Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

BCS Services, Inc. v. Heartwood 88

August 10, 2007

BCS SERVICES, INC., AND PHOENIX BOND & INDEMNITY, CO., PLAINTIFFS,
v.
HEARTWOOD 88, INC., BAMP, LLC, ANTHONY DELAURENTIS, RICHARD TURER, RICHARANY, LLC, SASS MUNI-IV, LLC, SASS MUNI-V, LLC, SALTA GROUP, INC., MARSHALL ATLAS, HBZ, INC., LORI LEVINSON, JUDITH BERGER, WHEELER-DEALER, LTD., B G INVESTMENTS, INC., BONNIE J. GRAY, AND TIMOTHY E. GRAY DEFENDANTS.



The opinion of the court was delivered by: James F. Holderman, District Judge.

MEMORANDUM OPINION AND ORDER REGARDING DEFENDANTS' MOTIONS TO DISMISS

On March 9, 2007, plaintiffs BCS Services, Inc. ("BCS") and Phoenix Bond & Indemnity Company ("Phoenix") filed a complaint against multiple defendants that compete against the plaintiffs and other buyers at the annual Cook County tax lien sale.*fn1 (Dkt. No. 1.) In the complaint, the plaintiffs bring federal claims under the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. §§ 1962, 1964, and bring a state law claim of tortious interference with prospective business advantage. Defendants, for the most part, have filed separate motions to dismiss the complaint.*fn2 Defendants BG Investments, Inc. ("BG") and Bonnie Gray have filed a motion to dismiss the complaint under Federal Rule of Civil Procedure 12(b)(6). (Dkt. No. 32.) Defendants Wheeler-Dealer, Ltd. ("Wheeler-Dealer") and Timothy Gray have filed a motion to dismiss the complaint under Federal Rule of Civil Procedure 12(b)(6), adopting the arguments of Defendant BG and Bonnie Gray. (Dkt. No. 44.) Defendants SASS Muni-IV, LLC ("SASS Muni-IV") and SASS Muni-V, LLC ("SASS Muni-V") have filed a motion to dismiss the complaint under Federal Rule of Civil Procedure 12(b)(6). (Dkt. No. 57.) Defendant Salta Group, Inc. ("Salta") has filed a motion to dismiss the complaint under Federal Rule of Civil Procedure 12(b)(6). (Dkt. No. 85.) Defendant Marshall Atlas has filed a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6). (Dkt. No. 88.) Defendant Heartwood 88, LLC ("Heartwood") has filed a motion to dismiss the complaint under Federal Rule of Civil Procedure 12(b)(6). (Dkt. No. 93.) Defendants HBZ, Lori Levinson ("Levinson"), and Judith Berger ("Berger") have filed a motion to dismiss the complaint under Federal Rule of Civil Procedure 12(b)(6). (Dkt. No. 96.) For the reasons stated below, this court grants in part and denies in part the defendants' motions to dismiss.

BACKGROUND

The background of this case is almost identical to that of the related case, Phoenix Bond and Indemnity, Co. v. Bridge, No. 05-C-4095, 2005 WL 3527232 (N.D. Ill. Dec. 21, 2005), rev'd, 477 F.3d 928 (7th Cir. 2007). Assuming familiarity with that case, the court summarizes the allegations here, taking all well-pleaded factual allegations in the complaint as true and drawing inferences therefrom in favor of the plaintiffs. Hernandez v. City of Goshen, 324 F.3d 535, 537 (7th Cir. 2003).

I. Cook County Treasurer's Office's Tax Auction

Each year the Cook County Treasurer's Office sells tax liens at an auction on properties for which the owner, after having been given due notice, has failed to pay real estate taxes thereon. Potential purchasers bid a percentage penalty which the delinquent owner must pay, in addition to the taxes and interest owed, to the winning purchaser to clear the lien. The winning bidder pays the County the delinquent taxes on the property and then owns the tax lien, and has the opportunity to obtain the tax deed, and thus own the property, if the delinquent owner does not pay the penalty, taxes and interests within the statutory period.

The penalty percentage that the potential purchasers may bid is capped at a maximum of 18% by statute and a minimum of 0% by County regulation. The winning bids are those at the lowest penalty rate. Those who bid 0% expect to make their profits not from the penalty but from either resale to the owners or a sale to another purchaser.

For properties where several bidders bid the lowest penalty rate of 0%, the Treasurer allocates those properties on a rotational basis to each of those bidders to ensure the equal apportionment of liens among the lowest bidders. The County passed the Simultaneous, Single Bidder Rule ("the Rule") to prevent minimum bidders from obtaining more than their share of liens by having more representatives placing minimum bids. The Rule prohibits related bidding entities from simultaneously bidding on the same property at the auction.*fn3 All bidders must register with the Treasurer to participate in the auction and, at that time, the bidders must affirm under penalty of perjury compliance with the Rule, which has been in place since the 2001 auction.

In a form entitled "Acknowledgment of the Single, Simultaneous Bidder Rule," which a party signs to affirm compliance with the Rule, a related bidding entity is defined in a footnote as "any individual, corporation, partnership, joint venture, limited liability company, business organization, or other entity that has a shareholder, partner, principal, officer, general partner, or other person or entity having an ownership interest in common with, or contractual relationship with, any other registrant" at the annual tax sale. (Cmpl. Ex. A at 7.) However, the registration form for the auction in Section V requires potential bidders to make more detailed representations and warrants that the potential bidder is not affiliated with any other entity or person registering. Section V defines affiliated entities as those having (A) capital, purchase money or other finances in common with any other bidding entity or person registering at the auction; (B) common ownership interest or common source of funds with any other bidding entity or person registering to participate at the auction; (C) agreements to purchase or sell parcels successfully bid on at the auction to another registered bidding entity or person; (D) agreements to purchase or sell any parcels successfully bid on at the auction to an entity or person known to be ineligible to bid at the auction; and (E) standing to gain financially pursuant to an agreement with another bidding entity registered at the auction concerning parcels to be bid on or purchased by such other entity. (Cmpl. Ex. A at 5-6.) A single bidder may represent several buyers, so long as the bidder is not acting on behalf of multiple buyers at the same time on the same property.

Once there is a winning bidder on a property, the winning bidder must provide notice to the owner of the property in accordance with Illinois law to complete the sale of the tax lien or to later petition for a deed to the property. Within four months and 15 days of the purchase of the lien, buyers provide notice pursuant to 35 Ill. Comp. Stat. 200/22-5 ("22-5 notice") to the County that the County then mails to the owner. The buyer pays for the mailings to the owner. In addition, if the owner were not to redeem the property within the statutory period and the buyer wishes to petition for a deed, the buyer must file a petition five months before the end of the redemption period and provide notice of the petition pursuant to 35 Ill. Comp. Stat. 200/22-10 ("22-10 notice") to the owners, occupants, or other interested parties to the property. The County sheriff serves the 22-10 notice of the deed petition on the owners, occupants, or interested parties. Certified mail is used to send 22-10 notices to parties residing outside the state.

II. Alleged RICO Violations Against the Defendant Enterprises

The plaintiffs filed a complaint on March 9, 2007, alleging substantive RICO and RICO conspiracy violations with mail fraud as the predicate acts against the defendants. The plaintiffs allege that the defendants participated in a scheme to defraud the Treasurer and competing buyers of tax liens by falsely representing that they were non-related bidders and falsely affirming to follow the Single, Simultaneous Bidder Rule during various Cook County tax sales from 2002 to 2005 and used the mail to execute the scheme to defraud. According to the plaintiffs, the various combinations of the defendants formed three different "rigged bidding enterprises" to act together as related bidders and bid on the same properties at the lowest penalty rate in order to increase their share of allotted properties.

A. "Sabre Rigged Bidding Enterprise"

The plaintiffs allege in Counts I and II the existence of the "Sabre Rigged Bidding Enterprise" in violation of RICO's substantive and conspiracy laws. Defendants Heartwood, Bamp, DeLaurentis, Richarony, Turer, Sass Muni-IV and Sass-Muni-V allegedly agreed along with various entities named in the related Bridge case to act as related bidding entities on behalf of Sabre Group, LLC ("Sabre") (another defendant in the Bridge case). The plaintiffs allege that, in carrying out the scheme, Heartland, Bamp, DeLuaurentis, Richarony, Turer and the Sass Muni defendants submitted false registrations to the Treasurer's Office, stating that they were unrelated bidders and would adhere to the Rule, despite purchasing liens for Sabre's benefit through a later transfer of the liens to Sabre in exchange for a financial benefit. These false statements were made so that the defendants would have more bidders and could purchase from the Treasurer's rotational allocation a greater amount of those properties that receive multiple bids of the lowest percentage penalties to the detriment of the plaintiffs who had also bid the minimum penalty on these properties.

B. "Salta Rigged Bidding Enterprise"

In Counts III and IV of the complaint, the plaintiffs alleged the existence of the "Salta Rigged Bidding Enterprise" in violation of RICO's substantive and conspiracy laws. The plaintiffs contend that defendant HBZ, through principals Levinson and Berger, and Salta, through principal Atlas, filed false statements in the registration process, representing that they were not related to the Treasurer at the time of registration for the 2003 through 2005 tax auctions and that they would abide by the Rule. These false statements were made so that the defendants would have more bidders and could purchase from the Treasurer's rotational allocation a greater amount of those properties that receive multiple bids of the lowest percentage penalties.

C. "Grays Rigged Bidding Enterprise"

In Counts V and VI of the complaint, the plaintiffs alleged the existence of the "Grays Rigged Bidding Enterprise" in violation of RICO's substantive and conspiracy laws. The plaintiffs contend that defendant Wheeler-Dealer, through principal and defendant Timothy Gray, and defendant BG, through principal and defendant Bonnie Gray, filed false statements in the registration process, representing that they were not related to the Treasurer at the time of registration for the 2003 through 2005 tax auctions and that they would abide by the Rule. These false statements were made so that the defendants would have more bidders and could purchase from the Treasurer's rotational allocation a greater amount of those properties that receive multiple bids of the lowest percentage penalties.

D. RICO Violations Alleged Against Each Enterprise, Respectively

In each of the RICO Counts, the plaintiffs claim that the false representations by the members of each enterprise were part of a scheme to defraud in violation of the RICO Act. The plaintiffs allege the existence of association-in-fact enterprises, called respectively the Sabre Rigged Bidding Enterprise, the Salta Rigged Bidding Enterprise, and the Grays Rigged Bidding Enterprise, with mail fraud as the predicate acts of each enterprise, identifying the loss chance of winning more liens under the rotational allotment system for multiple minimum bidders. The predicate acts of mail fraud alleged is each enterprise's scheme to defraud the County and competitive bidders with the defendants' misrepresentations of nonrelatedness in order secure more than their share of tax liens evenly allocated among all minimum bidders. Each enterprise's scheme was alleged to be executed ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.