Madison County, Dunstan, Von Nida dismissed from class action lawsuits alleging tax price fixing scandal

Clinton County Circuit Judge Dennis Middendorff granted several Madison County officials’ requests to dismiss allegations against them in three class action lawsuits alleging former Madison County Treasurer Fred Bathon participated in tax sale price fixing from 2005-2008.

Madison County filed its motion to dismiss the lawsuits arguing that Bathon was not an employee of the county, rather he was elected; therefore, his actions did not benefit the county. Its motion was granted on Oct. 28.

“The criminal act in no way served the purposes of Madison County,” Middendorff stated, “and may have actually damaged the county’s interests.”

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.

Bathon pleaded guilty in February to violating the Sherman Anti-Trust Act. He was convicted of structuring property tax sales in a way that increased interest rates for the tax buyers in exchange for campaign contributors. Charges against him are punishable by up to 10 years imprisonment and a $1 million fine. His sentencing is scheduled for Dec. 6.

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.

Following Bathon's guilty plea, three class action lawsuits were filed in Madison County on behalf of distressed homeowners.

In its motion to dismiss, Madison County also argued that it should not be liable for Bathon’s actions because the “Illinois Constitution does not give the county board authority to direct the day-to-day operations of the Treasurer’s office, to supervise or discipline the Treasurer.”

Middendorff determined that the plaintiffs failed to state a cause of action against Madison County because the real wrong was in the conspiracy, which the county was not involved in.

“That the conspiracy may have been carried out in the form of fraudulent sales of unpaid real estate taxes does not bring the conduct within the parameters of ‘conduct of the kind the employee was employed to perform,’” Middendorff wrote.

Middendorff also granted Madison County Circuit Clerk Mark Von Nida’s motion to dismiss on Oct. 28, arguing that the only allegations against Von Nida is that he was County Clerk during the relevant time period of the alleged conspiracy.

Middendorff stated that even though Von Nida was required to attend the sales in person or by deputy, he did not play a role in the procedure and did not have a “duty to monitor or control the County Treasurer during the sale of delinquent property taxes.”

“This court finds that the function of the County Clerk in the sale of delinquent tax property is as a functionary and not as a supervisor or monitor of the actions of the County Treasurer,” Middendorff wrote.

The plaintiffs were given 28 days to amend their complaints against Von Nida.

“Plaintiffs may not simply plead that Von Nida had some statutory obligation, but must be able to allege active participation in the alleged scheme,” Middendorff wrote.

On Oct. 22, Middendorff addressed Board Chairman Alan Dunstan’s motion to dismiss.

Dunstan argued he is immune from civil liability and that the complaints fail to state a cause of action for breach of fiduciary duty.

Middendorff replied to the motion stating that the plaintiff relied too heavily on a document titled “The Citizen’s Guide to Madison County,” which is not a lawful source.

“This apparently fanciful document is not law, and as quoted by the plaintiffs, does not accurately state the law.

He followed by clarifying that the Illinois Constitution does not give the County board power to direct the Treasurer’s and County Clerk’s offices.

Michael D. Schag of Heyl, Royster, Voelker & Allen in Edwardsville represents Prenzler, Von Nida, Dunstan and Madison County.

Clyde Kuehn of Belleville represents Bathon.

John Barberis of St. Jacob and Steve Giacoletto of Collinsville represent plaintiff Scott Bueker (13-L-276).

Aaron G. Weishaar and Christopher A. Michener of Reinert, Weishaar & Associates in St. Louis represent plaintiff Virgil Straeter (13-L-376).

Nelson L. Mitten, Charles S. Kramer and Paul A. Grote of Reizman Berger in St. Louis represent plaintiff Geralyn Lindow (13-L-390).

Madison County Circuit Court case number 13-L-276, 13-L-376, 13-L-390