Carbondale Man Sentenced in Madison County Tax Sale Scheme
|U.S. Attorney’s Office March 25, 2014|
The United States Attorney for the Southern District of Illinois, Stephen R. Wigginton, announced today that Barrett R. Rochman, 71 of Makonda, Illinois, was sentenced in United States District Court in East St. Louis, Illinois, for violating the Sherman Antitrust Act.
Evidence argued at the sentencing hearing established that Rochman participated in a price fixing scheme orchestrated by former Madison County Treasurer Fred Bathon. Bathon structured the Madison County tax sale to permit the tax buyers to charge distressed homeowners inflated interest rates from 2005 to 2008 in exchange for campaign contributions.
Rochman was sentenced to 16 months in prison, to serve three years’ supervised release, and to pay a $30,000 fine and a special assessment of $100. The sentence was the maximum sentence recommended by the United States Sentencing Guidelines. Former Treasurer Fred Bathon, along with tax buyers Scott McLean and John Vassen, have all been previously sentenced to federal prison for their roles in this scheme.
Arguments made in court revealed that Rochman’s lawyer had reached out to prosecutors before he was charged and offered to pay a large settlement in lieu of prosecution or in exchange for a misdemeanor plea. Prosecutors said that Rochman’s conduct was too serious to be resolved solely by way of a settlement or a reduced plea and that they would not create the perception or the reality that one defendant would be able to buy his way out of trouble. U.S. Attorney Wigginton noted, “Whether the case involves an elected official, a local attorney, or a wealthy businessman, my office will ensure accountability. No amount of money offered will interfere with the administration of justice.”
The charges allege that at Illinois tax lien auctions, investors bid to purchase tax lien certificates issued against delinquent tax payers. Investors are supposed to compete to purchase these tax liens by bidding on the interest rate the property owner will be required to pay prior to redeeming the tax lien attached to the owner’s property. The bid opens at no more than the statutory maximum of 18 percent and through a competitive bidding process can be driven as low as zero percent. The bidder offering the least penalty percentage rate, i.e., the bidder who is willing to allow the owner to redeem his property for the smallest penalty, is allowed to purchase the tax lien. As such, competitive bidding benefits financially distressed homeowners by reducing the amount of money that they have to pay to save their home from foreclosure; however, that same system reduces the profit made by tax buyers. Tax buyers prefer to receive high interest rates, which corresponds to higher profits.
For the tax sales conducted in 2005 to 2008, Fred Bathon structured the tax sales in a way that eliminated competitive bidding and allowed the tax buyers to engage in price fixing by only bidding the statutory maximum interest rate of 18 percent. The tax buyers who pled guilty today were charged with making campaign donations to Bathon in exchange for receiving property tax liens at non-competitive interest rates.
By 2007 and 2008, the bid rigging and price fixing was so pervasive that distressed homeowners were charged the statutory maximum interest rate on nearly every property tax lien sold. During the tax auction occurring November 14-15, 2007, 2,549 of 2,574 property tax liens were awarded to bidders for the statutory maximum interest rate of 18 percent, which represented 99.03 percent of the property tax liens auctioned. During the tax auction occurring November 13-14, 2008, 2,290 of 2,364 property tax liens were awarded to bidders for the statutory maximum interest rate of 18 percent, which represented 96.86 percent of the property tax liens auctioned.
United States Attorney Wigginton observed that if Rochman were sincere in his desire to pay back those affected, that he could agree to do so by putting the money in some sort of escrow account. “Rochman is encouraged to make victims whole by helping repay their losses. What he is not free to do is to use his fortune to evade criminal responsibility.”
The investigation was conducted through the Metro East Public Corruption Task Force by agents from the Internal Revenue Service and the Federal Bureau of Investigation. The case is being prosecuted by U.S. Attorney Stephen R. Wigginton and Assistant United States Attorney Steven D. Weinhoeft.