Atlanta investor pleads guilty to foreclosure bid-rigging

An Atlanta real estate investor and his company pleaded guilty Tuesday to federal charges of conspiring with other investors to rig bidding for auctioned foreclosed properties in Fulton and DeKalb counties.

According to prosecutors, Seth Lynn, owner of Penguin Properties, agreed with other investors not to bid against one another, but instead to designate winning bidders to obtain desired foreclosures.

Not only did the conspirators gain properties at non-competitive prices, but lenders, other debt holders and, in some cases, homeowners lost out on proceeds, prosecutors said.

When reached Tuesday, Lynn told The Atlanta Journal-Constitution that he regretted his role in the conspiracy, but would not go into details without his lawyer being present. The attorney, Jay Strongwater, was unavailable for comment Tuesday.

Prosecutors said it is the first such case in Georgia in a nationwide investigation into foreclosure bid-rigging. Lynn faces a penalty of up to 10 years in prison and a $1 million fine, and his company faces a fine of up to $100 million.

Foreclosures were at their height during some of the period of the alleged criminal activity, between 2004 and 2012, with courthouse steps full of bidders, lenders’ representatives and beleaguered homeowners who had lost their property.

Metro Atlanta routinely ranked near the top in the country in foreclosure notices during the housing bust and subsequent recession beginning in December 2007. Notices peaked at 13,834 in November 2010. Today, metro foreclosures are at pre-crisis levels due to the recovering economy and housing market.

Prosecutors said Lynn and other bidders decided among themselves who would win a bid. The title to the property would then later be mailed to the winning bidder, prompting Lynn’s addition charge of federal mail fraud conspiracy.

In announcing the guilty plea, Bill Baer, assistant attorney general in charge of the U.S. Justice Department’s Antitrust Division, said there have been dozens of guilty pleas in similar cases in other states. Prosecutors said the goal of the conspiracies was to “suppress and restrain competition and to conceal payoffs.”

Lynn told the AJC he realized in early 2012 that what he was doing “was mostly likely wrong.” But he said when he found out the government was conducting an investigation, he asked his attorney to contact investigators about his involvement.

Lynn would not say how much money he made off the conspiracy, although he faces restitution costs of $197,600.

He said Penguin Properties, which he founded about 10 years ago, is still in operation, acquiring foreclosures, renovating them and then reselling the homes.

“It’s something that I have learned my lesson from,” Lynn said of the federal case. “I’ll face the consequences accordingly. I don’t wish this upon others.”

In addition to the possible bid-rigging penalty, Lynn faces a possible maximum 20 years in prison and fine of $250,000 on the mail fraud conspiracy count, while his company faces a fine of up to $500,000.