Six major Washington-area real estate firms and three of their presidents were fined a total of $200,000 today for conspiring to raise their commissions on home sales in violation of price-fixing laws.
The increase in commission rates from 6 to 7 per cent cost home sellers $700,000 in Montgomery County, where the firms are headquartered. Under the antitrust act, each of the companies could have been fined up to $1 million and the executives sent to prison.
There was an audible sign of relief when U.S. District Judge C. Stanley Blair did not impose a prison term on the first defendant The Justice Department had asked for stiffer sentences, including jail for two of the realtors.
In the first criminal trial on anti-trust violations involving the real estate industry, the realtors were found guilty of agreeing to raise the rates at a Sept. 5, 1974, meeting held at Congressional Cluntry Club in Bethesda.
The firms now face several potentially costly civil suits and possible forfeiture of their real estate licenses.
The sentences imposed were:
John P. Foley Jr., 46, $10,000 fine and three years' probation. His company, Jack Foley Realty, Inc., was fined $15,000.
John T. Carruthers Jr., 35, $25,000 fine and three years' probation. Colquitt-Carruthers, Inc., was fined $50,000.
Robert W. Lebling, 53, president of Bogley, Inc., $5,000 fine and one year probation. Bogley, Inc., was fined $15,000.
Robert L. Gruen, Inc., $15,000; Schick & Pepe, $25,000; and Shannon Luchs Co., $40,000.
The Justice Department had asked for heavier sentences, including prison terms for Foley and Lebling (as well as a suspended sentence for Carruthers, who has heart trouble). It recommended fines of $100,000 each for Shannon & Luchs and Colquitt-Carruthers. (Government guidelines call for fines of 10 per cent of the net gross increase resulting from the illegal act.)
In imposing lighter sentences, Judge Blair said he had taken into consideration the evidence presented, the financial worth of the parties, the reverberation on the business community, the reputtion of the individuals and the fact that the criminal conviction may leave the firms liable to heavy damages in forthcoming civil cases.
The degree of culpability was also a factor in the judge's decision. The heaviest individual and corporate fines, $75,000, were levied on Colquitt-Carruthers and its president. Though Foley was the host at the country club dinner and the first to announce a rate increase, at least two witnesses testified during the trial that Carruthers had tried to persuade other reluctant realtors to go along with 7 per cent commissions.
Before the sentences were read, individual defendants were asked by the judge if they had anything to say.
Foley stood mute for a few seconds, his head bowed, his silent lips moving, until Judge Blair called a recess.
Afterward, Foley broke into tears. "I thought I was a strong man," he sobbed. "It was a nightmare. I never intended to break a law. I've never been in a courtroom before."
Carruthers, on the verge of tears, told how he had spent his life building his business and his family. "I'm sorry the whole situation came about," he said.
Lebling, on the other hand, appeared cool. He defended his integrity and protested his innocence. "I never felt that a person who was innocent would be charged, tried and convicted with the American jury system we have," he declared. He said he was "very disillusioned" with that system. Then after more remarks about his innocence, he thanked the judge for his time.
All of the convicted parties are expected to appeal.
During presentencing remarks, when defense attorneys were asking for leniency, several referred to pending civil actions. John H. Lewin Jr., representing Jack Foley, Inc., a small firm, said that a substantial fine could push it to the brink of bankruptcy.
William O. Bittman, an attorney for Robert L. Gruen, Inc. said the fact of conviction had had a "devastating effect" on that small company.
Sometime next year the same defendants will be party to a suit by the Maryland attorney general. In addition to the $700,000 in refunds sought by the state, it will also seek about $2 million in treble damages. They also face a class action by four home sellers who claim they were injured by having to pay 7 per cent commissions.
Finally, the real estate firms, as well as their presidents, face the possibility of having their licenses suspended or revoked.
After exhaustion of all appeals, the Maryland Real Estate Commission will decide whether or not to take such action.
The District of Columbia, according to informed sources, does not intend to wait out the appeal process. The matter is already before the corporation counsel, who must decide if an antitrust violation is tantamount to the other crimes for which a conviction means revocation of license.
It is expected that if the counsel decides the offense is in a category with conspiracy to defraud and embezzlement, the D.C. Real Estate Commission will revoke.
In that case, the companies, which do a considerable amount of business in the District, could be expected to go to court to get an injunction, staying revocation until the appeal process is exhausted.