Former Glenwood Springs city councilman, partner indicted for alleged bid-rigging in foreclosure sales
Glenwood Springs Post Independent
Former Glenwood Springs City Councilman Todd Leahy and a longtime real estate business associate have both been indicted by a Colorado Grand Jury for alleged bid-rigging related to foreclosed properties.
The class 5 felony charges against Leahy and James Gornick stem from a Colorado Attorney General’s Office investigation that has been ongoing for several months.
The allegations are detailed in an eight-page indictment handed down May 16 and filed with the 9th District Court in Glenwood Springs on Wednesday.
According to the indictment, Leahy and Gornick unlawfully conspired on different occasions between June 12, 2013 and Nov. 15, 2017 to rig the bidding process at public trustee auctions involving foreclosed properties in Garfield County.
The accusations involve monetary agreements prior to bidding, where parties would agree not to bid, and ultimately controlling the final sales price, according to the document signed by Robert Shapiro, the First Assistant Attorney General for the state under recently elected AG Philip Weiser.
Bid rigging is a criminal offense under the Colorado Antitrust Act of 1992, which is intended to ensure free-market competition, the indictment explains.
Leahy just completed his second, four-year term on Glenwood Springs City Council in April before leaving council due to term limits. He won election to the council in two uncontested races for the city’s Ward 3 seat in 2011 and 2015.
He and Gornick have been longtime real estate partners, formerly operating as Leahy Gornick Real Estate during the time period of the alleged illegal actions. They more recently joined with a group of other real estate and property management professionals in Glenwood Springs to form Integrated Mountain Properties.
Reached by phone Wednesday, Leahy deferred to his Denver attorneys, Rick Kornfeld and Kelly Page, for comment.
“This case arises from Todd’s personal participation in a trustee sale in 2017,” Page confirmed in a phone interview. “Todd has cooperated and continues to cooperate with the Attorney General’s office as he has from the beginning of the investigation.”
She declined further comment on the specific allegations contained in the indictment.
Gornick, a New Castle resident, could not be reached for comment.
Both men are due in court for a bond hearing June 26. Leahy and Gornick are currently free on respective $10,000 personal recognizance bonds.
Alleged side deals
The indictment refers to a public trustee auction on Nov. 15, 2017 in which Gornick allegedly approached the only other prospective bidder for a property in New Castle, and asked if the “two of them could reach a deal so that there was not a bidding war …”
The deal involved a $20,000 payment from the other bidder to Gornick, in which he would agree not to bid on the property, according to the allegations contained in the indictment.
“Based on this agreement, (the other bidder) placed a winning bid of $429,300, which was only $50 more than the opening lender bid …,” according to the indictment.
According to investigators, Gornick later purchased a debt that was owed by the prior owners of the property, then called the successful buyer who had paid him $20,000 not to bid, saying “he intended to redeem the encumbrance and flip the house,” after which he would sell it back to the person for a higher price.
In another case earlier that year, on June 14, 2017, it was Leahy who allegedly approached another bidder at a public trustee auction — this time for a property on Overlin Drive in Glenwood Springs — and proposed the bidder pay him $5,000 in exchange for Leahy and “possibly another person” stepping away from the bidding.
Investigators later turned up evidence that the bidder in question had written two checks for $2,500, one to Leahy and the other to an associate of his who also was said to be present for the November transaction involving Gornick. Though implicated along with others in the investigation, the indictment only charges Gornick and Leahy.
On Dec. 13, 2018, investigators met with Leahy in Glenwood Springs, followed by a phone conversation initiated by Leahy to explain his relationship with Gornick.
Asked during those conversations with investigators if he or Gornick had ever approached anyone and asked for money in exchange for either of them not bidding, Leahy allegedly “stuttered and said, ‘We don’t do that.’”
Pressed on the matter, Leahy offered, “you just can’t do that … it’s not legal, I believe.”
When asked if he remembered accepting a check for $2,500, Leahy told investigators he did not, but that if he did it was likely related to a fee for allowing the bidder access to a property to check its condition before the bidding commenced.
The indictment also details a similar incident several years earlier, on June 12, 2013, in which both Leahy and Gornick accepted a $10,000 payment, allegedly for them to stop bidding when the price reached a certain amount.
One of the parties involved in that deal confirmed to investigators that Gornick and Leahy would often accept payment in exchange for not bidding, but that he did not think of it as “bid-rigging,” according to the indictment.
A class 5 felony conviction in Colorado carries a possible sentence of one to three years in prison and a fine of between $1,000 to $100,000.
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