The FBI is investigating whether real estate investors in California are cheating the system at auctions to keep prices on the properties low.

The FBI says it believes some participants are paying others to not bid on some properties so the home's price during the auction remains low--a practice known as bid rigging.

Bid-rigging is illegal and can carry up to 10 years in prison and a $1 million fine.

In one recent case, Anthony B. Ghio, a real estate professional in Stockton, Calif., pleaded guilty to bid ridding. He admitted to conspiring with a group of real estate speculators who agreed not to bid against each other at certain public real estate foreclosure auctions in the county, according to officials. The purpose was to suppress and restrain competition and purchase real estate at non-competitive prices, the U.S. Department of Justice said in a news release about the case.

After a designated bidder purchased the property, the group would then hold a second private auction to decide who would end up with the property.

Source: FBI Looks Into Bid Rigging at Courthouse Auctions, The San Francisco Chronicle (Jan. 21, 2011)