Property Auction Rigging in Spain: Nationwide Fraud Unchallenged

January 15th, 2015

Example of Real Auction in Spain

Auction rigging, commonly known as bid rigging, is a form of collusion between real estate speculators whereby they conspire to illegally rig the bidding process. This fraud at public real estate foreclosure is a criminal offence and in some countries (U.S), each bid-rigging carried a maximum penalty of 10 years in prison a $1 million fine.

According to a U.S. Department of Justice note, “over the past three fiscal years, the Justice Department has filed nearly 10,000 financial fraud cases against nearly 15,000 defendants including more than 2,900 mortgage fraud defendants.”

Spain’s Courts have been equally responsive when dealing with this problem: we can recall one famous bid-rigging fraud case in the Valencia Courts where 42 individuals (on appeal 27 were acquitted) received lengthy sentences, two of which got 10 years each. The only difference with the US is the last high profile case took place in… 1995. And since, very little Government activity to curb this plague.

This is not the only unusual thing: in this country, possible to witness firsthand how these fraudsters operate. All you have to do is attend a busy auction dealing with a coveted property.

Let’s take the Marbella Courts as an example where a selected group of “subasteros” (a mix between a speculator, opportunist, outright fraudster and a liar) operate with worrying impunity; these guys are familiar faces, “dummy bidders” that turn up day in day out to boycott auction procedures by chasing away legit bidders –occasionally with threats-, demanding money from serious contenders in exchange for not participating (as well as offering them money to refrain from doing so), or escalating the bids to force out any newcomer.

The boss of this Mafiosi syndicate used to be a bold (bald too) overweight individual (names withheld); he had experience, money and contacts in Courts, and led the rest in their nefarious activities. It appears he has now taken a step back, perhaps his prominence was beginning to mirror his physique and got that timely feeling that it was just the right moment to retire. The rest unfortunately remain, as so do many other hundreds operating throughout Spanish Courts.

Sadly, lawmakers have not yet noted the flaws of the current system nor the simplest solution for this instance of corruption: first-price sealed-bid auctions in which bidders place their bid in a sealed envelope and simultaneously hand them to the auctioneer, the Court in this instance.