Mastro Being Investigated - Article

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Posted By: <b>T206Collector</b><p>chicagotribune.com<br /><br />Burr Ridge auctioneers subpoenaed in sports memorabilia fraud probe, sources say<br />Authorities said to be investigating possible 'shill bidding' to drive up prices on collectibles<br />By Jeff Coen<br /><br />Chicago Tribune reporter<br /><br />11:40 PM CDT, August 4, 2008<br /><br /> There's a lot of money to be made in the sports memorabilia business, as shown by an auction in Chicago late last week in which a single baseball card sold for $1.62 million.<br /><br />But it's not just collectors who have taken an interest in the buying and selling—federal agents in Chicago are looking into allegations of fraud, sources say.<br /><br />The sources confirmed Monday that investigators handed out subpoenas to executives of Mastro Auctions at last week's National Sports Collectors Convention in Rosemont.<br /><br />Authorities are said to be investigating possible "shill bidding" in which bogus bids are submitted to drive up the prices of collectibles.<br /><br />Mastro Auctions, headquartered in suburban Burr Ridge, handled the $1.62 million auction of a rare 1909 Honus Wagner baseball card Friday evening in Chicago. There was no indication that the card's sale is of interest to investigators.<br /><br />Spokesmen for both the FBI and the U.S. attorney's office in Chicago declined to comment on the existence of any probe.<br /><br />Mastro Auctions, one of the biggest auction houses in the sports memorabilia business, did not return a call Monday seeking comment on the subpoenas.<br /><br />Mastro is led by president Doug Allen and reported revenues of $45 million in 2006. On the company's Web site, Mastro bills itself as a premier choice for those seeking to sell memorabilia at auction.<br /><br />"The level of ethics, credibility and service you'll receive from Mastro Auctions is second to none in the industry," the Web site says.<br /><br />The National Sports Collectors Convention, billed as the largest in the country in the sports memorabilia hobby field, was held Thursday and Friday.<br /><br />As part of the convention, Mastro auctioned off the Wagner card at the downtown Chicago ESPN Zone and sold the 600th home run ball hit by Ken Griffey Jr., who was traded to the White Sox last week.<br /><br />The FBI exposed fraud in the sports memorabilia industry a decade ago. The nationwide probe, code-named "Operation Foul Ball" and centered in Chicago, resulted in the convictions of more than a dozen people in large part because of the undercover work of a former dealer.<br /><br />That investigation revealed forgeries of sports stars' autographs on thousands of jerseys, other sportswear and equipment. Distributors were convicted of selling millions of dollars in phony collectibles, including basketballs and jerseys purportedly signed by Bulls great Michael Jordan.<br /><br />At the time, authorities said the industry itself estimated that forgeries made up as much as 70 percent of the sports memorabilia market.<br /><br /><br><br>_ <u> </u> _ <u> </u> _ <u> </u> _ <u> </u> _ <u> </u> _ <u> </u> _ _ <br /><br />Visit <a href="http://www.t206collector.com" target="_new" rel="nofollow">http://www.t206collector.com</a> for signed deadball card galleries, articles and more!

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Posted By: <b>Jeff Lichtman</b><p>That Jeff Coen really hates Mastro. Bastard.

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Posted By: <b>barrysloate</b><p><img src="/images/happy.gif" height=14 width=14>

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Posted By: <b>Anonymous</b><p>(sings the Warren Zevon line)<br />send lawyers, guns, and money<br />the ---- has hit the fan

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Posted By: <b>John</b><p>If they really wanted to get under Mastro's skin they should have served them the subpoenas but charged them $75 bucks for each one.

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Posted By: <b>JK</b><p>That is really funny John.

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Posted By: <b>andy becker</b><p>what josh said! <br /><img src="/images/happy.gif" height=14 width=14>

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Posted By: <b>boxingcardman</b><p>Charge them $75 for the subpoenas but (1) give them free to more important people and (2) change the terms of the subpoena in the middle of the investigation. <br><br>Sic Gorgiamus Allos Subjectatos Nunc

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Posted By: <b>peter spaeth</b><p>I wonder if the Feds have anyone analagous to the dealer who worked undercover helping them in Operation Bullpen.

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Posted By: <b>boxingcardman</b><p>Code name "Deep Collection"<br><br>Sic Gorgiamus Allos Subjectatos Nunc

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Posted By: <b>Jeff Lichtman</b><p>John, trust me -- the cost of each subpoena to Mastro is more than $75.

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Posted By: <b>DD</b><p>This is not meant to be tongue in cheek. <br /><br />I find it appalling that their web site has no mention of this. Are they on such friendly terms with each of their consignors and bidders that it can be overlooked? What if the implausible happens and the feds find something, and decide to shut them down until further notice? I don't know if that could happen, but I know that if I were a consignor I would want some public assurance before that would have to be addressed.<br /><br />Spin it all you want, but say something.

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Posted By: <b>CoreyRS.hanus</b><p>David,<br /><br />I don't think any business in any field that is being investigated by law enforcement would do what you are suggesting. Such disclosure could have a crippling impact on the company's business prospects, possibly putting them out of business. And what if in the end no indictments are issued? Or to go further the investigating agencies issue some sort of statement saying they have found no evidence of wrongdoing, and close the investigation? It might then be very difficult for the company to reclaim the business they will have lost. <br /><br />Should an indictment come down, then at that point I would expect the company to issue some sort of statement.<br><br>

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Posted By: <b>Bruce Dorskind</b><p><br /><br />We concur with Mr. Shanus' position on the likelihood of Mastro making<br />mention of the recent government action. No criminal charges have been<br />filed.<br /><br />Why would anyone in their right mind, remind visitors to their store or their<br />web site that they are being questioned by the government?<br /><br />Can you imagine a Four Star Restaurant or a Five Star Hotel posting a notice<br />that they be called as a witness at an investigation of the industry?<br /><br />Whilst we are hoping that the "bad guys" are eliminated and that card doctors,<br />forgers and shills are punished, if and until someone or some organization is <br />proven guilty, they must be considered innocent.<br /><br />We certainly hope that "the fraud" is limited in scope and that all parties will<br />cooperate to ensure that what is sold or auctioned is what it says it is.<br /><br />Bruce Dorskind<br />America's Toughest Want List<br /><br />

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Posted By: <b>Lance</b><p>at the end of every auction, a bidders list must be made available to the public for review? If Joe Nobody, who hasn't ever won an auction, but placed bids on half of the entire auction, it might raise suspicion. Then again, you may find the same two names splitting the auctions down the middle. I actually enjoyed seeing who I was bidding against in the "old days" of Ebay and I think this simple plan could eliminate all shill bidding doubts. The auction houses have nothing to lose by doing this. Sure, some high end buyers will want to stay in the shadows, but they will all agree if it's the only way to make a purchase. I feel this could simply eliminate the problem with the smallest amount of effort for the auction houses.

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Posted By: <b>Jodi Birkholm</b><p>To say that "the auction houses have nothing to lose by [openly listing all bidders]" is a ridiculously naive statement. To publicly disclose who is bidding in their auctions would rank the ire of all privacy-minded customers, both the big players and the smaller bidders. Following that logic, I suppose auction houses may as well simply send an address list of their entire clientele to every dealer out there, along with an attached post-it note reading, "Here! Take our business away from us! It's not as if we have families to feed! Sincerely, Auctioneer & Co.".

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Posted By: <b>raymond g.</b><p>Lance its a good thing you didn't use "Joe Pa". WE ARE ---

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Posted By: <b>Anonymous</b><p>I agree with Corey and Bruce, though the situation might be different for a publicly-traded company subject to disclosure requirements.

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Posted By: <b>Steve</b><p>Agree with Corey.<br /><br /><br />Steve

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Posted By: <b>Steve Murray</b><p>Me too.<br /><br />Another Steve

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Posted By: <b>Lance</b><p>Jodi,<br />Ahhhh, sorry? As a dealer, I would like to think my investment is in good hands and will be maximized every time I consign. But as a buyer, I would also like to know that my bids were not maxxed out because my ceiling bid was available to the auction house. If this is such a horrible, meal stealing idea, how would you eliminate the possibility of the shill bidding? Maybe the list should only be made to the winner for review or maybe, just the first under-bidder to the winner to verify there was a real competition for the auction? OR...we can just accept what we have now, knowing whole heartedly that the auction houses ONLY have the buyers' interest in mind and shill bidding is just a figment of our imagination. <br /><br /><br />Raymond, the answer is.....PENN STATE...BTW!

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Posted By: <b>JT Burchfield</b><p>While I'm sure auction companies will not make their bidder lists public, I can see a good business opportunity for someone to act as an auction "auditor". If I was one of the major auction houses, I would be willing to let an independent auditor come in and verify things like 1) no shill bidding, 2) policies being adhered to, etc. This is assuming that the auditor signs confidentiality agreements, etc. That stamp of approval from a truly independent source would mean a lot to me as a customer given the rumors of shady dealings flying around the hobby right now.<br /><br />JT

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Posted By: <b>Jodi Birkholm</b><p>Lance,<br /><br />I understand your viewpoint, and it certainly has merit. Yes, how does the industry curtail such practises? Let's say the auction houses decide to go with your option--it still won't end shill bidding. It's an easy solve to keep shilling, so now there are <i>two</i> pretty big matzah balls hanging out there! <img src="/images/happy.gif" height=14 width=14> <br />This situation will not have a final outcome that pleases all involved.

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Posted By: <b>Jodi Birkholm</b><p>JT,<br /><br />Your idea is interesting, but I really don't see how it could be pulled off with any modicum of success based on the following scenarios:<br /><br />1. If the third-party auditor were already a part of this industry, who's to say that he wouldn't let certain issues slide by simply because he happens to be friendly with the company being audited? How can anybody truly be put in that place of trust? It's a different situation from card grading or autograph authentication, as this "auditor" does not require a talent for doing what he does--they just have to be honest. Granted, he/she would need to know the ins and outs of the industry. How would people go about selecting such a person? Who would appoint them? The FBI? Would the auction houses have any say in the matter?<br /><br />2. Let's say an agent from the appropriate branch of the government was made "Chief Auditor". It goes without saying that the people at the auction houses know their industry far better than this unbiased government representative. If the company at hand has deceitful intent, it really would not be too difficult an undertaking to pull the wool over the government's eyes. Fraud is fraud, but I really don't think a few scant years of studying this industry is any match for somebody who has been involved full-time in the hobby for several decades.<br /><br /><br />

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Posted By: <b>leon</b><p>Understanding Scott and I are very new to the auction house business we believe our written policy (permanent on our website) helps alleviate fear. Add to this the fact that from day 1 Scott and I HAVE NEVER HAD THE OPPORTUNITY TO SEE EVEN 1 MAX BID and the fear of shilling should be nill......No, we can't stop what others do in our auction but we can police ourselves as much as possible. PLUS, we have a written rule against us, or family members, bidding in auctions... 0/12.5% ...why pay more?<br /><br />and our policy....<br /><br /><br /><br />"Bidding Records, Altering, Trust- Brockelman and Luckey Auctions keeps all bidding records in perpetuity. If an issue ever arises they can be audited. All BIDDING RECORDS WILL REMAIN CONFIDENTIAL UNLESS THERE IS AN ISSUE. If a record is disclosed it will be made known to 3rd party sources (only) for verification of bids and to ensure the integrity of the auction process. We want bidders and consignors to have 100% confidence in our process and these UNIQUE rules, we believe, will further that objective. Brockelman and Luckey Auctions will not alter any cards, or other items, or ever have anything other than authentication done to them. We feel there is more to lose than to gain in this area of the hobby." <br /><br /><br />I don't think disclosing bidding records openly is a good thing. Too many hobbyists want to stay private and their privacy should be maintained......<br />

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Posted By: <b>Lance</b><p>I agree that there will be no solution to cure the entire problem. But, with record prices realized in EVERY auction, it makes me wonder. Is there never a situation where something loses a little value? Or, is there never an auction that is simply over-looked by the masses and a great deal is found? I do know if I won an auction and I won with a ceiling bid, I personally would feel better if the auction house had to justify maxxing my bid. Even if it was disclosing the first under-bidder only. A name, an email address, something to say someone else wanted this item ALMOST as much as I do. How many times do we see other congratulate others on the board on items they were the next in line for? I don't feel something like this would hurt the business and actually I see it as a way to increase business. The more I trust an individual or company, the more likely I will try to do business with them. Trust is everything and the auction houses are going to have to do something to reassure the public's faith. Anyway....<br /> -Clint

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Posted By: <b>Jeff Lichtman</b><p>Guys, there already is an auditor in place for Mastro's auctions -- it's called the FBI.

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Posted By: <b>Peter_Spaeth</b><p>An independent auditor could, at a minimum, verify that each lot "sold" was actually sold and payment received --as opposed to being clandestinely returned to the consignor if it didn't meet an undisclosed reserve. But I don't think this is likely to happen.

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Posted By: <b>CoreyRS.hanus</b><p>In the end it boils down to how much trust you have in the auction house. Most/all will cite safeguards they implement to assure prospective bidders the practice does not take place. Some will be comforted by those safeguards, other will wonder if they exist or if there are not loopholes around them. The best protection in my view is simply to not make ceiling bids -- to either check if your bid has been topped as the lot nears its close, or in the alternative to request a callback in the event you are topped. Yes, I know this can be inconvenient, and even impractical for those without access to a computer or a phone. And it won't eliminate all questions whether shilling took place. But it will at least increase the risk to the auction house of shilling you up, and increase the odds you won the item at the lowest possible price.

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Posted By: <b>barrysloate</b><p>There are a few auction houses, which I will leave nameless, that consistently get higher prices than even the houses that are much larger than they are. Considering we all share roughly the same pool of bidders, I find this perplexing. <br /><br />There are fluctuations in the market but there is no reason that a card that sells for $2000 should sell a week later in one of those auctions for $3500, and on a regular basis no less. I always suspect something is awry but I have no proof.<br /><br />But I agree that even an independent auditor could be easily fooled. And there would be so many ways to do it. Corey is correct that you just need to have faith in who you do business with, and of course recognize that you have to be careful and sensible when you bid.<br /><br />Edited to correct a ghastly spelling error that several people emailed me about. When you become the spelling cop the whole world is watching.

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Posted By: <b>boxingcardman</b><p>But if shills and hidden reserves are used to ensure that an item doesn't sell for too little, why not just place a reserve and do it legally? Why all the machinations to accomplish something that you could just do?<br /><br />And FWIW, it could be that Mastro is being subpoenaed as a witness against someone else (like that guy in OH); until indictments are released all we are doing is speculating. <br><br>Sic Gorgiamus Allos Subjectatos Nunc

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Posted By: <b>Fred C</b><p>The hell with reserve prices. If there is a minimum price for the auction then that should be the minimum bid. Anyone interested in the item at the minimum bid price will bid on it. Hidden reserves are bull$hit (excuse me). Auctions houses (big and small) should adhere to that rule. <br /><br />I remember the last Superior Card auction. Nobody had a clue that there were reserves built in. At the end of the auction the way we found out was that we had the high bid yet the item was not sold to us. Talk about a crock of crap. I guess the people at Suprior must have figured out that they screwed up because over half the (over 200 OJs) didn't sell. A few of us were able to pick up a few nice cards at decent prices because they reduced the price on some of the cards, probably just to recoup some cash. <br /><br />Overall, I wouldn't want my name out there for everyone to see what I'm bidding on. I'd rather keep that private. At some point in time you just have to trust the auction houses. If there is any impropriety uncovered/discovered then that auction house is going to be shunned. Overall I trust the auction houses, I don't have a choice. I have to believe that they are on the level else I would have a miserable time staying in this hobby.<br /><br />One reason auction houses (not ebay) get good results is because we trust them and we have our privacy. I don't even want to get on the subject of alterations because then not only do you trash the auction houses you start to trash the grading companies which opens another can of worms. That could be fun. I haven't participated in a good PSA trashing thread in a while... those are so much fun! <img src="/images/happy.gif" height=14 width=14>

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Posted By: <b>shane leonard</b><p>We think this is a good idea for an investigation to occur on the behalf of our industry. Whilst it may take a couple of years to sort out this mess, we are of the opinion that this can only better our hobby.<br /><br />Shane Leonard<br />America's easiest want list

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Posted By: <b>Jodi Birkholm</b><p>Shane,<br /><br />I have that '87T Storm Davis you've been after. PSA 5, too.

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Posted By: <b>Peter_Spaeth</b><p>I am sure that the experience of the world's major auction houses demonstrates that more buyers show more interest, and are likely ultimately to bid higher, with low minimum bids.

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Posted By: <b>boxingcardman</b><p>But if your choices are (1) illegally shill an auction or (2) establish a reserve legally, I'd think any reasonably intelligent auctioneer would opt not to risk his reputation, business and possibly personal freedom on option #1. But then, what do I know; I'm just an armpit collector without a secondary personality or plastic fetish. <br><br>Sic Gorgiamus Allos Subjectatos Nunc

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Posted By: <b>Peter_Spaeth</b><p>I continue to think the more important ethical issue is where someone actually wins an item who was shilled up to his ceiling bid and otherwise would have won it for less; not the situation where the outcome would have been the same with our without a hidden reserve, i.e. that the bidder did not win the item.

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Posted By: <b>davidcycleback</b><p>For practical rather than philosophical purposes, the main question in a situation such as this is whether or not the practice is illegal. The law is arbiter. Comparing shilling and reserves is comparing apples and oranges, as one is legal and is illegal.

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Posted By: <b>Jeff Lichtman</b><p>"But if your choices are (1) illegally shill an auction or (2) establish a reserve legally, I'd think any reasonably intelligent auctioneer would opt not to risk his reputation, business and possibly personal freedom on option #1."<br /><br />"Reasonably intelligent" being the operative words.

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Posted By: <b>davidcycleback</b><p>People who shill don't anticipate getting caught. If they anticipated being caught, they wouldn't shill.<br /><br />As has been said many times in different ways, a man's ethics is not shown by what he does when he thinks people are watching, but what he does when he thinks people aren't watching.

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Posted By: <b>paulstratton</b><p>Does this mean the FBI is going to be able to look at consignors/bidders personal information? How often they consign things or bid on lots?

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Posted By: <b>Jeff Lichtman</b><p>Paul, I guess it depends upon a) what records were subpoenaed; and b) if such records still exist. Sometimes those pesky bidding records find their way to the paper shredder.

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Posted By: <b>paulstratton</b><p>Thanks Jeff.

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Posted By: <b>B.C.Daniels</b><p>how much do you think the subpoenas will bring in up coming Mastro auctions????<br /><br /><br><br>BcD <img src="/images/happy.gif" height=14 width=14>

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Posted By: <b>Jeff Lichtman</b><p>Depends if PSA grades them.

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Posted By: <b>Kevin</b><p>Even better...if Topps gets the rights there can be enough to go around.<br /><br /><img src="http://img232.imageshack.us/img232/8589/agmastoyf4.jpg"><br><br>------------------------------<br /><br /><a href="http://www.AlteredCards.com" target="_new" rel="nofollow">www.AlteredCards.com</a> - in-depth education on advanced card doctoring techniques & detection with detailed examples<br /><br />

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Posted By: <b>John</b><p>Kevin...one of the funniest things I've seen on here!

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Posted By: <b>Matt</b><p>Kevin - how is that not in a PSA slab?

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Posted By: <b>Kevin</b><p><i>Kevin - how is that not in a PSA slab?</i><br /><br /><br /><br />Not holder available...like the latest Wagner, it's a jumbo. <img src="/images/happy.gif" height=14 width=14><br /><br /><br /><br><br>------------------------------<br /><br /><a href="http://www.AlteredCards.com" target="_new" rel="nofollow">www.AlteredCards.com</a> - in-depth education on advanced card doctoring techniques & detection with detailed examples<br /><br />