STOCKTON (CBS 5) — For those who are losing their homes to foreclosure, it’s a bitter pill to swallow. But some homeowners may have lost their homes to investors cheating on the courthouse steps.

Richard Northcutt and Yama Marifat are part of a ring of at least six men who have pled guilty to a new kind of foreclosure fraud called “bid-rigging.”

It all started on the courthouse steps in Stockton, where there are thousands of foreclosures up for bid. It’s a fast-paced world where cash is king, and the highest bidder nabs the best deal. With that much money swirling, federal officials say some people cheat.

In fact, a disgruntled bidder tipped off U.S. Attorney Benjamin Wagner to a conspiracy so complex, the feds now admit it may be one of the contributing factors into why San Joaquin County leads the nation in home foreclosures.

“What they would succeed in doing is getting together and agreeing that nobody would bid,” said Wagner.

Here’s how it worked: Instead of competing against each other, the group of investors would select just one person to bid, allowing them to buy foreclosed properties often for just a penny over asking.

And the bidders who didn’t play along were muscled out. “People knew who they were. They sent out the message to other bidders that they were not welcome,” said Wagner.

The other bidders were not welcome into a second private auction, where the same house was re-sold at a higher price. The difference was profit that the group would split. “They had a formula that they used to divvy up those profits,” said Wagner.

So why would that generate the might of the U.S. Attorney’s office? Because they say bid rigging not only drives down the prices of real estate, but it also steals equity from those homeowners trying to weather this financial storm.

But one auction expert calls the feds heavy handed. “I think a lot of folks see foreclosure investors as you know sharks or vultures picking off of dead carcasses,” said Sean O’Toole, founder and CEO of “That is unfortunate because at the end of the day they are cleaning those dead carcasses off our streets.”

O’Toole used to buy foreclosures, on the courthouse steps in Martinez and said real estate investors are struggling to make a dollar. “There may be other debt on the property you may have to pay property taxes,” he said.

So he admits that could give some an incentive to cheat. “When you have a group of people that stand together every day the temptation is high. I think its human nature to say ‘Well geez John we just had lunch together, I am not going to bid you up.’” But he believes most know better than to cross the line.

U.S. Attorney Wagner disagrees. “The auction process is not a highly regulated process. So unfortunately that allows fraud to creep in.”

It was a temptation Marifat and Northcutt couldn’t resist. Both have admitted to making hundreds of thousands of dollars from the bid rigging scheme. “This is not going to be the last that you hear about these types of prosecutions,” said Wagner.

(Copyright 2011 by CBS San Francisco. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed.)

Comments (11)
  1. bill easley says:

    how can these people sleep at night? doesnt anybody have a concious any more!!!!! im studying real estate investing and i would never do something like this . Especially to someone loosing their home. someone should tar and feather the sob’s. Rules(laws) are put in place for a reason we make them to try and make our wourld a fair place to live in just follow them you dont have to cheat and steal to make a buck

    1. Hmmm... says:

      Once a shyster always a shyster Mr. Marifcuk

  2. whathappened says:

    Isn’t this free interprise. if two or more people say well lets make a profit and not bid against each other why is that against the law? the only violation I see is forcing other people not to bid.

  3. dave says:

    this article doesn’t sound like anyone did anything illegal as long as not threats were made to stop others from bidding.

    the Feds are just upset that their friends the “BANKS” did not make more money

  4. Eugene B. Berman says:

    It is the willingness of such as those who have commented to sanction colusion to corrupt the free marketplace that contributed so heavily to the foreclosure crisis. This is the way monopolies are built…and this is the way a free market is cirrupted by the greedy and unethical.
    The sytripes on the suits worn by these financial manupulators should be horizontal rather than verticle.

  5. Luis says:

    This is just what the Federal Reserve does, whats the big deal. They simply get together to fix the interest rates.

    So just to clarify, A non-government organization made up of all the big banks get together to fix the rates and programs.

    Big Banks do it, its ok….but then you have the small time investor and “oh no, how can they sleep” wake up everybody

  6. pauldsue says:

    No wonder my neighborhood house are being 1/5 the price I paid for mine.

  7. Mitch Bupp says:

    Fannie and Freddie also keep home prices high because this insurance sets a bottom at the auction for a property which was over-priced to start with let alone after it was foreclosed on …..

Leave a Reply

Please log in using one of these methods to post your comment:

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s

Watch & Listen LIVE