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From Antitrust Law Daily, May 12, 2014

Real estate investor convicted of bid-rigging is acquitted of obstruction of justice

By Linda O’Brien, J.D., LL.M.

An investor convicted of conspiracy to rig bids at public real estate foreclosure auctions was entitled to a judgment of acquittal on an obstruction of justice charge, the federal district court in Sacramento has decided (U.S. v. Katakis, May 9, 2014, Shubb, W.).

In 2009, the federal government began investigating anticompetitive conspiracies between Andrew Katakis and other real estate investors at public real estate foreclosure auctions in San Joaquin County, California. As part of the investigation, bank records for Katakis and his company, California Equity Management, were subpoenaed. The bank sent a letter to Katakis, informing him of the subpoena. Katakis purchased and ran a program that removes data from hard disks on the company’s computers and mail server. Subsequently, Katakis was charged in an indictment with obstruction of justice, conspiracy to commit mail fraud, and a violation of Section 1 of the Sherman Act. A jury found Katakis guilty of the antitrust and obstruction of justice charges. Katakis sought a judgment of acquittal on the obstruction of justice charge.

The court determined that the evidence for the obstruction of justice charge was materially insufficient for the government to carry its burden of proof. Under Federal Rule of Civil Procedure 29(a), a court on the defendant’s motion must enter a judgment of acquittal on any offense for which the evidence is insufficient to sustain a convictions. The government contended that the verdict could be upheld based on evidence that Katakis (1) deleted emails on his computer, an individual’s computer, and on the company mail server using the data removal program; (2) manually deleted the emails; and (3) manually moved the deleted emails to the deleted items folder in the other individual’s computer. The government presented sufficient evidence that Katakis purchased, installed, and ran the data removal program on his computer, the other individual’s computer, and the company mail server. However, expert testimony showed that Katakis could not have used the data removal program to destroy or conceal any of the emails in questions.

Additionally, there was no evidence that Katakis manually deleted the emails on his computer, an individual’s computer, and on the company mail server, according to the court. Although there is sufficient evidence for the jury to find that Katakis knew of the investigation, there was no evidence that he deleted the emails on a date reasonably near when he learned of the investigation. Deleting emails and emptying them from the deleted items folder in the ordinary course of business is a common practice and cannot be inferred exclusively from the fact that incriminating emails were deleted at some unknown time, the court noted.

Moreover, there was no evidence that Katakis’ placement of the deleted emails in the deleted items folder indicated his intent to conceal or destroy the emails when it was undisputed that the emails remained accessible. Since there was no evidence from which a jury could infer that Kataki deleted the emails with the requisite intent to obstruct the investigation, the charge could not sustain a guilty verdict, the court concluded.

The case is No. 2:11-cr-00511-WBS.

Attorneys: Russell L. Carlberg, United States Attorney's Office, for United States. Paul Joseph Pfingst (Higgs Fletcher & Mack LLP) for Andrew B. Katakis

Companies: California Equity Management

MainStory: TopStory Antitrust CaliforniaNews

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