Guilty plea in tax sale rigging

Investor to pay a $750,000 fine, face prison term

June 04, 2008|By Fred Schulte and June Arney | Fred Schulte and June Arney,Sun reporters

In the first charges to stem from a broad federal investigation into Maryland's tax-sale auctions, a veteran real estate investor has admitted conspiring to rig bids over several years at auctions in Baltimore and five Maryland counties.

Steven L. Berman, 50, of New Freedom, Pa., will pay a $750,000 fine and face a possible prison term, federal prosecutors said yesterday. In pleading guilty to the single felony count, Berman agreed to cooperate with the investigation.

The Justice Department's antitrust division in Washington has been examining alleged collusion and restraint of trade in the annual auctions for more than a year.

Prosecutors allege that Berman conspired with other investors to rig the sales from at least 2004 through last year in Baltimore City and in Anne Arundel, Baltimore, Howard, Montgomery and Prince George's counties. In an affidavit filed last year to obtain a search warrant, FBI agents contended that bid rigging has corrupted the auctions for years, allowing a few bidders to win a large percentage of the properties.

According to an FBI affidavit, the other subjects of the investigation are Baltimore County attorney Harvey M. Nusbaum, 70, and his longtime business partner, Jack W. Stollof, 73, of Stevenson.

Berman, Nusbaum and Stollof, and some family members, are also major investors in Maryland ground rents and have been among the most aggressive at either seizing homes or demanding large fees from homeowners who missed as little as $24 in payments. Their tactics, highlighted in a 2006 investigative series in The Sun, helped move General Assembly lawmakers last year to overhaul the centuries-old system under which more than 100,000 homeowners pay rent to investors on the land under their homes.

Paul Mark Sandler, a Baltimore attorney representing Nusbaum, said his client "continues to cooperate with the Justice Department and anticipates resolution of this matter in the near future. Beyond that, there is nothing further I can say."

Stollof declined to comment. His attorney, Kirby Behre, a Washington specialist in white-collar crime defense, said that some of the FBI's allegations in the affidavit were "not accurate and never tested in court."

Tax assessors sell off thousands of properties to private investors in the annual auctions to recoup unpaid property taxes and municipal bills and help find new owners for abandoned or rundown properties. The process gives these investors the power to collect the debts - plus thousands of dollars in fees and interest - or to foreclose if property owners do not pay them.

The Sun reported last year that Maryland tax sales have been dominated by a small number of investors. In Baltimore, hundreds of homeowners have lost their property even when their property taxes were paid up, over minor debts such as water bills and rental property registration fees. Earlier this year, the General Assembly passed emergency legislation to reform the system.

"The division is committed to ensuring that all aspects of real estate transactions, including the tax lien auctions, remain competitive and free from collusion," Thomas O. Barnett, assistant attorney general in charge of the department's antitrust division, said yesterday in announcing the plea deal with Berman.

Berman's lawyer, Stephen J. Nolan, said yesterday that his client "has been fully cooperating with the government in its investigation from the moment he first learned of it. There are many things we would like to say, but feel constrained by Mr. Berman's cooperation."

Many details of the FBI's probe are spelled out in the affidavit, which was filed in August but only unsealed, with portions blacked out, in January. It asserts that Nusbaum, Stollof and Berman over several years divvied up large blocks of available liens at tax sales throughout Maryland.

For instance, an FBI special agent says she saw Nusbaum and Berman signaling each other when to bid and not to bid during Baltimore County's live auction last year. An FBI surveillance team also watched the men get together at Berman's office before the 2007 Baltimore City auction, according to the affidavit.

The FBI affidavit was filed in U.S. District Court in August just before agents raided two Baltimore County real estate offices used by Nusbaum, Stollof and Berman. A federal grand jury, at the same time, issued subpoenas to officials in Baltimore and several Maryland counties, seeking information about their tax sales and bidding processes.

Bidders in Baltimore's auction submit their offers through a Web site. Prince George's, Montgomery and Anne Arundel counties require sealed paper bids. Baltimore County and Howard County conduct live auctions, at which investors hold up paddles signifying their bids. Whatever the format, FBI agents assert, investors have fixed the auctions.

Baltimore Sun Articles
|
|
|
Please note the green-lined linked article text has been applied commercially without any involvement from our newsroom editors, reporters or any other editorial staff.