A Baltimore businessman and aggressive ground rent investor pleaded guilty in federal court Wednesday to illegally rigging bids at Maryland tax lien auctions.
Jack W. Stollof, 74, faces up to 10 years in prison and a $1 million fine for violating the Sherman Antitrust Act. His co-defendant and one-time ground rent partner, Harvey M. Nusbaum, is scheduled to go to trial in March on the same charge.
Stollof, who will be sentenced after the trial, is not expected to testify, unlike a third defendant who reached a plea deal with the government in 2008.
Prosecutors say the three men and others conspired to limit competition at certain tax lien auctions through coordinated bidding from spring 2002 through August 2007. The collusion led their small group to win the majority of auctioned liens, which allowed them to collect debts, fees and interest from homeowners who were behind in their payments, or to foreclose on the liened properties.
In a statement read by his attorney, Stollof said he thought the agreement was legal, though he recognized that was not a defense.
"Throughout my life of almost 75 years," he said, "I have always accepted both the responsibility for and the consequences of my actions."
Thousands of properties with liens against them because of unpaid taxes or municipal bills are sold each year at annual auctions to investors, who often foreclose on the properties. The Baltimore Sun reported in 2007 that most of the tax lien sales in the state were dominated by a few investors, later identified as Stollof, Nusbaum and Pennsylvania businessman Steven L. Berman in an FBI affidavit filed that year.
The agency alleged that the men dominated the auctions illegally by dividing large blocks of available liens at tax sales throughout Maryland, determining who would bid on what, and signaling to conspirators when it was safe to bid. Some auctions were online, while others were in person.
Members of an FBI surveillance team said they saw the men meeting at Berman's office in Baltimore County shortly before dropping off bid envelopes in Montgomery County. And FBI records suggest there were hundreds of calls between Berman and Stollof, who once worked for Berman's father at the old Fairfax Savings and Loan in Baltimore.
Berman pleaded guilty in 2008 to one count of bid rigging connected to the multiyear scheme. But he agreed to cooperate with investigators in return for a reduced sentence. He's expected to testify at Nusbaum's trial in March, according to a court filing.
In court Wednesday, Stollof said his business relationship with Nusbaum goes back more than 40 years.
A 2006 Baltimore Sun investigation showed that Stollof and Nusbaum were longtime partners as well.
In 1991, they created Jack & Harvey Inc. to invest in the city's arcane ground rent system, under which more than 100,000 Marylanders pay rent on the land beneath their homes. The company levied large fees and filed paperwork to seize hundreds of homes from residents behind in their payments by as little as $25, according to a Sun analysis. However, they rarely took the dwellings, choosing instead to settle the cases by accepting various payments for things like "title examination."
Such tactics led the General Assembly to revamp the easily abused system in 2007.