Restitution for property owners is a matter of litigation

Distressed Madison County property owners victimized in a tax purchase scheme won’t be made whole in criminal court proceedings.

U.S. District Judge David Herndon, who sentenced two tax buyers to federal prison on Wednesday over their participation in a price fixing scheme orchestrated by former Madison County treasurer Fred Bathon, said restitution is a matter to be settled through civil court action.

Scott McLean, 51, of Belleville was sentenced to 18 months in prison and John A. Vassen, 56, of O’Fallon was sentenced to two years in prison for violating the Sherman Antitrust Act. They had pleaded guilty in October to a scheme involving the sale of tax lien certificates issued against delinquent property tax payers. According to federal prosecutors, between 2005 and 2008, Bathon structured tax sale auctions that allowed tax buyers, such as McLean and Vassen, to charge distressed homeowners inflated interest rates in exchange for campaign contributions.

A third tax buyer who pleaded guilty to the same crime, Barrett Rochman, 70, of Makonda, awaits sentencing next month.

The government has not yet announced whether charges will be filed against three other tax buyers who also profited from the Bathon “pay to play” enterprise. Bathon is serving a 30 month sentence at a low security facility in Terre Haute, Ind.

At Wednesday's sentencing hearing, Herndon also ordered McLean and Vassen to pay a $25,000 antitrust fine immediately. Fines for antitrust violations are assessed at between 1-5 percent of the affected volume of commerce.

Prosecutors found that McLean purchased $2,280,774 in tax liens and made $686,437 in excess interest above and beyond what he would have made if market rates would have prevailed during the four-year period of the scheme. His fine could have been as high as $114,038.70.

In Vassen’s case, prosecutors found that he purchased $2,386,773 in tax liens and made $696,616 in excess interest during the scheme period.  His fine could have been as high as $119,338.65.

At the sentencing hearing, Assistant U.S. Attorney Steven Weinhoeft said that it was “simply not practical” for the government to determine which property owners paid excessive interest rates due to collusion and which ones paid inflated rates for market-based reasons.  He said that he “literally” went through more than 22,000 tax lien transactions that took place in Madison County before and after the scheme period looking for ways that 7,119 affected property owners could be compensated. He said he did not want an impression left that the government did not “zealously” attempt a plan of restitution.

Current Madison County Treasurer Kurt Prenzler said that he was “pleased to see that justice has been served.”

Prenzler, who lost election to Bathon in 2006 and then won in a contest against Bathon’s appointed successor Frank Miles in 2010, said he blew the whistle in 2006.

In addition to tax buyers and Bathon, Prenzler has placed blame for the scheme on the “Democrat machine” - countywide elected officials he says actively observed Bathon’s tax auctions but did not raise objections.

Prenzler also said that he helped create a spreadsheet that has calculated losses parcel-by -parcel for affected property owners.

That spreadsheet could be useful to distressed property owners pursuing claims against tax buyers and Bathon in three related class actions pending in Madison County Circuit Court. The cases are presided over by a visiting judge from Clinton County, Circuit Judge Dennis Middendorff.