HOW THE BIDDING WORKS:
At the District’s tax auctions, liens are awarded to the highest bidders.
The minimum bid is the same as the lien — the back taxes plus penalties and interest. Because the city’s auctions are so competitive, participants often bid more than that, putting up what’s known as a “surplus.”
The surplus money, which can range from $25 to hundreds of thousands of dollars, is only used to determine the winning bidder. The city ultimately returns the surplus money to the bidder after a lien has been repaid by the homeowner. If the lien is not repaid and the bidders decides to foreclose, the city applies the surplus money to any subsequent unpaid taxes, fines or other costs.
Well-financed bidders often win the most liens, pushing out mom-and-pop participants, because the bidders can afford to put up the highest surpluses. The Post’s study of irregular bidding from 2005 to 2007 showed that six companies put up high enough surpluses to push out the smaller bidders, and then won liens in back-and-forth patterns that did not appear in subsequent years.
In 2006, a similar pattern emerged between another Berman company and Aeon Financial of Chicago, which collectively won 760 liens, half through the back-and-forth bidding.
In 2007, a Berman company was back again, this time engaged in similar patterns with Aeon as well as a second company, Heartwood, of Florida.
The Post found that Berman even admitted to FBI agents during the Maryland case that he and a Heartwood executive, Michael DeLuca, had sat in the back row during the bidding at the District’s auction in 2007, where there was talk about “sharing” liens.
“The liens that DeLuca wanted was (sic) made clear to Berman,” according to an FBI report.
A spokeswoman for the Department of Justice declined to comment on Berman’s statement about bidding in the District or whether the agency pursued the matter. DeLuca could not be reached for comment.
All told, the six companies identified by The Post picked up more than 2,300 liens over three years — half through the rotational bidding, The Post found. The patterns have not appeared in any other year since 2007.
Nusbaum, 75, said he didn’t want to discuss his activities in the District, adding: “That’s something that happened eight years ago. I’ve put this thing behind me.”
Stollof, 78, declined to comment through his attorney.
A representative for Heartwood, formerly a subsidiary of Florida’s BankAtlantic Bancorp, did not respond to questions about the firm’s bidding but said the company stopped buying liens more than five years ago.
Aeon did not respond to repeated calls and letters seeking comment.
Cordi, with the tax office, acknowledged that the agency never went back to review the bidding in the District for signs of wrongdoing after the Maryland criminal case became public. D.C. law requires the agency to cancel any sales where fraud is found.
Cordi also said the tax office doesn’t have the authority to ban bidders who get in trouble in other places — and wouldn’t necessarily want to.
“If you exclude bidders, you take in less money,” he said.
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