Investor admits rigging tax sale bids

Plea deal could bring 18-month sentence for Pa. businessman

June 12, 2008|By Fred Schulte and June Arney | Fred Schulte and June Arney,SUN REPORTERS

A veteran Baltimore real estate investor could serve up to 18 months in prison for conspiring to rig bids at Maryland tax sale auctions under a plea deal that obligates him to cooperate with a continuing criminal investigation of the auctions.

Steven L. Berman, in a plea agreement filed yesterday in U.S. District Court in Baltimore, admitted to a single felony count of bid rigging. Berman, 50, also agreed to pay a $750,000 fine.

"This is a very unusual case," said Berman's attorney, Geoffrey R. Garinther of Towson. "Steve did not know he was violating the law and from the moment the law was explained to him he accepted responsibility and cooperated fully."

No date has been set for Berman's sentencing by U.S. District Judge J. Frederick Motz, and the judge is free to deviate from the plea deal. Federal prosecutors recommended between 12 months and 18 months, according to a Department of Justice spokeswoman.

The sentence is at the bottom of guidelines for a violation of the Sherman Antitrust Act. The maximum penalty is 10 years in prison and a $1 million fine.

The bid-rigging case is the first to stem from a broad federal investigation that became public knowledge in August. Prosecutors allege Berman conspired with other investors to fix tax auctions from 2004 to 2007 in Baltimore City and Anne Arundel, Baltimore, Howard, Montgomery and Prince George's counties.

Berman, who lives in New Freedom, Pa., spent $38.3 million during the tax auctions in which his companies and a few others dominated.

Though Berman is the sole investor charged in the case, FBI agents in court filings have identified other subjects of the investigation as Baltimore County attorney Harvey M. Nusbaum, 70, and his longtime business partner Jack W. Stollof, 73, of Stevenson. Both men have denied wrongdoing through their attorneys.

County tax assessors hold the auctions every year to collect back taxes and other unpaid municipal debts. Investors buy the right to collect the debt along with thousands of dollars in fees and can foreclose if the property owners fail to pay.

Investors are supposed to bid competitively at the auctions, which range from online bidding to sealed bids submitted in advance. But FBI agents allege that for years a small group of bidders has colluded to restrain trade and split up the liens.

Berman, Nusbaum and Stollof or some members of their families have been major investors in ground rents and have been among the most aggressive in employing the archaic law to either seize homes or demand large fees from owners who missed payments of as little as $24.

The tax sales often ensnare the same low-income homeowners as has ground rent.

Both collection systems, some critics argue, can force homeowners into costly court battles to keep from losing their homes, sometimes over a few hundred dollars of delinquent taxes, water and sewer fees or bills for sidewalk and alley repairs.

Prosecutors allege that Berman, whose companies are based in Cockeysville, conspired with others "to suppress competition for tax liens conducted by a municipality and counties within the state of Maryland."

Investors met prior to the sales and "agreements were reached" on which properties each group would bid on, "and in some instances what prices would be bid," according to the plea agreement.

An FBI affidavit filed in federal court in Baltimore this year details more evidence that the agency says shows that the process has been corrupt for years.

FBI agents, for instance, watched as Berman and Nusbaum sat across from each other at Baltimore County's live tax auction on May 31, 2007. Each time Nusbaum bid, he shouted "taxes." Whenever this happened Berman did not bid, according to the affidavit.

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