A Baltimore real estate attorney has admitted to conspiring with other local lawyers to rig the bids for millions of dollars' worth of government tax auctions in Maryland, newly unsealed court records show.
Attorney John Reiff stated under oath that he and two law partners helped fix bids for the purchase of "large numbers" of property tax debts, or tax liens, sold by tax assessors at auctions in Baltimore and several Maryland counties from 2003 to 2007, according to court filings made public last month.
The bid rigging, which in some years affected nearly three-quarters of the liens up for auction, cost the city and several Maryland counties money by artificially holding down the bid price, local officials say, though they could not determine how much. The Department of Justice says the scheme affected "tens of millions of dollars" of tax lien purchases, and prosecutors say the attorneys involved subsequently collected millions in fees from debtors.
"I don't think there's any question but that the city was harmed by what was done," City Solicitor George Nilson said in an interview. "Could I put a price tag on it? No."
Reiff has been a key witness in a federal probe of corruption in Maryland property tax-lien sales that has resulted in three convictions. He and his two partners cooperated with the government and were not charged. Reiff could not be reached for comment this week.
The Justice Department's antitrust division began investigating the Maryland sales after a Baltimore Sun analysis of sales records in 2007 showed that while large numbers of investors participated in the annual tax sales, three groups dominated in Baltimore and other counties in the state.
More than two dozen states sell the right to collect unpaid property taxes and other municipal bills to investors, often banks and Wall Street hedge funds.
An investigation published in December by the Washington-based Center for Public Integrity showed how the lien buyers can tack on double-digit interest rates, legal fees and other costs that can add thousands of dollars to a homeowner's bill. In some states, lien holders can seize homes from those who fail to pay.
Though the tax-lien industry has long been controversial, Reiff's sworn declaration appears to be the first to mention a bank, or a tax-lien portfolio manager, in connection with allegations of criminal conduct in the bidding process.
Reiff stated that a firm formed with his law partners acted to "suppress competition for tax liens by refraining from full competitive bidding."
U.S. District Judge J. Frederick Motz in Baltimore unsealed Reiff's declaration and some other records at the request of the Huffington Post Investigative Fund, now part of the Center for Public Integrity.
Bids placed for BankAtlantic, Mooring Asset
Reiff said the firm had bid on behalf of several companies, including two subsidiaries of BankAtlantic Bancorp. called Heartwood 88 LLC and Sunrise Atlantic LLC. The Fort Lauderdale, Fla.-based bank, which has $4.5 billion in assets and 100 branches in Florida, has invested in tax liens in several states in recent years. Bank officials did not return calls seeking comment.
Reiff said his firm also placed bids for the Mooring Asset Group, a Virginia company that has managed tax lien investments for Bank of America Corp. Mooring also has managed a large portfolio of Florida tax liens that Bank of America sold last year in a securities deal.
Mooring is among the tax lien companies subpoenaed by a federal grand jury in New Jersey that is also investigating the industry. Mooring has denied any wrongdoing and said it is cooperating fully with the New Jersey investigation.
Reiff's sworn statement does not specify whether banks or corporate investors knew about the bidding collusion.
Mooring official Jim Meeks told the Center for Public Integrity that Reiff had represented his company, but he denied any knowledge of bid rigging. "This is a shocker to me," he said.
Meeks said: "We never conspired or colluded with anybody in these auctions," adding that the company had not heard from prosecutors. "We were never contacted regarding the case by the Department of Justice. They must have concluded that we were not involved," he said. Bank of America declined to comment.
Reiff and his partners, Anthony DeLaurentis and Richard Turer, were one of three investment groups that participated in the five-year scheme to dominate the tax lien auctions, according to prosecutors.
Other participants have pleaded guilty to bid rigging in the case. In May, Baltimore County attorney Harvey M. Nusbaum, 73, was sentenced to a year and a day in prison and an $800,000 fine. His partner, Jack W. Stollof, 75, was sentenced to 12 months of house arrest and an $800,000 fine.
A third man, Steven L. Berman, 53, received two years' probation and a $750,000 fine.