didn’t you qualify yourself when he asked if anyone wanted to bid over the $180k high number? I also attend this same auction site and have been for years as well. High numbers are commonplace, and when a property is rolled out you need to be ready to make your decision immediately. My guess is you were stunned by the high number and couldn’t figure out the potential profit margin in time and you let it go (as did the other interested investors that day). I have a hard time believing that had he said 1st call, 2nd call, 3rd and final that would have made any difference in your case. That would have given you an additional 3 seconds to announce your bid. As for your assumption that he bought it for another investor, just check the tax records in a couple of weeks and it will tell you who the “successful bidder” was. I bet you’ll find it went to the 2nd TD holder (Wells Fargo in this case). As for your claim that the current owner was also defrauded, check the title records. The deed that was foreclosed on was recorded on 12/31/02 in the amount of $106,000. He took out an additional $177,000 on 10/13/05 as a 2nd with Wells Fargo. He paid $120k when he bought the condo in 1997. Elder abuse? Really??! Sounds more like lender abuse to me. My guess is he’s probably driving a nice new Cadillac Escalade and likely took a lot of really nice vacations over the years. Get over it - if you paid a penny over $180k and had to put $15k into repairs and remodeling costs only to sell it for $225k you’re probably lucky you didn’t buy it. Doesn’t seem worth it to me, nor likely to the numerous other investors who also let it go. By the way, when a 2nd TD holder bids on a property they are not the foreclosing “beneficiary”, so fidelity is going to show it as a sale to a 3rd party which is correct. For someone who’s been doing this as long as you have, I’m surprised you wouldn’t know this. You could also have placed a bid for $179k if you wanted to stick it to Wells Fargo. In the meantime, get over it. Their will be plenty of other (and better) opportunities.


#15

there are a lot of people at the auction that don’t have a complete grasp of what goes on…the auctioneer was probably just making the bidding simpler for all involved by letting everyone know what the “hi” bid was going to be. (edited to remove auctioneers name)


#16

Danny - after re-reading your comment, note that we won’t show it as bank owned if it sells to a junior lender rather than the foreclosing lender. Junior lenders are still considered 3rd parties. Thus the reason we say “3rd party” rather than “investor” - even though junior lenders rarely bid these days.


#17

Sean,
Thanks for your input and call on this one…ditto on your comments.


#18

I personally appreciate it when the auctioneer reveals what the beneficiary’s or junior lender’s high bid is. That saves everyone from wasting their time going up $100 a crack for half an hour.


#19

No One Has Mentioned WHO took title via the Trustee’s Deed.


#20

Hi Mike, It does not appear that the trustees deed has been recorded yet. We will continue to monitor this record.