By Fred Schulte
A six-year conspiracy by veteran real estate investors to rig bids and stifle competition at tax sale auctions made two chief organizers at least $10 million, largely from fees homeowners paid to keep from losing their properties, according to federal prosecutors.
Though many details remain under seal in U.S. District Court in Baltimore, prosecutors allege that from 2002 through 2007 the pair acted to corrupt nearly two dozen municipal tax sales in Baltimore and five other Maryland jurisdictions, including Montgomery and Prince George's counties in the Washington, D.C. suburbs.
Every year, local governments in Maryland sell investors the right to collect unpaid taxes and municipal fees, often for a few hundred dollars or less. Lien holders can sue to take the property of those who fail to pay them.
The tax sale conspiracy deprived local governments of revenue from higher bids even as it enriched Baltimore County lawyer Harvey M. Nusbaum and his longtime real estate investment partner Jack W. Stollof, court records show.
"This was a crime of greed," prosecutors wrote in court papers.
Both men have pleaded guilty to felony charges of bid rigging. On May 4, U.S. District Court Judge J. Frederick Motz sentenced Nusbaum, 72, to a year and a day in federal prison as well as an $800,000 fine. Stollof is due to be sentenced Wednesday.
Prosecutors won court approval earlier this year to seal records naming most of the co-conspirators and outlining their roles, citing an ongoing criminal investigation by the Justice Department's antitrust division in Washington.
Yet court filings provide a glimpse inside the scheme that, prosecutors allege, evolved into a "gentleman's agreement" to split up the property liens for sale and refrain from bidding on liens assigned to other members of the conspiracy.
According to the government, Stollof and Nusbaum bought thousands of municipal liens and then used the court system to threaten homeowners with seizure of their properties unless they paid legal fees, interest and other charges. These fees often totaled 10 times the original debt.
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