Federal agents have raided two Baltimore County real estate businesses and seized a wide range of records as part of a criminal investigation into municipal auctions of property tax liens.
Search warrants show that the FBI obtained the records to support a probe into possible mail fraud and restraint-of-trade violations.
The Baltimore City office that oversees tax-lien auctions received a subpoena last month from the U.S. attorney's office and has turned over boxes of records, Stanley J. Milesky, chief of Baltimore's Bureau of Treasury Management, confirmed yesterday.
"We were asked to assemble records for a multiple-year period," Milesky said, adding: "I'm comfortable that there doesn't appear to be any impropriety on the part of the city."
Milesky refused yesterday to provide a copy of the subpoena. Linda C. Barclay, a lawyer for the city, said the document was not public because it was an "investigatory" record.
An affidavit outlining the rationale for the searches has been sealed in U.S. District Court in Baltimore, and FBI officials would not comment. "We don't confirm or deny investigations," said Marcy Murphy, a spokeswoman for the U.S. attorney's office in Baltimore.
The federal probe raises questions about how the annual tax sales are conducted. In these auctions, investors bid over the Internet for the right to collect back taxes or unpaid municipal fees from delinquent homeowners. The investors can then sue to take the house if the bills, plus interest and fees, aren't paid.
The system functions on the assumption that the bids are competitive. In Baltimore, the tax sale process is intended in part to find new owners for abandoned or dilapidated properties.
In past decades, these auctions often attracted scores of small-time investors hoping to pick up properties at a bargain price. But as rising real estate prices have made the properties worth far more than the debt owed, a few investment groups have come to dominate the process.
In last year's Baltimore tax sale, for instance, more than 100 companies or individuals bid for about 7,400 tax certificates sold to investors. But just three investment groups won more than two-thirds of the total, city records show. Two of those groups were the targets of simultaneous raids by the FBI on Aug. 9.
