Antitrust Law Daily New trial denied for real estate investors convicted of bid rigging
Friday, May 12, 2017

New trial denied for real estate investors convicted of bid rigging

By Jeffrey May, J.D.

Two real estate investors convicted of conspiring to rig bids at foreclosure auctions in California were not entitled to a new trial based on newly discovered evidence obtained after trial, "prejudicial spillover" from evidence supporting an ultimately rejected obstruction of justice count, and purported prosecutorial misconduct and ambiguous jury instructions. There was sufficient evidence to establish that the investors knowingly participated in the bid rigging scheme to support the convictions (U.S. v. Katakis, May 11, 2017, Shubb, W.).

After a 23-day jury trial in the federal district court in the Eastern District of California, Andrew B. Katakis and Donald M. Parker were found guilty of a Sherman Act, Section 1 violation. The government convinced the jury that the defendants conspired to rig bids at public real estate foreclosure auctions in California's San Joaquin County in 2008 and 2009, as alleged in a 2013 superseding indictment. However, the jury was unable to reach a verdict on a mail fraud charge. Katakis was convicted of obstruction of justice, but that jury finding was subsequently overturned.

Katakis later moved for a new trial on the bid rigging charge. Parker joined the motion but did not address the issue of newly discovered evidence.

Newly discovered evidence. To prevail on a Rule 33 motion for a new trial based on newly discovered evidence, the court explained, a defendant had to show that (1) the evidence was newly discovered; (2) the failure to discover the evidence sooner was not the result of a lack of diligence on the defendant’s part; (3) the evidence is material to the issues at trial; (4) the evidence is neither cumulative nor merely impeaching; and (5) the evidence indicates that a new trial would probably result in acquittal.

Even assuming Katakis met the first four requirements, he had not shown that the new evidence would probably result in acquittal if presented in a new trial. Katakis asserted that new evidence, including a declaration from his co-defendant Wiley Chandler, showed that Chandler and other investors were conspiring against him and his companies. Katakis argued that if the jury were presented with this additional evidence of the alleged conspiracy against Katakis, it would have discredited the cooperating witnesses’ testimony and would have concluded that Katakis did not engage in the conspiracy with them. "While the jury could infer that Katakis was an innocent bystander being swindled by his co-defendants and others, an equally if not more compelling inference from the evidence presented at trial and on the motion for new trial is that Katakis fully participated in the bid rigging scheme by agreeing not to bid on certain properties, paying others not to bid, and receiving payments for not bidding, all while being swindled by his co-conspirators," the court explained.

Prejudicial spillover. Katakis also unsuccessfully argued that the obstruction of justice evidence presented by the government left the jury unable to fairly assess the evidence on the bid rigging. And Parker contended that the jury might have improperly convicted him based on the obstruction evidence introduced against Katakis. Neither Katakis nor Parker showed "prejudice so pervasive that a miscarriage of justice looms" based on the admission of evidence that Katakis purportedly deleted emails using "DriveScrubber" computer software to overwrite the records so they could not be recovered, in an attempt to obstruct the investigation. The jury was properly instructed to consider each count and each defendant separately, and the mixed verdicts reached by the jury tended to show that the obstruction evidence was not so inflammatory that it would tend to cause the jury to convict on the remaining counts, the court noted. Further, the court said that, even absent the obstruction of justice count, it would have admitted evidence regarding Katakis’ attempts to delete emails as it was highly probative in showing Katakis’ consciousness of guilt, which outweighed any dangers of unfair prejudice.

Prosecutorial misconduct. The court rejected a new trial based on misconduct over the pursuit of the obstruction of justice charge and statements during closing arguments. It was "not convinced that the government engaged in misconduct, much less that the outcome of trial would have been different absent any misconduct."

Ambiguous jury instructions. The defendants also argued that the jury instructions did not properly inform the jury what mental state was required to convict Katakis for aiding and abetting a conspiracy. The court was not convinced that its aiding and abetting instruction, when read in conjunction with the other instructions to the jury, was erroneous. Even assuming the jury instructions were erroneous, the court determined that there was no reasonable likelihood that giving the aiding and abetting instruction caused the jury to convict Katakis without finding that all the elements of an antitrust conspiracy had been proven.

The case is No. 2:11-cr-00511-WBS.

Attorneys: E. Kate Patchen, U.S. Department of Justice, for the United States. Elliot Remsen Peters (Keker, Van Nest & Peters LLP) for Andrew B. Katakis.

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