Madison - St. Clair Record

Wednesday, August 21, 2019

Foley denies taking part in Madison County bid rigging conspiracy; Amended complaint rejoins county defendnats, seeks to expand class

By Heather Isringhausen Gvillo | Nov 20, 2017

In response to the recently amended Madison County bid rigging class action, auctioneer James Foley says he was not an alleged conspirator nor was he the auctioneer at tax sales where delinquent taxes were systematically sold at the highest penalty rate.

Foley, who is accused of participating in the conspiracy while serving as the appointed deputy of former Madison County treasurer Fred Bathon as the auctioneer for the annual tax sales at issue, answered the amended class action on Nov. 2 through Ann Barron of Heyl Royster Voelker & Allen PC in Edwardsville.

Foley alleges he did not purchase any delinquent property taxes, was not the auctioneer at the tax sales and was not part of the alleged conspiracy.

“Foley was not a conspirator in this action, and, to the extent an alleged conspiracy or illegal agreement is proven, those individuals or entities who participated in the alleged conspiracy are liable for any and all damages alleged as resulting from any alleged conspiracy, wrongful conduct or illegal agreement,” the answer states.

Foley also alleges he did not attend the 2008 tax sale, meaning the statute of limitations began running against him in November 2007.

Foley adds that the plaintiffs’ claims are limited by failing to pay their real estate property taxes in a timely manner.

He also argues that the plaintiffs are not proper representation of the class because they did not directly or indirectly redeem the delinquent property taxes at issue.

Foley says the plaintiffs’ claims are barred by the voluntary payment doctrine because someone voluntarily paid all amounts due and owing on the plaintiffs’ behalf to redeem the delinquent property taxes.

Attorney Nelson Mitten of St. Louis filed the amended complaint on Sept. 25 on behalf of the class after visiting Associate Judge J. Marc Kelly of Fayette County granted the plaintiffs leave to rejoin Madison County and former treasurer Kurt Prenzler as defendants.

The plaintiffs sought to re-join Madison County to the action following Bathon’s May 11 deposition.

Mitten wrote that during Bathon’s deposition, he testified that numerous Madison County officials knew of, and participated in, the alleged conspiracy.

In their amended complaint, the plaintiffs allege Bathon conspired with each tax purchaser defendant to establish a “no trailing bid” policy, meaning the process required one-time, simultaneous bidding. Rather than allowing a series of bids, all bidders had to bid at once, with the auctioneer accepting the lowest bid that was heard.

The defendants allegedly then made an agreement with Bathon to bid the maximum of 18 percent in the simultaneous bidding.

Mitten wrote that Bathon used a seating chart to ensure that the tax purchaser defendants would be recognized by the auctioneer and the Madison County employees conducting the sales as the winning bidders.

The plaintiffs allege Foley and non-party Patty Ward Stanley conducted the auctions and were supposed to “foster competition in order to obtain the lowest penalty percentage.” However, Mitten wrote that they agreed to act in concert with the conspiracy by accepting the bids at the maximum rate.

“The actions of Bathon, Foley, and Stanley were motivated at least in part to benefit not only themselves, but Madison County as well, by enticing the Tax Purchaser Defendants, as well as others, to purchase more tax certificates each year, such that the County would have more money in its treasury each year,” Mitten wrote.

The plaintiffs allege that as the actions of the tax purchaser defendants became evident, other purchasers also began bidding higher than they otherwise would have.

“Because there was no or virtually no competitive bidding, the bidding was rigged, prices were fixed, and almost every single property was sold at the statutory maximum penalty percentage of 18%,” Mitten wrote.

Then after Bathon resigned, every annual tax sale conducted has resulted in an average penalty bid of less than 5 percent, the suit states.

The plaintiffs allege that in return for rigging the tax sales, Bathon received campaign contributions and support from tax purchasers

Bathon charged on Feb. 5, 2013, for violating the Sherman Antitrust Act. He pleaded guilty the same day. Defendants Scott McLean, Barrett Rochman and Vassen also entered guilty pleas to federal antitrust charges on Oct. 17, 2013.

The plaintiffs rejoined Prenzler, as well as Madison County, under sale in error allegations.

Mitten wrote that there typically was no “lowest bid” in the taxable years at issue; so “there should have been no lowest bid, and the tax certificate should not have been awarded to any bidder.”

Prenzler allegedly “made an error every time [he] accepted a multiple simultaneous bid for the highest penalty amount, as there was no lowest bid,” Mitten added.

“While typically a sale in error refund is given to the holder of the certificate of purchase, here the property has either been redeemed, or a tax deed has issued.

“Consequently, the refund should go to the property owner whose property was sold at an inflated rate,” Mitten wrote.

The plaintiff class representatives each had property sold at Madison County tax sales at the highest penalty rate.

The amended complaint also seeks to expand the class to include anyone whose property was sold at the tax sales from 2005 to 2008 at any penalty rate bid in excess of 0 percent.

The class description approved of by the Fifth District consists of anyone who owned a parcel of property that was sold at a Madison County tax sale auction from 2005 to 2008 at a penalty rate bid of 12 percent or higher.

In his answer, Foley argues that that the broader class is improper.

Madison County Circuit Court case number 13-L-276

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Heyl Royster Madison County Madison County Circuit Court