Records turned over to a federal grand jury investigating municipal tax-sale auctions show that two of Maryland's largest tax-sale investors didn't bid against each other for properties during the past four years in Montgomery County.
Bidding lists were among documents demanded in the subpoena, which also sought any records from 2002 to 2007 that would show whether bidders communicated with one another about what properties they would bid on and prices they would pay, or about any inducement not to bid on certain properties or not bid at all.
The subpoena is part of an investigation being coordinated by the Justice Department's antitrust division in Washington. It was issued on the same day in August that the FBI conducted simultaneous raids at two Baltimore County real estate offices, seeking evidence of restraint of trade in tax sales.
The searches took place at an office suite formerly used by investor Steven L. Berman and his real estate attorney wife, Heidi S. Kenny, and the corporate address used by Harvey M. Nusbaum, an attorney and veteran real estate investor, records show. An affidavit outlining the rationale for the searches has been sealed in U.S. District Court in Baltimore, where the grand jury is meeting.
The subpoena sought any Montgomery County records referencing communication among those two groups and a third major player in tax sales, affiliates of Florida-based BankAtlantic, as well as communication between those groups and county officials. They are the only groups or their affiliates specifically mentioned in the Montgomery County subpoena.
Entities represented by Nusbaum and Berman or their families and affiliates of BankAtlantic collectively won two-thirds of the properties at Baltimore City's tax sale last year, and all also are active in tax sales in other parts of the state.
A spokesman for Nusbaum has said that the attorney is cooperating with the investigation and expects it will be resolved favorably. Kenny and Berman did not return calls for comment. John Reiff, an attorney whose Columbia firm De Laurentis, Reiff & Turer bid on behalf of BankAtlantic affiliates, also did not return calls. A BankAtlantic spokesman declined to comment.
At these annual tax sales, investors bid at live auctions or over the Internet for the right to collect unpaid property taxes and municipal fees, plus interest and fees, and to sue to foreclose on homeowners if the money isn't paid. Competition is essential to the process, in order to get the municipality the most money possible.
Subpoenas have been issued to officials in Baltimore City and several neighboring counties, as well as to Montgomery County, as part of the grand jury probe. Montgomery County agreed to provide The Sun with copies of the subpoena and the records it was asked to submit.
Officials in Baltimore City and in Baltimore, Howard, Anne Arundel and Prince George's counties and in Washington, D.C., have declined to provide The Sun with either a copy of the subpoena or the records sought, or refused to say whether they have received such a request.
The documents provided by Montgomery County to the grand jury included more than 120 pages of bids at its tax sales from 2002 through this year. Montgomery County sells tax liens in bundles, in which the county randomly groups properties to be sold as one unit rather than selling individual liens separately.
Properties are not grouped by location, which makes it difficult for investor groups to bid only on properties in a particular geographic area.
For the June 2005 tax sale, Nusbaum bid for 2005 Montgomery LLC, a company for which he is listed as the resident agent in state records, on bundle numbers 2, 4, 6, 8, 10, 13 and 17, according to documents provided by Montgomery County. Berman bid for Mason-Dixie Tax LLC on bundles 3, 5, 7, 9, 11, 14 and 18, and on bundle 15 for Mid-Atlantic Tax Sale LLC, for which he is resident agent. The total number of bundles offered for 2005 was 18. Kenny is listed as the resident agent for Mason-Dixie.
The next year, Nusbaum bid on bundles 4, 10, 11, 14 and 17 on behalf of 2006 Montgomery LLC, a company for which he is resident agent. Berman bid for Mason-Dixie only on bundles 5, 7, 9, 12, 15 and 18, according to the Montgomery County documents. That year, the total number of bundles available again was 18.
In the June 2007 tax sale, 2007 Montgomery LLC, with Nusbaum as the listed resident agent, bid on bundles 2, 3 and 8 while Berman, representing County TSC Holdings LLC, bid on bundles 1, 4, 5, 6, 7 and 9 in a sale in which only nine total bundles were offered, the records show.
In 2004, Nusbaum bid on 16 bundles on behalf of Mason-Dixie - the firm for which Berman offered bids in 2005 and 2006 and for which Kenny is the listed resident agent. Berman, on behalf of Mid-Atlantic, bid in 2004 only on one bundle, and that was one Nusbaum did not bid on, according to the records. Twenty-six total bundles were offered that year.