I-Team: Lawsuit Claims Conflict of Interest in Real Estate Aucti - 8 News NOW

I-Team: Lawsuit Claims Conflict of Interest in Real Estate Auctions

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LAS VEGAS -- Investors decide the future of Las Vegas homeownership underneath a downtown carport. They trade millions of dollars and dozens of homes every weekday.

But a new lawsuit claims those at the very top of the group running real estate auctions may have a conflict of interest that violates state law. State law creates a monopoly in local home and business trustee auctions. According to a lawsuit, there is a question of whether the company that has that monopoly violated the public trust.

Joseph Zito kept showing up to a downtown parking lot for days, hoping to convince people not to buy his home at auction, after convincing himself he was a victim of title forgery. He failed and the home is no longer his.

How Foreclosure Auctions Found a Host

Most auctions are perfectly legal, but a lawsuit against Bank of America questions one particular auction.

Former Nevada Assemblyman Scott Sibley owns Nevada Legal News. They are the only group with Clark County permission to run large auction. The former owner of an office building in Henderson claims that when it went up for auction last year, it simply disappeared.

"To the best of our knowledge, this asset was held out of a 10 a.m. sale and sold some time around 5 p.m. or shortly thereafter by the auction house to a related party," said attorney Mike Mushkin.

According to Mushkin, that related party is Scott Sibley, the man who oversees the auctions. Clark County records show the property sold for $1,600,000.01 -- one penny over the original asking price. The previous owner estimates the building was worth $3 million.

The paper states that the company who bought that building is called FRB Note. Below that is a handwritten note stating FRB Note is "care of" AZG Limited Partnership. County records indicate AZG Limited Partnership is Sibley company.

Nevada law prohibits the person running an auction from being "interested in any purchase" at their own auctions. 

"If this is what I'm seeing correctly, it appears that FRB Note obtained a note of $1.65 million. My guess is to get their purchase money back because they paid $1.6 million for it. But after the transfer tax is paid, FRB Note, or whoever actually owns that property, receives an extra $41,000. Where is that money going?" said Anthony Martin, owner of Auction Control Systems.

Through his attorney, Scott Sibley denied requests for an interview. His attorneys say at no point did AZG Limited Partnership own the building in question. 

But a check written by AZG Limited Partnership shows Sibley's company paid $8,000 in county taxes for the building at the center of the lawsuit. Comparing the signature on that check to Scott Sibley's own personal home mortgage appears to be a match.

The question remains: is the man running the auctions, personally involved in the sale of a multi-million dollar property? That would be a violation of state law -- the same state law Sibley helped pass as an assemblyman in 2005.

Most of the properties sold at auction are owned by large banks. If they feel cheated out of profits they could have made with a more open auction, they could sue Clark County, putting taxpayers on the line for millions of dollars.

When asked about his signature on that check, Sibley's attorney's say, "Mr. Sibley has signing authority over AZG Limited Partnership's checking account. The check represented an accommodation and the money was paid back."

Anthony Martin says he has ideas to make these auctions more open and transparent to the public, including holding it in a county building, making  it impossible for the person running the auctions to change the auction order at the last minute, and videotaping the entire auction so there are fewer questions about what happened.

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