EDWARDSVILLE — A lawsuit seeking class-action status has been filed against Madison County over former treasurer Fred Bathon's handling of the annual delinquent tax sales.
Bathon has pleaded guilty in federal court to a criminal charge of rigging the tax sale so that his political donors profited from inflated penalties paid by property owners.
The class-action suit was filed Thursday in Madison County by St. Jacob attorney John Barberis and Collinsville attorney Steve Giacoletto. For now, the only named plaintiffs are Scott and Dawn Bueker, of St. Jacob, Jason and Christine Moss, of Collinsville, and Guideon Richeson, of Troy.
But the plaintiffs are asking the court to certify the suit as a class action on behalf of any Madison County property owners whose tax bills were included in the county's tax sales from 2005 to 2009. Prosecutors have said there were roughly 10,000 tax bills affected.
The suit does not yet seek specific amounts in damages, but rather an awarding of money for "all losses and injuries suffered" as a result of the scheme. The suit says property owners have lost, or stand to lose, "millions of dollars in interest which has been artificially inflated due to the defendants' illegal conduct."
Named as defendants, along with the county, are Bathon and certain buyers of the delinquent tax bills: John Vassen, Dennis Ballinger, Robert Luken, John Scott, Scott McClean and Edward Beasley.
Madison County Board Chairman Alan Dunstan was not immediately available for comment Thursday. The tax buyers have previously declined comment.
Bathon pleaded guilty earlier this month to rigging the tax sale from 2005 to 2009, so that investors who gave him political contributions would be able to charge high penalties. He faces up to 41 months in prison when he is sentenced in May.
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 as well as 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.
In most counties, the tax bills are sold in a reverse auction, where the investor offering to take the lowest penalty rate is the winning bidder. The process is supposed to ensure that property owners aren't charged excessive penalties for paying their taxes late.
However, witnesses say Bathon conducted his tax sales like a bid opening, where investors were not allowed to undercut each other or "bid down" the penalty percentage.
Under Bathon's procedure, all the bidders would shout an opening bid. The one who shouted the lowest bid first was declared the winner.
Federal prosecutors say Bathon's procedure resulted "in a chaotic scene where every participant at the tax sale shouted their bids simultaneously, leaving the auctioneer, a treasurer's office employee, to select the 'winner.'"
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.
Prosecutors say some of the tax buyers "colluded" with Bathon, and the investigation into the scheme is ongoing.
Current Treasurer Kurt Prenzler conducted the county's annual tax sale earlier this week, and the average penalty rate was 3.7 percent. All three of the tax sales conducted under Prenzler's tenure have produced average penalty rates below 4 percent.
Prenzler said a penalty rate of 18 percent packs a wallop, especially if the property owner doesn't immediately pay his debt, because the penalties compound over time.
"Interest rates of 18 percent were bad, but it got worse. If a person's taxes were sold at 18 percent, and they didn't redeem their taxes within the first two and a half years, the interest rate could get up to 108 percent. If their taxes are sold at 3 percent, and they don't pay during the first two and a half years, it can go no higher than 18 percent. You can see the difference," Prenzler said.
Prenzler has said the scheme cost property owners millions of dollars in inflated penalties and lost equity.
Contact reporter Brian Brueggemann at firstname.lastname@example.org or 239-2511.