Real Estate Investor Charged with Running Secret Foreclosure Auctions

Allison Tussey —  April 2, 2014 — Leave a comment

Chad E. Foster, Theodore, Alabama, a former real estate investor, has been indicted and charged with conspiracy to commit mail fraud as part of a scheme related to public real estate foreclosure auctions held in southern Alabama.

The indictment, returned on March 27, 2014, and entered in the U.S. District Court for the Southern District of Alabama, charges the former real estate investor with conspiracy to commit mail fraud affecting a financial institution. The department alleged that the scheme defrauded financial institutions, homeowners, and others with a legal interest in selected foreclosure properties for the unlawful purpose of obtaining money and property through fraudulent pretenses, representations, or promises.

The indictment charges Foster with conspiring with others to, among other things, conduct secret, second auctions open only to members of the conspiracy, to make payoffs to and receive payoffs from co-conspirators and to divert money away from financial institutions, homeowners, and others with a legal interest in selected properties. Several financial institutions suffered actual monetary losses as a result of the conspiracy. According to the charge, Foster participated in the mail fraud conspiracy beginning at least as early as February 2005 and continuing until at least January 2007.

To date, nine individuals and two companies have pleaded guilty in connection with the department’s ongoing investigation into bid rigging and fraudulent schemes in the Alabama real estate foreclosure auction industry.

The charge of conspiracy to commit mail fraud affecting a financial institution carries a maximum penalty of 30 years in prison, five years of supervised release, and a $1 million fine.

The Department of Justice announced the charges.

The charge stems from an ongoing investigation being conducted by the Antitrust Division’s new Washington Criminal II Section and the FBI’s Mobile Field Office, with the assistance of the U.S. Attorney’s Office for the Southern District of Alabama. Anyone with information concerning bid rigging or fraud related to public real estate foreclosure auctions in Alabama should call the Antitrust Division at 404-331-7116, or visit www.justice.gov/atr/contact/newcase.htm.

“Conspiring to defraud financial institutions and distressed homeowners is a crime the Antitrust Division takes seriously,” said Bill Baer, Assistant Attorney General in charge of the Department of Justice’s Antitrust Division. “The division will vigorously prosecute those who subvert the competitive process for their own gains.”

“The public demands that the integrity of our nation’s financial institutions and processes be free from fraud and deceit,” said Stephen E. Richardson, FBI Special Agent in Charge of the Mobile Field Office. “These indictments in this investigation reflect the FBI’s unwavering commitment to protecting the citizen’s reliance on those processes.”

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