Bid-Rigging at Foreclosure Auctions: Brannons, J & R Properties Indicted

Mobile, AL – A federal grand jury in Mobile returned an indictment against two real estate investors and their company, charging them with participating in conspiracies to rig bids and commit mail fraud at public real estate foreclosure auctions held in southern Alabama, the Antitrust Division announced today.

The indictment charges Robert M. Brannon of Laurel, Miss., and Jason R. Brannon of Mobile, and their Mobile-based company, J & R Properties LLC, with conspiring with others not to bid against one another at public real estate foreclosure auctions in southern Alabama.

After a designated bidder bought a property at a public auction, the conspirators would generally hold a secret, second auction, at which each participant would bid the amount above the public auction price they were willing to pay. The highest bidder at the secret, second auction won the property.

The Brannons and J & R Properties were also charged with conspiring to use the U.S. mail to carry out a scheme to acquire title to rigged foreclosure properties sold at public auctions at artificially suppressed prices, to make and receive payoffs to co-conspirators, and to cause financial institutions, homeowners and others with a legal interest in rigged foreclosure properties to receive less than the competitive price for the properties.

Jason Brannon, Robert Brannon and J & R Properties are charged with participating in the bid-rigging and mail fraud schemes from as early as October 2004 until at least August 2007.

‘Today’s indictment underscores the commitment of the Antitrust Division to prosecute those who illegally profit on the real estate market at the expense of distressed homeowners,’ said Scott D. Hammond, Deputy Assistant Attorney General of the Antitrust Division’s Criminal Enforcement Program. ‘The division will pursue vigorously those who engage in collusive schemes to eliminate competition in the marketplace.’

FBI Acting Special Agent in Charge Patrick Kiernan reaffirmed his commitment to pursuing these complex economic investigations stating, ‘This investigation has sent a strong message to the community at large, and the real estate community specifically, that abuses within the real estate industry will not be tolerated. Fraud related to home mortgage investments can have financial implications both locally and nationally, and the integrity of the system must be vigilantly maintained.’

Each violation of the Sherman Act carries a maximum penalty of 10 years in prison and a $1 million fine for individuals, and a $100 million fine for companies. The maximum fine for a Sherman Act charge may be increased to twice the gain derived from the crime or twice the loss suffered by the victim if either amount is greater than the statutory maximum fine.

Each count of conspiracy to commit mail fraud carries a maximum penalty of 20 years in prison and a fine of $250,000 for individuals, and a fine of $500,000 for companies. The fine may be increased to twice the gross gain the conspirators derived from the crime or twice the gross loss caused to the victims of the crime by the conspirators.

To date, five individuals—Harold H. Buchman, Allen K. French, Bobby Threlkeld Jr., Steven J. Cox and Lawrence B. Stacy—and one company—M & B Builders LLC— have pleaded guilty in the U.S. District Court for the Southern District of Alabama in connection with the investigation.