Soon after former Madison County Treasurer Fred Bathon pleaded guilty Tuesday to rigging the sales of property owners' delinquent tax bills, County Board Chairman Alan Dunstan issued a statement saying he's deeply disappointed.
Perhaps most notable about the three-sentence statement was what it did not say.
There was no mention about what the county might do for the victims, who were already financially distressed when they were ordered to pay inflated penalties in order to keep their homes.
Will the victims get a refund? Will they get a break on their next tax bill?
Those are complex questions, with no simple answers.
Federal prosecutors say there were about 10,000 victims, and it would be a nightmare to even locate them. Trying to calculate how much each person should get in restitution wouldn't be any easier.
Notifying victims 'impracticable'
Bathon pleaded guilty to rigging the tax sale from 2005 to 2009, so that investors who gave him political contributions would be able to charge high penalties.
At the county's annual tax sale, investors buy the right to pay the delinquent taxes of property owners. Property owners who don't repay the taxes and a penalty to the investors can lose their property. The penalty rate is supposed to be determined through competitive bidding, to see which investor is willing to accept the lowest rate.
The average penalty rate in three of the years was either 17 percent or 18 percent, the maximum allowable under state law. In two of the years, the bid-rigging was so pervasive that the 18 percent penalty rate was awarded for almost all of the roughly 5,000 properties affected in those years.
Trying to retroactively figure out what the penalty rate should really have been for each of the roughly 10,000 pieces of affected property would be next to impossible. Should it have been 15 percent, or 12 percent, or 7 percent, 1 percent or even 0 percent? A number of factors can go into the investors' bidding strategy, including the condition of the property, its location and market conditions.
Another factor is whether the profit is likely to be made through the penalty or through obtaining the property via foreclosure, when the property owner is unable to repay the tax and penalty. And how would restitution be determined for a person who says he or she lost the home because of the inability to pay the inflated penalty?
In court Tuesday for Bathon's guilty plea, U.S. Attorney Stephen Wigginton and Assistant U.S. Attorney Steven Weinhoeft asked the judge that they be relieved of some of their responsibility to notify victims about the case and its progress. In a written motion, the prosecutors said it would be impractical and expensive to locate and confer with each individual. For one thing, they said, census data shows that about one-third of people were residing in a different location from 2005 to 2010.
U.S. Magistrate Judge Stephen Williams granted the prosecution motion, allowing the government to set up a website where victims will be able to get information.
The site will be linked to the website for the U.S. Attorney for the Southern District of Illinois: http://www.justice.gov/usao/ils/
As for restitution to individual victims, the plea agreement between Bathon and prosecutors state that prosecutors will seek a court order "determining that the complex issues of fact related to the high number of potential victims in this case makes it impracticable to perform a complete accounting of the losses to each particular victim directly or proximately harmed as a result of the offense."
"The government will ask the court for an order finding that it has exercised its 'best efforts' to accord crime victims their right of restitution in the instant case and for a ruling that no additional resources need be expended in determining the exact amount of restitution owed to each of several thousand victims in the within case," the plea agreement states.
Williams asked what would happen if individual victims came forward on their own and asked for restitution. The prosecutors said it's possible they could receive restitution, but that issue will be addressed later.
'They did nothing'
Although Bathon left office more than three years ago, some legal experts believe Madison County faces potential legal liability for Bathon's misdeeds.
Bill Schroeder, who teaches constitutional law at the Southern Illinois University Carbondale School of Law, said he believes Madison County could face some degree of civil liability. That's because Bathon's crimes would be covered by a 1983 federal statute that protects citizens "from deprivation of civil rights under color of law," said Schroeder, adding the civil right involved would be "the right to honest services or an honest auction."
Don Weber, a Republican and former Madison County state's attorney, agreed that Madison County could be on the hook, especially if it could be proven that other county leaders knew about Bathon's criminal conspiracy but did not stop it.
"This is not a crime that happened at night in some faraway place. It happened right in front of these people and they did nothing," Weber said. "And as far as I'm concerned they did nothing because Fred is a Democrat."
Current Madison County State's Attorney Tom Gibbons, a Democrat, said there were some Democratic county officials who sounded alarms about the tax sales.
"The problem is, you can see how long this investigation took the feds. With these kinds of crimes, conspiracies, they happen under the cover of darkness," Gibbons said, adding that although something might look suspicious in the beginning, "getting to the actual knowledge of what's going on behind the scenes is a whole other thing."
Dunstan, a Democrat, was not available for additional comment later in the week.
Gibbons was asked if the county could be legally liable for any victims' losses.
"Well, certainly we have given a lot of thought to that, but I can't talk about what our discussions have been regarding liability," Gibbons said. "Those are confidential discussions that take place among counsel and my client, the county."
Gibbons said "the best first step" to provide relief to victims began with the U.S. Attorney's office.
"We have a lot of faith in their ability to accomplish it; they have a lot of leverage at this point," Gibbons said. "I have absolute confidence in Steve Wigginton's office, that they're going to be looking out for the victims here."
Gibbons agreed that trying to figure out each individual victim's loss "would be a very complicated process, if it's undertaken."
Under Bathon's plea agreement, he faces 30 to 41 months in prison when he is sentenced May 17, but prosecutors indicated they will seek a sentence reduction if Bathon continues to help investigators pursue others. Prosecutors also agreed to seek no more than $7,500 in fines, even though the law allows a fine up to $1 million. The law also allows increasing the fine to twice the amount gained from the crime, or twice the amount lost by victims, whichever is greater.
Current Treasurer Kurt Prenzler has said the victims likely lost "many millions in excessive penalty interest, fines, fees and lost equity."
It's not clear what resources Bathon, 58, would have available to pay a substantial fine or restitution. He retired in 2009, and according to federal prosecutors, he is certain to lose his $88,000-a-year pension because of the conviction.
Tax lien investigations
Along with his guilty plea, Bathon has agreed to cooperate with federal investigators in building cases against his co-conspirators, none of whom have been named.
The tax buyers who comprised the four biggest donors to Bathon's campaigns -- Dennis Ballinger, of Decatur, at $29,100; Scott McLean, of East St. Louis, at $27,950; Barrett Rochman, of Carbondale, at $27,200; and John A. Vassen, of Belleville, at $25,025 -- declined comment or did not return calls seeking comment.
Nationwide, investigations of bid-rigging in municipal tax lien auctions are rare. So far Bathon is the only current or former public official caught in a federal probe of this type. Twenty-nine states rely on tax lien auctions, with more than $7 billion in late taxes sold every year.
In 2008, the U.S. attorney in Baltimore obtained the conviction of a tax buyer who agreed to plead guilty and pay a $750,000 fine for conspiring to rig bids in several Maryland counties.
More recently, in Newark, N.J., the U.S. Justice Department's anti-trust division has since 2011 obtained 11 guilty pleas from nine individuals and two companies as a result of an ongoing probe into bid-rigging at municipal tax lien auctions, according to the agency.
Bathon's conviction is significant because "in those 29 states there are literally thousands of tax lien auctions. And there's not nearly the number of investors as there are tax liens," said Brad Westover, executive director of the National Tax Lien Association, in Jupiter, Fla.
As a result of the potential for fraud at lien auctions, the association is ramping up efforts to teach its members how to spot bid-rigging, Westover said.
"We teach the correct principles, and once you know the correct principles, it's very easy to be safe and stay safe," Westover said.