Stephen E. Hruby, Bid Rigging, New York 2009

Grimy Times has learned that a former executive of a New York-based tax liens company has pleaded guilty to bid rigging at municipal tax lien auctions in New Jersey.

A felony charge was filed today in the U.S. District Court for the District of New Jersey in Newark, N.J., against former Vice President Stephen E. Hruby, of Hainesport, N.J. Under the plea agreement, which is subject to court approval, Hruby has agreed to cooperate with the ongoing investigation.

According to the felony charge, from at least as early as December 2002 until approximately February 2009, Hruby participated in a conspiracy to rig bids at auctions for the sale of municipal tax liens in New Jersey by agreeing to, and directing others to, allocate among certain bidders which liens each would bid on.

Hruby, and those under his supervision, proceeded to submit bids in accordance with their agreements and purchased tax liens at collusive and non-competitive interest rates.

“Today’s guilty plea demonstrates that the Antitrust Division will not tolerate illegal conduct that harms distressed homeowners,” said Sharis A. Pozen, Acting Assistant Attorney General in charge of the Antitrust Division. “The division will continue to prosecute the perpetrators of anticompetitive bid rigging schemes at municipal tax lien auctions in New Jersey and elsewhere.”

The primary purpose of the conspiracy was to suppress and restrain competition, in order to obtain selected municipal tax liens offered at public auctions at non-competitive interest rates. When the owner of real property fails to pay taxes on that property, the municipality in which the property is located may attach a lien for the amount of the unpaid taxes.

Hruby conspired with others not to bid against one another at municipal tax lien auctions in New Jersey. Because the conspiracy permitted the conspirators to purchase tax liens with limited competition, each conspirator was able to obtain liens which earned a higher interest rate. Property owners were therefore made to pay higher interest on their tax debts than they would have paid had their liens been purchased in open and honest competition.

A violation of the Sherman Act carries a maximum penalty of 10 years in prison and a $1 million fine for individuals. The maximum fine for a Sherman Act violation 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.

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