'I was taken advantage of': State investigates Fred Bathon's tax auctions

News-DemocratDecember 25, 2010 

— A state investigation is under way into Fred Bathon's handling of delinquent tax sales during his years as Madison County treasurer, according to County Board member Chris Slusser, R-Wood River.

Slusser disclosed this information after a meeting Wednesday afternoon with Thomas Gibbons, the county state's attorney.

Gibbons told Slusser his office is cooperating with the attorney general probe.

"Mr. Gibbons told me what I would've hoped to hear from him," Slusser said.

In addition, Slusser said he will turn over to Gibbons the names of nearly 40 county property owners who called a special hotline set up in the wake of a News-Democrat investigation of tax sales in late September.

The newspaper stories showed that Bathon, a Democrat, took in about $140,000 in campaign donations -- more than the rest of Illinois' other state treasurers' combined -- from investors who had bought delinquent tax bills on Madison County homes, businesses and farms.

Those investors were routinely allowed to buy property owners' tax debts at an 18 percent penalty rate -- the maximum allowed under state law. The investors took in up to $200,000 apiece in penalties for some years, the newspaper reported.

Bathon, who stepped down as treasurer in late December 2009, did not return calls seeking comment.

"I want (Gibbons) to know there are dozens of people who had the courage to come forward," Slusser said.

Two days after the newspaper stories appeared, then-State's Attorney Bill Mudge called on both Madigan and Steve Wigginton, the U.S. Attorney for Southern Illinois, to review Bathon's handling of tax sales.

Gibbons, who was sworn in as state's attorney earlier this month after Mudge resigned to become a county judge, confirmed to the News-Democrat that an investigation is ongoing after checking with Wigginton's and Madigan's offices.

But Gibbons declined to provide any details.

"My understanding from my discussions with the two agencies is that it's continuing," Gibbons said. "I can't talk about any specifics because they're not telling me any specifics."

Randy Massey, a U.S. attorney spokesman, declined to comment for this story.

Robyn Ziegler, a Madigan spokeswoman, said the attorney general's office is "still reviewing the allegations" involving Bathon's handling of the tax sales.

One anomalous pattern state investigators might scrutinize is the fact that all of Madison County's delinquent tax bills for 2006 -- more than 6,000 homes, farms, businesses and not-for-profits -- were sold by then-Treasurer Bathon to tax buyers for the maximum interest penalty of 18 percent.

In contrast to the practice of the state's 101 other county treasurers, Bathon did not conduct the tax sale as a reverse auction aimed at driving down interest penalties paid by property owners.

As a result, homeowners in some of Madison County's best and most stable neighborhoods, who normally might have paid interest penalties of 5 percent or less, were forced to shell out millions of dollars in extra interest rates and fees while never being informed about the excessive interest rates they were paying.

Some homeowners saddled with these interest rates are wondering if the probes initiated by Mudge will go anywhere.

"I find it hard to be optimistic about anything," said Allen Gagnon, a construction worker who fell behind on the property taxes for his house at 19 Timber Meadows in Edwardsville.

Gagnon's delinquent taxes were bought for two years by Dennis Ballinger, of Decatur, one of Bathon's biggest campaign donors.

The 18 percent interest penalty that Ballinger received on Gagnon's house escalated sharply in two years, increasing to nearly 72 percent, county records show.

In Illinois, investors, known as tax buyers, can pay a person's property tax debt. The tax buyers make money by charging the property owners a penalty rate, or, if the property owner doesn't eventually pay up, the tax buyer can take the property.

The penalty rate for each piece of property is determined at the treasurer's tax sales, which usually occur twice per year. The interest penalty compounds every six months by the amount of the original interest penalty.

Ballinger also received an 18 percent initial interest penalty for the unpaid taxes on the house at 14 Kingsbury Court, Glen Carbon, owned by David P. Kohler, who runs a small construction company.

Kohler spent more than $2,000 to redeem the taxes on his house, whose original tax bill was $498.

At the time he redeemed his taxes, Kohler thought the interest and fees he was paying were excessive.

"But I just thought that's how government works," he said. "I still think I was taken advantage of. It's no different than credit cards."

Meanwhile, newly sworn-in Treasurer Kurt Prenzler said he is reviewing the tax auction process in his office with plans to reform it by replacing the verbal bidding system with computerized bidding, in which tax buyers bid anonymously on laptop computers.

"I encourage a formal investigation and welcome an investigation whether it be county, state or federal," Prenzler said. "Investigators will have 100 percent cooperation of the treasurer's office."

So far, however, no law enforcement agency has requested records from his office, Prenzler said.

Property owners who feel they were take advantage of should call his office at 692-1790, Prenzler said.

Contact reporter Mike Fitzgerald at mfitzgerald@bnd.com or 239-2533.

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