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May 19, 2010 11:34 AMPublication: The East Hampton Press & The Southampton Press

Justice Department probes Hamptons real estate business

May 19, 2010 11:34 AM

The business of how the South Fork’s real estate heavy hitters share information, and how the region’s multiple listing services work, has come under the scrutiny of the U.S. Department of Justice.

Earlier this month, interrogatory calls were made by Justice Department officials to several East End real estate-related businesses, though few were willing this week to go on the record and share details of the discussions. But a few insiders have pointed to George Simpson, owner of Suffolk Research Service of Hampton Bays, as providing the impetus for the probe.

In March 2009, Mr. Simpson and his wife, Jean, filed a lawsuit against 25 real estate companies and principals operating on the East End, and against Nick Khuri, the managing partner of OREX, the company that owns RealNet and Hamptons Real Estate Online. The lawsuit charged that OREX is an illegal and cost-prohibitive multiple listing service that induces anti-competitive practices, collusion, price-fixing and restraint of trade.

The Simpsons, whose business researches and sells real estate transaction data, withdrew the suit in August 2009 without explanation.

On Wednesday morning, John Nickles, a Southold-based broker and chairman of the multiple listing service for the Hamptons and North Fork Realtors Association (HANFRA), reported that he had been contacted by Justice Department officials on May 5. He said that he had a 30-minute “pleasant conversation” with Ann Marie Blalock from the anti-trust division, an attorney, another Justice Department lawyer, an economist and a paralegal. According to Mr. Nickles, the questions were generally about real estate practices on the South Fork and whether or not those practices involved “restraint of trade.”

A spokesperson from the Department of Justice declined to comment on the probe on Wednesday morning, stating that a press release would be issued if charges were filed during the course of an investigation. Most of the East End’s major real estate players—including the Corcoran Group, Prudential Douglas Elliman, Sotheby’s, Brown Harris Stevens, and Town and Country Real Estate, as well as the company that owns and operates RealNet Solutions and Hamptons Real Estate Online—were named as defendants in the Simpsons’ lawsuit, which claimed that they engaged in anti-trust practices. Most responded with motions to dismiss the case and argued that Mr. and Ms. Simpson’s claims were false.

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I love the Simpsons, that Homer and Marge really know how to stir things up.
What's that you say? Wrong Simpsons? DOH! I must be all DUFFED-UP again.
By uncleronk (136), southold on May 20, 10 8:09 AM
The justice department does not investigate unless they think there is a case
By fcmcmann (417), Hampton Bays on May 20, 10 8:10 AM
A formal complaint or even an anonymous tip can touch-off an investigation from a branch of the government with the powers to do that. They decide if there is a case after conducting interviews not before, and often decide not to proceed after an interview or two. Sometimes, as in cases like Bernie Madoff, they decide not to proceed with a case when they should have. Other times, they decide to proceed when they shouldn't have, (and lose as a result).
Bottom line ? An outsider can't ...more
By Sag (53), Sag harbor on May 20, 10 9:27 AM
Maybe the elites will think twice before they vote for big government again.
By tuckahoetrip (46), Water Mill on May 20, 10 9:57 AM
I don't get it, tuckahoetrip. Are you saying that if government is doing its job and clamping down on unfair trade practices, that those "elites" who are engaging in that kind of activity won't vote for "big government" so they won't get caught? Or are you saying that this story may somehow convince the "elites" that government shouldn't be watching for unfair trade practices at all, that people should just be free to lie, cheat, steal, whatever? Which is it?
By Turkey Bridge (1906), Quiogue on May 20, 10 10:22 AM
I would agree that a simple tip is not enough to spark a time consuming investigation- while an investigation often does not result in an indictment, sending out CID letters suggests a bit more is being sought than a simple interview might provide.
By LM (35), riverhead on May 20, 10 10:46 AM
Here is the TRUTH, from someone who knows what is actually going on...

George Simpson files a claim....it is thrown out as frivolous as we all know. Jean his wife files or "tips" the DOJ, and so now they are REQUIRED to perform due diligence to follow up to make sure there are no anti-trust issues on the east end.

The reality is this: the big brokerages co-broke every listing to every agency. PERIOD. I am not personally a fan of REALNET/OREX, especially their pricing model, but ...more
By Anonymous Hamptonite (2), Southampton on May 20, 10 12:13 PM
Turkey, you sound a little amped up but fairness in business dealings has never been enforceable by "the man". Simpson is on this page saying he didn't complain to "the man". And to my knowledge everyone is innocent of your charges of lying, cheating, or stealing.
So, to me it sounds like another case of "the man" poking his nose where it aint needed or warrented. Free market activity is very healthy, except for those looking to the nanny state to police their personal affairs. Not liking folks ...more
By tuckahoetrip (46), Water Mill on May 20, 10 2:26 PM
And I bet you don't have any problem with the new Arizona law re immigrants, or with a super-tough law-and-order stance regarding street crime, but when it comes to white collar stuff, up in that privileged stratum, then it's hands off, right? A little inconsistent, don't you think?

BTW, there's a whole lot of people who've spent their professional lives dealing with the jurisprudence of unfair trade practices, on both sides of the issue. I think they'd be very surprised to learn that ...more
By Turkey Bridge (1906), Quiogue on May 20, 10 9:25 PM
Mr bridge, I am more than comfortable with what I stated and could care less what you think. You are a stranger on a home computer? "Stratum, jurisprudence blah, blah what? Hahaha you be silly!
By tuckahoetrip (46), Water Mill on May 21, 10 4:58 AM
Thanks for your thoughtful response.
By Turkey Bridge (1906), Quiogue on May 21, 10 9:37 AM
Seems like there is more "restaint of trade" with MLS than the east end brokers. If your not an MLS broker in the system they dont want to do business with you and if you push them to get into the property they offer no commission. So whos's interest are they looking out for? Apparently when one makes an appointment on MLS they have aplace to log you in as the showing agent and if your not on MLS it presents a problem to them. That should be fixed.
By North Sea Citizen (516), North Sea on May 21, 10 6:49 AM
Unfortunately, NS, that is only "fixed" through the actions of an ethical real estate agent, who is aware of the fiduciary verbiage they've agreed to when listing for the seller. On the up side, the cost for membership to the MLS, and all of the data available for consumers, is approx. $200.00 per month- anyone is able to join, and it's clearly a benefit to their clients and customers. The North fork is fully participating, and enjoying the transparency offered to consumers.
By LM (35), riverhead on May 22, 10 8:03 AM