Mastro Auctions Investigated for Shill Bidding

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Posted By: Jeff Lichtman

Everyone's biggest fear when bidding on a non-ebay auction: do auction houses shill bid lots after knowing the maximum bid placed on an item?

http://www.nydailynews.com/sports/story/427555p-360581c.html

Doug Allen was kind enough to come on this forum and explain the purpose of the $75 administrative fee charged by Mastro to all bidders for "costs" associated with Mastro auctions (as opposed to the 15 percent consignment fee and the 17.5 percent vig charged to winning bidders). Perhaps he can explain Mastro's defense to allegations by Ohio Authorities that Mastro may have engaged in shill bidding in its auctions. Apparently an Ohio criminal, a Republican fundraiser, used Ohio state funds to purchase zillions of dollars of sports memorabilia and coins from Mastro. According to a source, this criminal had a secret account with Mastro and was only allowed to deal with Bill Mastro on his transactions (anyone else ever have such personal service by Mastro?). This source claimed that "while Bill Mastro may be impressed with powerful people, he's not that interested in politics. "Money," the source says, "is the thing that motivates Bill.""

I'm sure since Doug made himself available for an interview with the NY Daily News (despite ceasing his contact with the Ohio authorities investigating Mastro), he'd be kind enough to come to this forum again and give us his side of the story - considering his auction is ongoing as we speak.

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Posted By: leon

I see allegations against Mastro. Great. I have heard and seen allegations against every auction house. If I were Doug I would not come on here and say anything if there might be an investigation. I am pretty sure his defense would be the same as he has stated. No shill bidding. All I read is the guy paid a lot of money for stuff and now someone thinks it was too much. As far as Bill or Doug dealing with individuals I think that is their choice. I deal with several principals of auction houses, I think I pay too much , so there must be funny business?? Next.....

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Posted By: Jeff Lichtman

Leon, which other auction houses do you know of that are being investigated by law enforcement for fraud? It would be a great service to know which houses, other than Mastro, are being currently investigated.

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Posted By: warshawlaw

Come on, Jeff, you're a criminal defense attorney; do you really expect Mastro or Allen to post a public recitation of the facts pertaining to a potential criminal investigation beyond the denials already released? The allegations are awful if proven (although as Leon points out, nothing more than we've all kicked around on this board before), but it isn't fair to call out Mastro to respond here when you would never let your clients post their stories on a public forum in a pending case. If Doug was naive enough to speak to a reporter on it, I am sure he has since lawyered up and will henceforth be quiet except for very carefully prepared non-factual statements. And no, I am not defending Mastro if the company did something wrong, I am only pointing out that calling them out here isn't kosher, IMHO.

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Posted By: leon

Aren't you a lawyer? Did I say others were being investigated? What I meant, if you didn't understand, is that anyone can be investigated. I don't think that proves guilt, or does it, in your mind? Show me the smoking gun. It sounds more like this Noe guy did some stuff that might not be legitimate and now others are getting pulled in. Show me something with teeth against Mastro.

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Posted By: David Vargha

Whether or not Mastro shills their auctions, you asked why they are being investigated. I suggest that you try to keep up on current events as the situation in Ohio is old news. The idiot being investigated was in charge of investing state funds and did so in part by investing in rare coins while taking a substantial loss on the portfolio. Since he had a private account with Mastro, Mastro almost immediately would be drawn into any investigation. That seems pretty basic.

DavidVargha@hotmail.com

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Posted By: Jeff Lichtman

First off, who's being naive here? Do you actually think Doug Allen spoke to the News reporter at a time when Mastro wasn't being represented by counsel? Of course they were. They just made a careful determination to speak to the News in an effort to spin the story their way and protect their business. Surely some major Mastro bidders read this forum; so why on earth wouldn't Doug come on here and give his side? It's the same concept though more acute here as there are more bidders concentrated on this forum than in the readership of the NY Daily News.

Leon, as a criminal attorney, of course I don't believe that where there is smoke there is necessarily fire. But I'm also intelligent and experienced enough to know that in order for a fraud probe to start something more than some single nutjob providing info is often required.

David, it's clear to me from reading the article that the Ohio prosecutor is discussing the investigation in the present tense. How on earth you could read that to mean that the investigation is "old news" is beyond me - an investigation becomes "old news" only after the statute of limitations on it has run its course. As for your claim that it's "pretty basic" as to how Mastro got drawn into the investigation - the crook who stole Ohio funds had a Mastro private account - you're kidding, right? What does having a private account have to do with allegations of shill bidding against the auction house?

Frankly, if I were representing Mastro, I would have surely sought to spin the News article my way -- too much potential revenue to be lost. I wouldn't be concerned about making any incriminating statements to the press because I would have prepared my spokesperson a list of things he was permitted to say (and nothing else). I would have been present during the interview or else I would have emailed responses on behalf of any Mastro rep.

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Posted By: Judge Dred (Fred)

The reason people bid in Mastro auctions (as well as other reputable auction houses) is because people feel trust in these establishments. I hope I'm not naive in believing that they don't monkey with the software and that they don't manipulate the auctions. REPUTATION - these auction houses work off of their repuations. The first question I'd ask myself is why would anyone want to totally screw up a money making machine by getting a little greedy? Personall, I don't see it and I hope I'm not the kid that say's "Say it aint so, Joe" because that's how much I believe these guys run an honest business. I can see people having others bid on their material. To me that would amount to consignor shilling which would be beyond the control of the auction house. It would bother me to know that someone was doing that but the auction house can't do anything to control that aspect of the business. I would hope that an auction house would do something about that type of situation if they got wind of that type of activity. The bottom line is that in an honest auction if someone shills their own item they run the risk of eating the buyers commission if they won their own lot. I hope I'm not naive....

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Posted By: leon

For the record, one or some, auction houses openly let folks know that consignors can bid on their own lots. Let's start another thread if we want to debate that again. I think at the very end of the day the 2 camps are 1. Just what JudgeFred just said. 2. It's going to happen anyway, one way or the other, so let's put it out there in front. I can see both points....but then maybe I am naive?

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Posted By: joe

Jeff, your question?

(anyone else ever have such personal service by Mastro?).

When I was thinking of sending some items to auction houses, I considered Lelands and Mastros. I spoke with Josh Evans of Lelands at the National about the items and Jonathan Perry called me about consigning some items. Bill Mastro personally called me and we talked for quite some time about the consignment items. Bill gave me his phone number and I was told I could call him anytime. I will say I have known Bill since the 1980's, not a close friend but from shows where he set up with Nagy in Michigan. I did consign some items in Mastro's March 2006 auction, not major items by the way, less than $10,000, so yes there are other collectors who deal directly with Bill Mastro. I don't think I would be the only collector out there that deals with Bill Mastro or Josh Evans directly.

Joe

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Posted By: Cat

So the guy isn't going to hire Mastro to re-sell the items. Maybe he can hire Sotheby's who admits to the process we refer to as "shilling."

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Posted By: cmoking

"Sotheby's who admits to the process we refer to as "shilling.""

Can you elaborate?

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Posted By: Bob

<<Ohio was the decisive battleground in the 2004 election, and President Bush might have been sent back to his Texas ranch if it hadn't been for coin dealer Tom Noe, the Bush-Cheney campaign chairman in northwest Ohio who raised more than $100,000 for the president's re-election bid.>>

So we have the vote fraud in Florida to thank for the first 4 years and this bum to thank for the next 4 years?

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Posted By: Frank Evanov

I think the key "new" news here is:

"...Mastro Auctions, Weglian and Brandt say, may have engaged in shill bidding and other questionable practices that resulted in inflated prices and auction house commissions...."

It seems in the Noe investigation, this evidence turned up and now:

"Weglian says his office will turn its focus on Mastro Auctions after Noe's state court trial in October"

Having read many posts over the years about bidders complaining that their Mastro bids always seemed to end at their "max", I think we should all follow this investigation closely.



Frank

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Posted By: John S

We can debate forever whether this is a common practice in any auction venue. I stopped going to a local live auction because I began to notice that the same half-dozen "bidders" would be present in the audience for every auction. Obviously I was there as well but I bid on and won items regularly. They never won a thing.

As much as I might want an item I set a limit before I start bidding. At least in my mind, even if shill bidding is involved I will not be cheated.

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Posted By: Eric Brehm

how do you know you won't get shilled up to even your max bid? If it were a fair auction, you might have gotten the item for even less. You are still getting cheated, even if you are happy with your final price. That is why shill bidding is illegal.

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Posted By: Jay

I have known Bill for over ten years and Doug since he joined Mastro Auctions and I trust both implicitly. This article offers no facts and just shows that another state is looking for someone to sue--no news there.

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Posted By: Cat

King:

This has always sounded like shill bidding to me. I copied this directly from their "Terms and Conditions" (see below). We see folks all the time, on EBay, that bid their own items because they don't want to accept less than X. That's shill bidding and that is precisely what Sotheby's allows and actually participates in.



RESERVE
9. All lots in this catalogue are offered subject to a reserve, which is the confidential minimum price acceptable to the Consignor. No reserve will exceed the low presale estimate stated in the catalogue, or as amended by oral or posted notices. We may implement such reserve by opening the bidding on behalf of the Consignor and may bid up to the amount of the reserve, by placing successive or consecutive bids for a lot, or bids in response to other bidders. In instances where we have an interest in the lot other than our commission, we may bid up to the reserve to protect such interest. In certain instances, the Consignor may pay us less than the standard commission rate where a lot is ?bought-in? to protect its reserve.

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Posted By: davidcycleback

Unless I'm mistaken, I don't beleive Sotheby's got into trouble for shilling but for conspiring with another auction house(s) to maintain the auction fees high. It and others secretly agreed not to compete against each other by lowering fees. I know of a collector who received money as he had been a Sotheby's or Christies bidder who was overcharged.

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Posted By: Oldbb

Hey Tbob,

Nobody cares about your political message of how Mastro Auctions shill bidding relates to Bush. Get with the program!

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Posted By: warshawlaw

Kat: if the rules are disclosed to all bidders it cannot be considered fraudulent. You would have to look at the auction laws of the state where the auction is conducted to determine whether the practices in question are legal.

Sotheby's and Christies were hit for conspiracy to fix prices on commissions. I can assure everyone that there is none of that with Mastro as I've spoken to a number of consignors who are paying all sorts of prices with Mastro and with others.

As far as personal service goes, I'd say personal service is the norm from what I've seen and doesn't necessarily mean it is illegitimate. I consign perhaps two or three items a year yet I know several auction house reps and I speak with them on a variety of issues, as I do with vendors in nearly every other aspect of my business from grading services to computer repairs.

Regardless of where this all goes, the bottom line is as it always has been: assume your maximum bid is what you will pay and act accordingly to protect yourself.

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Posted By: Cat

Warshaw:

Does the fact that it is not illegal make it right. Back to my Ebay analogy... EBay has a corporate rule that states you can't do it..NOT FEDERAL LEGISLATION that you can't do it. So if you declare shilling, does it become OK. I guess it is a matter of personal opinion. I say it's wrong (not to be confused legal or illegal). Certainly, it is "better" that they declare it only because you know what you are getting from them.

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Posted By: cmoking

Cat - thanks. I agree with your outlook - whether legal or illegal, I think its wrong and I don't like it either. I'm glad I know this, and I'll be looking for thiese clauses in other auctions in the future.

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Posted By: Jeff Lichtman

Jay, I'm sure Bill and Doug are swell guys but in our America we've had people at the highest levels lie to our faces - what makes you think it's impossible for Mastro to be involved in this? I'm a defense lawyer so I'm the last person to believe any allegations by law enforcement or prosecutorial bodies; however, an investigation is going on with sources that have claimed fraud is aftoot. Until proven otherwise, I won't put a bid in a Mastro auction except for the next highest bid, one at a time. No more maximum bids. It's just the prudent thing to do.

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Posted By: warshawlaw

Cat: All I care about is lawful conduct; is the auctioneer acting in a manner that does not violate civil and criminal law. If so, I am ok with it. I am not going to start making value judgments about business transactions. If you do not like the auction rules, don't participate and do tell the auctioneer that you are not participating because of the rules. I guarantee that if they start to lose bidders they will change their rules.

Another point on bidding: anyone who expects to pay less than their max bid is being naive and anyone who puts in a max bid they don't want to pay is engaging in wishful thinking. I put in the max I want to pay and I walk away from the auction until it is over. If I get the item, fine; if not, fine. Either way I am never surprised or unhappy, except if the item closes under my max (a pleasant surprise). I suggest anyone who is afraid of being shilled by a big auction house do the same. We'd all get more sleep too, BTW.

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Posted By: ockday

I have left MANY maximum bids over the years with Mastro, and more often than not I have won the lot without reaching my maximum.I trust Bill, Doug and the whole crew at Mastro and will continue to be an active bidder.
Alan

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Posted By: Larry

As Alan(ockday) just stated, I have won lots without max bid and they are and always have been a quality and reliable auction house, hopefully this will get resolved quickly and they will be absolved without our industry receiving a major black eye, for we all have a lot at stake, whether hobbyist, dealer or both.

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Posted By: David Vargha

So we have the vote fraud in Florida to thank for the first 4 years and this bum to thank for the next 4 years?

You are horribly mistaken. In the first election, despite massive voter fraud, Bush still won. Secondly, if you think that $100,000 was the key to an election that wasn't that close in 2004, then you are completely ignorant about how much money exchanges hands in a presidential election.

But here's a piece of advice -- Keep your bitter (and stupid) political views off of a baseball card discussion board.

DavidVargha@hotmail.com

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Posted By: Steve M.

I am one who cares.

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Posted By: Richard Masson

I have also won many items for bids under my max. I am more familiar with auctions in the horse business where anything goes. The buyer always has the ultimate recourse- don't buy if the price is too high.

If the rules of Mastro's auctions say they don't bid for the house to bump the price, they would be foolish to do so because getting caught would kill the franchise and 17.5% of the increment is just not much money.

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Posted By: David Vargha

Steve, I care about politics as well. This just isn't the forum for such a discussion. Anyone can feel free to grab me at the National dinner and argue politics, religion or whatever you'd like with me. But let's not feel the need to interject venomous, political potshots from either side of the aisle into discussions on a sporstcard board.

DavidVargha@hotmail.com

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Posted By: Jeff Lichtman

"You are horribly mistaken. In the first election, despite massive voter fraud, Bush still won. Secondly, if you think that $100,000 was the key to an election that wasn't that close in 2004, then you are completely ignorant about how much money exchanges hands in a presidential election.

But here's a piece of advice -- Keep your bitter (and stupid) political views off of a baseball card discussion board."

Pot, meet kettle.

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Posted By: David McDonald

Yay, Jeff!

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Posted By: Paul

I'm confused. The whole tone of the article is that Mastro was somehow involved in Noe's scheme to misappropriate public funds entrusted to him. ("Now the scandal has even spread to the world of sports memorabilia: Ohio investigators say Mastro Auctions, the world's largest sports auction house, may have played a role in what is being called "Coingate.") But the article doesn't actually accuse Mastro of helping Noe steal public funds. Instead, the article accuses Mastro of stealing from Noe by overcharging Noe through shill bidding. Even if those allegations were true, I'm not sure how that makes Mastro part of the Noe scandal.

Obviously, if Mastro were guilty of shill bididng, it would be something I'd want to know about and quite probably something that should be punished. But it seems like there is an effort here by the NY Daily News to drag Mastro into an entirely different scandal.

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Posted By: Jeff Lichtman

Paul, good point. It would seem that the uncovering of Noe's purported criminality in connection with the state funds led the authorities to evidence that suggests that Mastro used shill bidding to drive up the prices paid by Noe and other Mastro bidders. I don't think the Daily News was looking to drag Mastro into anything, however; clearly, Ohio authorities are the ones alleging Mastro's possible involvement in fraud, not the News. The paper is just reporting it.

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Posted By: Richard Masson

If the guy blew $50 million in "coin funds" organized with Escala, I'm guessing the real problem is with Greg Manning Auctions, Heritage, and the other coin dealers.

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Posted By: Brian H (misunderestimated)

I would wait to see if they even wind up pursuing this unrelated case. For the prosecutors office the Politics is "the money shot." (I agree that this is not the proper forum for any discussion of the politcs although I think my political views may be apparent for other reasons -- ie my "name")
From what's in the article and my limited experience I wouldn't hold this against Mastro at all until I learned a lot more.

I would, however, have concerns if everyone here said that they only have only won Masto Auctions at their max bid (which they have not).

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Posted By: David Vargha

Brian -- Why are you taunting me with that Klem card that I need? Apparently you as well as Mr. Bush have been misunderestimated.

DavidVargha@hotmail.com

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Posted By: Brian H (misunderestimated)

I didn't have a scan of Judge Landis so I thought the "ancient arbiter" might be apropriate to this thread.

I'm always trying to find this card (and the Evans or course) to upgrade.
If I ever find another Klem I'll let you know. Otherwise I guess the best you can do is a matchbook, a Callahan or one of those silly "Schutter-Johnson" (?) cards.

Now back to our regularly scheduled legal/ethical debate.

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Posted By: John Spencer

I firmly believe that ethics and sound business practices rule at the Mastro Empire. I have known all the principals there for years and have never had an unpleasant experience in my dealings with them. In response to the allegations of shill bidding, I have many times won auction items for less than my maximum bid, although I have never really gone after one of the headline items. I recently consigned a fair number of vintage cards through Kevin Struss, which I never would have done if I had any doubts about their integrity.

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Posted By: warshawlaw

Use the title he earned

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Posted By: David Vargha

Actually, now that you mention it, all presidents have earned the title of "President". Mea culpa, even though you wrote in jest.

DavidVargha@hotmail.com

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Posted By: dan bartenbaker

i won the 1909 pittsburg pirate pocket mirror in barry halpers austion and sotheby's independent shipping co. charged me $100.00 for shipping,i was disgusted,but could do nothing as they already had my winning bid'so i paid it. then within the next year i recieved a refund check for $100.00.

[calvindog]

Hey, more good stuff.

[Davy_Kangaroo_Jones]

Shill bidding is just like stealing if you ask me. Stealing people's money is a crime..