North Carolina Halts Foreclosure Auction Scheme

With home sales still moving at a snail's pace, more and more foreclosed homes are going to public auction, as banks try to clear their balance sheets. But in some cases, these auctions open the door to operators trying to make a fast buck.

North Carolina Attorney General Roy Cooper has accused a Virginia company of extracting payments from bidders, in return for dropping out of the bidding. Cooper cites three cases in which he says Bruce Olvin McBarnette of Sterling, Virginia, and his company, Summit Connection LLC, entered into agreements to rig bids on four foreclosed properties being auctioned in Durham County, North Carolina.

Strong-arm tactics

In one case, McBarnette allegedly told a local pastor that he would continue bidding against her for property her church wanted to purchase unless she paid him $1,200. A man trying to purchase a home for his mother reportedly paid McBarnette $800 after McBarnette told him he would lose the auction unless he paid the money. And a pastor who wanted to help revitalize his church's neighborhood allegedly paid McBarnette a total of $2,900 so that his company wouldn't keep bidding on two properties.

In seven other property auctions, Cooper contends McBarnette attempted to get competing bidders to pay him not to bid against them but the bidders turned him down.  Four of those auctions involved Durham County properties, and three involved Mecklenburg County properties.

Sanctions imposed

Cooper obtained a consent judgment against McBarnette and Summit Connection. Under the judgment, McBarnette and Summit Connection must pay $47,400.

Of that total, McBarnette and Summit Connection have paid $4,900 in restitution, the amount of money they made for agreeing not to bid on certain properties. The money will go to sellers of the properties who would have made more money at auction had McBarnette not rigged the bids.

Restitution will be paid through the Durham County Clerk of Superior Court, which alerted the attorney general's Consumer Protection Division to some of McBarnette's activities.

In addition, McBarnette and his company are barred permanently from entering into any agreement not to bid on public sales of property in North Carolina. They are also prohibited from asking anyone not to bid and from offering or accepting anything of value in exchange for not bidding.