Bathon sentenced to 30 months for role in bid-rigging scheme

News-DemocratDecember 6, 2013 

Former Madison County Treasurer Fred Bathon.

STEVE NAGY/BND

— A federal judge sentenced ex-Madison County Treasurer Fred Bathon to 30 months in prison and a $20,000 fine Friday for organizing a scheme that cheated thousands of Madison County taxpayers out of millions of dollars.

Bathon, 58, was also ordered to pay a $100 special assessment.

U.S. District Judge David Herndon imposed the sentence after listening to Bathon, in a voice stoked with emotion, apologize to the Madison County taxpayers he admitted to cheating during the years of the scheme -- 2005 to 2009, when Bathon abruptly resigned from office.

"I know none of this ever should have happened," Bathon said. "And it's all my fault. I accept full responsibility for my actions. I also need to apologize to the taxpayers of Madison County. They didn't get what they deserved from me. And for that I am very sorry."

Less than five years ago Bathon, despite a prickly and confrontational temperament, was one of the most powerful Democratic leaders in a solidly Democratic county -- a status he enjoyed through his prolific fundraising and willingness to donate the money he raised to fellow Democrats.

But Bathon's world crumbled in February, when he pleaded guilty to a federal criminal charge of rigging tax lien sales so that his political donors profited from inflated interest penalties paid by property owners on their delinquent property taxes.

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Bathon's sentencing on a felony immediately cost him his $90,000-per-year state-funded pension, resulting in a financial loss to his family of at least $1 million, and possibly $2 million, depending on how long he lives, said Clyde Kuehn, Bathon's attorney.

Bathon spent 36 years as a public employee building up his pension but now will lose it, Kuehn said.

"This is over a $2 million hit to him and his family," he said.

Bathon's prison sentence was one month less than the minimum of 31 months he agreed to serve as part of his plea agreement involving a single charge of violating the federal Sherman Anti-Trust Act, in that Bathon impeded interstate commerce by rigging the bidding on delinquent property taxes.

Bathon's scheme centered on two things: his continued reliance on verbal bidding; and on pre-arranged deals under which Bathon subordinates conducting the auctions awarded the best properties to Bathon's top donors at 18 percent interest, the highest under the law, while refusing to recognize lower bids from other tax buyers.

Bathon, under federal statutes, could have received a maximum sentence of 10 years in prison.

U.S. Attorney Steve Wigginton, however, argued that Bathon should receive a 37-month prison sentence on the grounds that Bathon had committed a serious abuse of the public trust and that a powerful message needed to be sent.

"He was the leader of the office," Wigginton said. "He knew better. He knew that in order to become powerful in politics in Madison County he needed to get a war chest."

Kuehn argued for a lighter sentence, noting Bathon's long list of charitable endeavors, especially on behalf of children living at the Catholic orphanage in Alton where Bathon had grown up, as well as impoverished youngsters in Venice and Madison whom Bathon supported.

"So Fred is the man who will be remembered as the man who corrupted the Madison County tax sale," Kuehn said before sketching out the portrait of a man the public knew little about: a hard-working, compassionate humanitarian who spent 12 years in the Catholic orphanage in Alton after his mother died and his father gave him up adoption at age 2.

Outside the glare of publicity, Bathon worked tirelessly to raise money for children living at the orphanage, Kuehn said.

Bathon coached baseball and soccer teams for low-income kids, and each year he donated $1,000 so kids in Venice and Madison could buy new shoes at Christmas, according to Kuehn, who cited letters of support from a Catholic nun who befriended Bathon at the orphanage and James Gray, the president of the Alton Branch of the NAACP.

Bathon also knew well the pain of great loss, said Kuehn, who cited the death in a golf cart accident of Bathon's 16-year daughter Jessica and the sudden death a few years later of Bathon's baby grandson.

"Fred knows the deepest depths of loss a man may know," Kuehn said. "But at his core there is more than a flicker of light. There is a flame."

Wigginton used a series of charts and graphs to show the blatant nature of Bathon's scheme to rip off the very taxpayers he had taken an oath to serve and protect.

Bathon's scheme, according to Wigginton, rested on three pillars: the ending in the November 2005 tax lien auction of the previous competitive bidding process; reliance on a seating chart whereby Bathon's co-conspirators were given prominent seats in the front rows; and using mid-auction print-outs to ensure the outcomes Bathon wanted.

Bathon went to these lengths because he wanted to uphold "his position as Madison County treasurer in order to ensure his top political contributors were allowed the winning bids in Southern Illinois," Wigginton said.

At the 2005 tax sale, Bathon initially awarded more than 2,500 tax liens at a penalty interest of 18 percent, the maximum under the law. Apprised of how fishy that looked, Bathon retroactively marked down the interest penalty on half the sold tax liens, to 12 percent interest, according to Wigginton.

But two years later, Bathon's greed spiraled out of hand and he apparently quit worrying about appearances. Of nearly 2,600 tax liens awarded to tax buyers in November 2007, 99.03 percent were awarded at the top rate of 18 percent, Wigginton said.

The big profits Bathon's favored clique of six tax buyers netted from this scheme led them to make major donations to Bathon's campaign fund, allowing Bathon "to gather influence and wield influence among other individuals who were running for office" in Madison County, Wigginton said.

Before imposing Bathon's sentence, Herndon said the case differed from every other public corruption case he's dealt with in that Bathon did not channel his ill-gotten gains into his own pockets, but instead circulated the funds among political allies.

"So while it did benefit him personally, it's simply not like the standard public corruption case," Herndon said.

Herndon also acknowledged the beneficial impact of Bathon's charitable work over the decades.

The judge, however, was quick to contrast Bathon's good side with the damage his bid-rigging scheme inflicted upon the public and upon the reputation of the treasurer's office and tax lien sales conducted under its auspices.

"We know that the integrity of the office and the integrity of the system certainly suffered," Herndon said. "It causes people to lose faith in government."

With Bathon's help, a federal investigation led three tax buyers in late October to plead guilty to helping Bathon rig tax lien sales. The three -- John Vassen, 56, of Belleville; Scott K. McLean, 51, whose company is based in East St. Louis; and Barrett Rochman, 70, of Carbondale -- are to appear at sentencing hearings set for Feb. 21.

Kurt Prenzler, the current Madison County treasurer, was elected to the treasurer's office after running on a campaign to implement reforms to make tax lien auctions more fair and transparent, such as installing computerized bidding procedures and refusing to accept donations from tax buyers.

In a statement released Friday, Prenzler said that when he first heard stories about Bathon's bid-rigging scheme in 2006, "I immediately blew the whistle."

Prenzler's allegations, however, did not gather steam until the News-Democrat published a series of stories in September 2010 exposing the major elements of Bathon's bid-rigging scheme.

The newspaper series also showed how under Bathon the average interest penalty on auctioned tax liens in Madison County was almost 18 percent, contrasting sharply to the interest penalty rates in other counties, whose use of computerized bidding led to interest penalty averages of 3 percent or less.

In 2011, the first year Prenzler conducted the tax auctions, Prenzler implemented a computerized system that drove the interest penalty on average to less than 3 percent.

Alan Dunstan, the Madison County Board chairman, released a statement in which he said he was "heartened by the fact that, once again, our system of justice worked and Mr. Bathon will now suffer the consequences of his actions."

At the end of Friday's hearing, Bathon requested that Herndon recommend to the U.S. Bureau of Prisons that Bathon be sent to the minimum security prison camp in Marion.

Contact reporter Mike Fitzgerald at mfitzgerald@bnd.com or 618-239-2533.

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