Plaintiffs' attorneys in three class action suits against former Madison County Treasurer Fred Bathon and others claiming the defendants participated in tax sale price fixing from 2005-2008 say that recent guilty pleas in the U.S. District Court in East St. Louis bode well for the case.
“Before the guilty pleas, we were convinced we were going to be able to prove our case," said Steven Giacoletto of Collinsville, attorney for plaintiff Scott Bueker. "This will make it happen perhaps faster. I don’t want to say easier."
Giacoletto said when Bathon pleaded guilty in February, the case "had smoke." Now that buyers on the other side have pleaded guilty, the case "has fire."
Barret R. Rochman, 70, of Makanda, Scott K. McLean, 51, of Belleville and John A. Vassen, 56, of O’Fallon each pleaded guilty to participating in non-competitive tax sales and violating the Sherman Antitrust Act on Oct. 19 in federal court in East St. Louis.
Sentencing for all three tax buyers is scheduled for Feb. 21, 2014.
Bathon pleaded guilty on antitrust charges in February and was convicted of structuring property tax sales in a way that increased interest rates for the tax buyers in exchange for campaign contributors. His sentencing is scheduled for Dec. 6.
Violating the Sherman Antitrust Act is punishable by up to 10 years imprisonment and a $1 million fine.
According to federal prosecutors, in tax sales conducted between 2005 and 2008, Bathon structured them in a way that eliminated competitive bidding and allowed tax buyers to engage in price fixing by only bidding the statutory maximum interest rate of 18 percent.
The tax buyers who pleaded guilty last Friday were charged with making campaign donations to Bathon in exchange for receiving property tax liens at non-competitive interest rates.
Prosecutors say that 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.
As a result of the federal investigation, three civil class action suits were filed in Madison County on behalf of distressed homeowners.
Attorneys Nelson Mitten of Riezman Berger, representing plaintiff Geralyn Lindow and others, and Aaron Weishaar of Reinert, Weishaar & Asociates, representing plaintiff Virgil Straeter and others, agreed that the recent guilty pleas are good for their clients.
"This is clearly a positive development for the plaintiffs and all the potential class members," Mitten said. "It obviously shows that Mr. Bathon and others engaged in inappropriate conduct."
Weishaar said, "It's an all-in-all good development. We have yet to see how all this is going to shake out."
Prior to his guilty plea in federal court, defendants Vassen and V.I., Inc filed an answer to the civil complaint on Sept. 30 through attorney Paul Slocomb of Hoffman Slocomb in St. Louis, denying allegations made against them in the suits.
Vassen filed nine affirmative defenses with his answer saying the plaintiff failed to state a claim upon which relief may be granted, failed to file within the statute of limitations, that his actions were protected under the First Amendment and that all tax sale certificates were paid for by V.I. Inc rather than Vassen individually, among others.
Vassen also argued that he could not receive a fair trial.
“The inhabitants of the county are prejudiced against defendants in particular,” Vassen claims, “and tax buyers generally, due, in whole or in part, to the negative and one-sided media attention that has been generated about tax buyers.”
Defendant Rochman also filed an amended motion to dismiss the civil case prior to his guilty plea through attorneys Andrew Kasnetz, Timothy C. Sansone, Natalie Kussart and Katherine Smith of Sandberg Phoenix & von Gontard P.C. in St. Louis on Sept. 30, arguing that the plaintiffs did not file their complaint within the required time limit of the Illinois Antitrust Act.
He also stated that when alleging conspiracy, the plaintiffs must give specific facts showing actionable wrongs committed by the defendant, rather than characterizing acts and giving conclusory pleadings.
Rochman filed an amended memorandum of law supporting his motion to dismiss through his attorneys. He alleges the plaintiffs’ claims are time-barred; Count II fails to state a claim or cause of action as the Illinois Antitrust Act bars claims based on activities undertaken by a local government; the plaintiffs only offer conclusory allegations against him; and the plaintiffs failed to state a viable conspiracy claim because the Antitrust Act expressly forecloses such a claim.
Rochman further alleges “the complaint attempts to associate defendant Rochman with actions taken by Bathon and Madison County without specifying a single detail or act allegedly committed by defendant Rochman that is or was wrongful and actionable.”
Defendants McLean, John W. Scott, Prairie State Securities, Inc., SI Securities and Lincoln Securities LLC filed a combined motion to dismiss, which Bathon later joined, on Sept. 30 through attorney Brian E. McGovern, Mark G. McLean and Mario A. Gianino of McCarthy, Leonard & Kaemmerer in Chesterfield.
Clinton County Circuit Judge Dennis Middendorf issued an order on Oct. 10 denying SI Securities’ motion for protective order, which Middendorf stated was an extension of a previously denied combined motion to stay.
The defendants argued that proceeding in the civil case would prejudice their Fifth Amendment rights against self-incrimination, according to the motion for protective order filed in September.
SI Securities claimed in its motion, “none of its agents can attest to any responses to plaintiffs’ pending written discovery requests without interfering with their Fifth Amendment right against self incrimination.”
Middendorf wrote, “One of the primary reasons that this court denied the motion for stay was that, as to almost all of the defendants in this civil proceeding, there are no criminal proceedings pending.”
He also stated that if he were to grant a motion to stay, some members of the class could be prejudiced by “having their claims lapse during a stay, or while discovery is delayed by a protective order.”
Bathon appealed to the Fifth District on Sept. 5 Middendorf’s order denying Bathon’s motion to stay civil proceedings pending his sentencing hearing on Dec. 6.
Madison County Assistant State’s Attorneys John L. Gilbert and Philip J. Lading of Sandberg Phoenix & von Gontard were granted a motion for substitute of attorneys for defendant Madison County, Illinois.
Michael D. Schag of Heyl, Royster, Voelker & Allen in Edwardsville took over as counsel for current Madison County Treasurer Kurt Prenzler, Jim Foley, Mark Von Nida, Alan J. Dunstan and Madison County, Illinois, and demanded a jury.
Clyde Kuehn of Belleville represents Bathon.
John Barberis of St. Jacob and Steve Giacoletto of Collinsville represent Scott Bueker (13-L-276).
Aaron G. Weishaar and Christopher A. Michener of Reinert, Weishaar & Associates in St. Louis, MO, represent plaintiff Virgil Straeter (13-L-376).
Nelson L. Mitten, Charles S. Kramer and Paul A. Grote of Riezman Berger in St. Louis, MO, represent plaintiff Geralyn Lindow (13-L-390)
Madison County Circuit Court case numbers: 13-L-276, 13-L-376, 13-L-390