This article is part of an ongoing series covering violations of real estate law. Here, the DRE denied outright reinstatement of a broker license to a broker whose license the DRE had originally revoked due to his involvement in a bid rigging scheme.
In April 2021, the California Department of Real Estate (DRE) denied a request to outright reinstate the broker license of Thomas Andrew Legault, whose license was originally revoked in November 2018.
Legault, who has been licensed since 1985, participated in a bid rigging scheme at foreclosure auctions in Contra Costa County in 2010 and 2011. He and other participants in the scheme agreed not to bid against one another, artificially manipulating the price of real estate they had pre-selected.
In some cases, the participants held private auctions to bid on the already-auctioned properties again among themselves. While the highest bidder in these private auctions came away with the relevant property, participants allocated the proceeds as payoffs to unsuccessful bidders — essentially as bribes for refusing to participate in the public auction.
Legault pled guilty to these charges in 2016 and was convicted and sentenced to three years’ probation and fined $20,000 in money losses, along with nearly $2,500 in restitution.
When Legault’s license was revoked in 2018, he was the broker officer of Kropa Realty, and supervised 14 sales agents. He appealed the decision with the DRE, claiming he did not know his conduct was illegal. In their public filing, the DRE noted Legault “satisfied many of the rehabilitation criteria”; however, the department ultimately decided to deny his appeal, owing to the timing of the crime (in the wake of the Great Recession), and its severity.
Although the DRE declined to reinstate Legault’s broker license, it granted him a restricted license — meaning he may resume his real estate practice, but any new violation will result in revocation.
Knowledge is power — and safety
In this series, we’ve covered both the practice of bid rigging and the consequences of a criminal conviction substantially related to a broker’s real estate practice. However, given Legault’s proclaimed ignorance of bid rigging laws, it’s worth taking another look at these issues.
In a typical nonjudicial foreclosure sale (aka trustee’s sales), a notice of trustee’s sale (NOTS) is recorded at least three months after a notice of default (NOD) hits the property, ensuring the sale is public. The trustee then conducts the auction to foreclose the property and pay off the mortgage balance.
When the “public” sale is a sham, and the auction is reconducted in private, as Legault and his fellow conspirators did here, the practice artificially drives down the prices of affected properties, putting the cost onto mortgage holders’ shoulders.
Bid rigging is both a violation of California real estate law and a violation of federal law. Not only does the practice harm mortgage holders (and often other bidders, in cases where the price is artificially raised), it also stifles competition, leaving legitimate buyers and sellers out to dry.
It’s worth remembering that ignorance of the law is no excuse for breaking it. Whether acting within or outside the scope of their profession, all real estate agents need to keep abreast of what conduct the DRE does and does not permit — and what conduct violates federal law.
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