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.
Recently, interrogatory calls were made by Justice Department officials to several East End real estate-related businesses, though few were willing 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. But Mr. Simpson said he is still passionate on the subject.
“In the last 10 years, large agencies headquartered in NYC, using unfair and, I believe, illegal practices, have taken over the real estate market in the Hamptons,” he wrote in an e-mail. “They have damaged the local broker and the buyer/seller of properties. These larger agencies should be sued, tried, and punished.”
On Monday morning, Mr. Simpson confirmed that he had been contacted by officials from the Department of Justice approximately six weeks ago. He added that to his knowledge, the agency has been studying Hamptons real estate practices for nearly three years.
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.
Detractors of the OREX system allege that the agents who use it do not adhere to the Realtor Code of Ethics as presented by the Long Island Board of Realtors. All agents who use the Multiple Listing Service must obey the code or face censure.
The Realtor Code of Ethics states: “Realizing that cooperation with other real estate professionals promotes the best interests of those who utilize their services, Realtors urge exclusive representation of clients; [and] do not attempt to gain any unfair advantage over their competitors.”
Last 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.”
But, he added that he thought that there was some basis for the lawsuit brought on by the Simpsons, and that the bigger agencies should take heed of the federal interest in local practices.
“Anytime the DOJ is involved, you should be very concerned,” he said.
A spokesperson from the Department of Justice declined to comment on the probe last week, stating that a press release would be issued if charges were filed during the course of an investigation.
on May 25, 2010