Former Madison County Treasurer Fred Bathon, 58, pled guilty today in federal court to violating the Sherman Antitrust Act. He was convicted of structuring Madison County property tax sales in a way that increased prices and rewarded campaign contributors.
According to a release from the U.S. Attorney's office for the Southern District of Illinois, it was revealed in court that for tax sales conducted in 2005-2008, Bathon structured 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.
In addition to awarding properties at non-competitive interest rates, Bathon also used a seating chart to ensure that his largest campaign contributors were recognized by the auctioneer as the winning bidder, the release states.
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 Nov. 14-15, 2007, 2,549 out 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 Nov. 13-14, 2008, 2,290 out 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.
“This crime exploited financially-distressed homeowners who were at risk of losing their homes for the financial gain of political contributors," said U.S. Attorney Stephen Wigginton. "
"This type of pay-to-play politics is intolerable and will be aggressively prosecuted. It is time that those involved in politics learn that public office is a public trust that should never be manipulated to reward friends and supporters. I want to make it clear that not only is this particular investigation far from finished, but that I will continue to investigate violators wherever they are found. Note that today’s charge is a charge of conspiracy. By its very nature, conspiracy involves more than one person.”
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 filed on 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 0 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 correspond to higher profits.
A violation of the Sherman Antitrust Act is punishable by up to 10 years imprisonment and a $1 million fine. The maximum fine may be increased to twice the gain derived from the crime or twice the loss suffered by the victims if either amount is greater than the statutory maximum. However, the United States Sentencing Guidelines must be applied to the case and considered by the Court during sentencing.
Sentencing has been scheduled for May 17.
Under Illinois law, Bathon will also forfeit his entire public pension as a result of his conviction.
The Illinois Pension Code provides that “[n]one of the benefits herein provided for shall be paid to any person who is convicted of any felony relating to or arising out of or in connection with his or her service as a member.”
This provision of Illinois law is oftentimes referred to as the “Ryan Rule,” following the Illinois Supreme Court’s decision in Ryan v. Bd. of Trustees of Gen. Assembly Ret. Sys., 236 Ill. 2d 315,924 N.E.2d 970 (2010), which determined former Governor George Ryan forfeited all of his public pension benefits following his conviction on federal corruption charges. The state pension forfeiture provision reaches all public pension benefits, including those earned while serving in public positions with no connection or nexus to the federal conviction.