Mastro/Legendary Article in Today's NY Daily News

[Rich Klein]

Without commenting further; it's a real doozy! And note the familiar people quoted in the article.

http://www.nydailynews.com/sports/ba...er.html?page=0

Regards
Rich

[Matt]

"But that is no longer Jim and Liz Murphy's concern. On the morning of June 8, Liz Murphy started repeatedly calling Allen's cell phone, Legendary's main office number and Allen's accountant. The goal was to tie up Legendary's phone lines until the final payment would be resolved. After two or three hours, Allen agreed to send a postdated check for the balance of the account.
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Allen says he decided to write the check to the Murphys not because he was legally obligated to do so but because he wants to resolve his old firm's obligations as quickly as possible."

I don't know why everyone is making such a big deal about this - it seems pretty easy to get your consignment money.

incredible.

[RichardSimon]

One heck of an incredible story. Looks like O'Keeffe has added lots of fuel to the Mastro fire as these people continue to go down in flames. Anybody want to send a consignment to Legendary now???

[barrysloate]

Legendary Auctions will not survive this. No way.

[cyseymour]

You would have to be crazy to send a consignment to Legendary Auctions, at least as one of the "little guys". Perhaps the big guys will still be able to do so and Legendary will stay afloat. I don't see them recognizing great prices, however.

I find it strange that the President of a grading company would be actively purchasing massive amounts of collectibles that he couldn't afford. Was it an addiction? It doesn't make any rational sense.

I am sure they did engage in shill bidding, but it might be hard to prove. All in all, it is really sad that it is the "little guys" who did not get paid, as they need the money more than anyone else. Mastro/Legendary is toast. I'm not sure I'd even risk buying from them since they do not seem honest. Will stick to Mile High, SCP, Mem Lane, REA, Goodwin, etc.

[Matt]

Forman seems to get involved in some major hobby lawsuits. I hope he has a half way decent attorney.

[jmk59]

I don't think this could possibly get more interesting.

And if, as Doug says, they did everything legally and the obligations of Mastro remain with Mastro, then why is he still involved in making arrangements and trying to pay off Mastro consignors and saying that Legendary wanted to get the Mastro business wrapped up as quickly as they could?

Which is it? If the debts are legally not Legendary's, as they claim, then why the ongoing involvement in those payments?

Go back to Adam's post above about personal liability. That's the only context in which this makes sense.

J

[19cbb]

Originally Posted by Rich Klein

...And note the familiar people quoted in the article.

Too many for my liking!

[Bicem]

If Dave is such an active seller in the hobby, um... what exactly prevents him from making sure that his cards are in the very highest SGC grade possible?

Conflict of interest?

[Peter_Spaeth]

No, for two reasons. One, SGC likely is not an "alter ego" of Dave and could not be held liable for his personal debts, and two, even if it could, SGC doesn't own the cards it holds for grading, they are not its assets.

[cyseymour]

I think that if Forman was buying cards raw, then that would certainly open it up for speculation. I know he sold some stuff at REA http://www.robertedwardauctions.com/.../2009/280.html, though it explicitly stated that Forman had purchased it on the open market. He probably knows he can't buy raw cards.

That Forman ran up such a debt, failed to pay it when card prices crashed, and apparently had a close friendship with Bill Mastro, known for allegedly shill bidding and card trimming, is disturbing. It's really hard to know what to think. I'd like to think the best of everyone. Those of us who do are bound to be disappointed (but probably happier for it).

:Edited to note that Forman bought the T206 Bresnahan SGC 96 on 12/13/07 - that must have been the date that the trouble started with Forman buying too many cards. That was right before the recession hit.

[FrankWakefield]

Jay...

Seems to me that if I own a card, and I consign it to an auction house, I still own the card and the auction house has a consignment contract, an interest in the card. When the auction occurs I still own the card until my agent, the auction house, is satisfied with the winner's payment, at which time the winner owns the card and the auction house owes me money. The idea is that the auction house is an agent, they NEVER own the card.

If the auction house sends a card I consigned off for grading, I still own the card. So to answer your question, I think the owner of the card still has rightful title and ownership. The auction house, their creditors, the grader, all of those folks may claim some sort of lien on the card, but I don't see how title / ownership would pass without notifying the rightful owner and then proceeding on the lien. Mere possession of the card does not convey title to anyone.

When I send a card to an auction house, I'm not conveying title. I'm entering into an agreement that I will convey title if certain things happen... ie an auction, and payment. And I'm agreeing to convey ownership to the winning bidder, not the auction house nor anyone else.

All of that would be subject to Lord knows what that might have been put in micro type in some contract.

[batsballsbases]

I just sat down and read the article in the daily news. To me it still leaves more questions unanswered than answered. I think finally when the other "SHOE" drops that no matter how much damage control Doug does to try and save face it wont matter. One of the only good parts in keeping Legendary an auction house is the possibility that if Doug is serious about making everyone "Whole" the only way to have that happen is to be able to stay in business. If not then all the consignors will have a very long drawn out legal battle and probably walk away with nothing.So in the end it may be a love hate relationship with the Devil!

[T206Collector]

Originally Posted by Bicem

If Dave is such an active seller in the hobby, um... what exactly prevents him from making sure that his cards are in the very highest SGC grade possible?

Conflict of interest?

...And I am sure is watching this one closely. About now someone from SGC ought to explain what, if any, safeguards are in place to honestly review the cards of their President.

[HRBAKER]

Originally Posted by T206Collector

...And I am sure is watching this one closely. About now someone from SGC ought to explain what, if any, safeguards are in place to honestly review the cards of their President.

Agreed, this isn't exactly third-party grading is it? This assumes "raw" cards are being graded for him which may not be the case. A fair query nonetheless.

[Bicem]

Originally Posted by HRBAKER

Agreed, this isn't exactly third-party grading is it? This assumes "raw" cards are being graded for him which may not be the case. A fair query nonetheless.

or graded cards that are then bumped up. The incentive ($$$) is there no matter if it's actually happening or not which is enough for me not to feel very good about it.

[cyseymour]

If I can read into this correctly, is it possible that on 12/13/07, Dave Forman placed a number of max bids, and then after "winning" the cards, felt that he had been shilled, and refused to pay for them?

I think it's fair to question the ethics of card grading company staff, but in this instance I don't see how it applies, since Forman was the buyer of graded cards. I think Joe Orlando owns cards, too; it's hard to imagine that a President of a grading company wouldn't have a passion for cards and not want to collect them. That in itself is not a sin. There seems to be no evidence that Forman bought anything raw and had it graded; that would certainly be hazy, but it wouldn't lack integrity unless the grading that became unobjective. But to buy graded cards, I think is okay. These people have a right to collect.

I don't think this does anything to damage the integrity of SGC's grading. I just think it's a real embarrassment for its President, which might affect SGC's image. I feel bad for him.

Disclosure: I own no high value SGC cards.

[Peter_Spaeth]

If SGC does grade cards Dave owns, and Dave (directly or through others) is selling them, then there is at least a troubling appearance of a conflict of interest, even if SGC represents that it grades the cards as it would anyone else's.

We should not pre-judge the situation, but at the same time we should be vigilant to get the facts.

[DJR]

,

[benjulmag]

My understanding is that Mastro Auctions intends and expects in the relatively near future to pay all consignors. Their delay in doing so was caused by a "Perfect Storm" of extraordinary occurrences: (i) recognized credit-worthy individuals not timely paying on their debts and (ii) withdrawal of a line of credit caused by economic circumstances unseen since the 1930's.

Their practice of selectively sending out lots prior to payment is hardly without precedent in this hobby. As has been noted, when one other noted auction house did it, they received tremendous applause and no dissent. The belief that Mastro's actions were unique in this hobby is the height of naivety. So Mastro caters to certain bidders. Mastro's rationale almost certainly is that it induces those bidders to bid more aggressively in their auctions, which benefits all consignors. I have yet to hear a complaint from a consignor who received substantially more for his consignment due to bids from an individual who knew he would be extended just the sort of credt that caused this whole situation.

Bottom line to me: Mastro's business practices are the rule, not the exception, not just in this hobby but in collectables in general. Yes, by the letter of the law perhaps they fall short. But then so do the substantial majority of others. Those out to crucify Mastro certainly have enough fodder to make it a grand feast. But they are smoking on something if they feel Mastro is the exception and not the rule.

[Jewish-collector]

This is going to be one hell of a Net54 dinner !!!

[oldjudge]

Well said Corey.

[JamesGallo]

Does anyone have any idea what Dave's role is on a daily basis at SGC?

I don't believe he is a grader...

I am not saying there isn't a potential conflict of interest but it is also possible that Dave wasn't buying cards but memorabilia or other things.

IMO Mastro is still the villian hear and I will save judgement on Forman until I know more of the facts.

Also if I bought 400K worth of stuff and shortly thereafter found out some shilling could have occured I would not pay for the stuff until the issues of shilling was taken care of.

What I don't understand is that if Dave owes them 400K for whatever and neither Mastro nor Dave have the stuff then where the heck is it???

James G

[jmk59]

Sometimes I swear I must be the biggest dumb-ass in the world. Or just incredibly naive. I know that credit is normal, and all that. But if Mastro was giving the big guns time to pay, wouldn't it just stand to reason that there is a "Gotcha covered" buried in there somewhere? That it was an extension of a business courtesy on their part to cover the money short term and not an offer at the risk of the consignor? Would you think anyone would even have to ask that? I know I wouldn't.

And am I also naive to think that, if these courtesies are going to be extended, Mastro (or anyone else handling so much of other people's cards or money) would take even the most basic precautions around the process? Like getting it in writing, at least. Or retaining some interest or ability to retrieve either the cards or the value if the payments fell through.

Here's what bugs me. First of all, I don't remember a time in this hobby in which there wasn't chronic speculation and grouching about favoritism to bigwigs while the individual small and medium or unconnected collectors sat on the sidelines playing by the rules. That's been out there on everything from auction house practices to grading preferences for the big submitters. Now the favoritism is crashing the news today, with the exact outcome that the little guy got nailed so the big shots could play mover and shaker.

At the center of it all is Mastro. I know there are people that didn't pay Mastro. But these people were not in a position to limit the fallout and shield the collectors and consignors that had owned the items. Mastro was the only entity that could have done that, and they didn't.

Personally, I couldn't pick either Dave Forman or Bill Fisher out of a crowd of two - don't know them at all. But I think it's unfortunate that their money issues are playing out in public, especially since I absolutely don't believe that the issue of consignor non-payment has the slightest thing to do with them. It's just more noise around the central issue of Mastro's behavior.

I understand that some of the bigger players in the hobby might want to look at what it means that Forman is still in cards while owning a grading company (although the recent REA auction had some pretty impressive disclosure) and wonder if there is an appearance of impropriety.

I'm more concerned with the actual improrpriety by Mastro that has already come out, already affected real people and collectors and is by far the biggest taint on the hobby in this whole mess.


J

[bijoem]

Originally Posted by benjulmag

My understanding is that Mastro Auctions intends and expects in the relatively near future to pay all consignors.

That would be great, and I hope it is true.

[baseballart]

Originally Posted by benjulmag

...
Bottom line to me: Mastro's business practices are the rule, not the exception, not just in this hobby but in collectables in general. Yes, by the letter of the law perhaps they fall short. But then so do the substantial majority of others. Those out to crucify Mastro certainly have enough fodder to make it a grand feast. But they are smoking on something if they feel Mastro is the exception and not the rule.

Corey

I would expect any dealer who sends items without payment to be sufficiently capitalized to pay the consignor even if the winning bidder defaults; i.e. the auction house would have sufficient cash reserves without drawing on credit. I have no idea whether REA or others were so capitalized, but it is clear with hindsight that Mastro was not.

As such, I don't think you can generalize about such practices without this information.

Max

[slidekellyslide]

"Forman's attorney, Jeffrey Lichtman, says that his client doesn't deny that he has an outstanding balance. But that figure is less than the lawsuit contends because Mastro officials did not subtract the value of baseball cards sold by the auction house against Forman's wishes. Forman had given the cards to Mastro Auctions for a future sale, but when the economy turned sour - and with the FBI probe tarnishing the auction house's reputation - Forman decided to hold on to the cards. Instead, Lichtman says, they were sold at a Mastro Auction for much less than Forman might have gotten at a future date with a different auction house."


-------------------------------------------------------------

I'm sorry, but Forman's defense sounds ridiculous to me....The shilling allegations against Mastro have been going on for years and I don't think for one minute that Forman didn't know about them...I also think it's ridiculous to hold Mastro responsible for an outside sale that didn't go through because the seller lost the comic book...no money changed hands! And why would Mastro return cards to Forman if he owed them $400,000?? What did Forman do with the items he won from Mastro?? And how does Forman/Lichtman know that he could have gotten more for the cards at a later date with a different auction house?? Especially considering the economy.

[Exhibitman]

It had no credit to extend. The "credit" was other peoples' possesions that were entrusted to Mastro, that Mastro did not own, and that Mastro did not have the owners' permission to "lend" to the bidders.

I reviewed a Mastro consignment of mine to see whether it said anything about making loans with my stuff. Not surprisingly, there isn't a word in there to that effect, but it does say this:

"If any Buyer does not pay us for any Memorabilia within sixty (60) days after the end of an Auction, you have the option to withdraw the Memorabilia and have us return it to you, at your expense, or you may leave the Memorabilia with us for placement in another Auction."

So, not only did Mastro NOT inform consignors that it had the right to send their stuff out without payment, they promised consignors that if the item was unpaid for 60 days, it could be reclaimed. You cannot possibly tell me that what Mastro promised to its consignors is consistent with Mastro "extending credit" by "loaning" the consigned items to bidders. By definition, if the item's owner had the right to take it back from Mastro after 60 days, the item never, ever should have been sent out by Mastro to a bidder without payment first being received by Mastro. I do not think I would have any problem in court proving that this condition in the contract constitutes a promise by Mastro that it will hold onto the items until they were paid for by the winning bidders, and that continuing to make this promise despite what is now apparent was a long history of repeated violation of this promise is evidence of a management policy of actively defrauding consignors. The fact that they weren't caught until now is not an indicator of the soundness of the practice; by that logic Bernie Madoff did nothing wrong except to the last people who didn't get their principal back.

As far as SGC goes, that is another case. Right now it is supposition and innuendo--we don't know what really happened, yet. What we do know, right now, is that Lege-stro screwed some of its consignors. It is a much "bigger" story to me at this point because it is proven. Some of our members have had the pleasure of watching their cards sold on Ebay with no money to show for it from Lege-stro.

[rhettyeakley]

I in no way am defending what Mastro/Legendary has done in the past. They seem to have shot themselves in the foot several times, and are guilty of at least being terrible businessmen. That being said, I guess I'm not all that surprsed that Mastro/Legendary is in the middle of this thing. They certainly seem to deserve most of what is being heaped on them at this point.

However, when reading this story for the first time earlier today what WAS surprising to me was he Dave Forman/SGC thing. I literally thought to myself after reading it "Holy crap, this is NOT going to go well for Forman". The Mastro stuff isn't as surprising to me because none of what was in there was "new", most of it had been at least alluded to over the past several months. The SGC/Forman thing is "new" and it is rightfully being scritinized based on the information that we have. I must admit though it doesn't pass the smell test.

I am far from a PSA apologist but if this was Joe Orlando/PSA the pitchforks would already be out. It does seems like a bit of a double standard from many here.

[dennis]

"I am far from a PSA apologist but if this was Joe Orlando/PSA the pitchforks would already be out. It does seems like a bit of a double standard from many here."[/QUOTE]
who will start the thread i will not send in cards to sgc?

[JamesGallo]

So no one has addressed what impact Dave has on day to day activity. I don't think Joe Orlando is sitting grading cards or unpacking orders, I don't think Dave is either.

I am not saying he is without guilt, but to fry him without pretty much any facts would be getting very much ahead or ourselves.

I think each person will have to make a decision on if they really believe that the graders do not know who the cards belong to. If that is the case then it really doesn't matter who submitted the cards and therefore I think some of the conflict of interest is removed, not all but sum.

Like I said without knowing any facts or what Dave's daily duties are I certainly can't make a decision to fry him or not.

Sometimes owners of companies can make bad decisions that doesn't mean the company as a whole is a pile of crap. I am not happy about this news, but I don't think it is as damaging as not opening on Mondays :-)

In a way I hope this goes to court, but there are always 3 sides to a story and I am not sure we will ever really know what the truth is regardless of the outcome of the case. It is very possible that the person who is right could very well get screwed.

James G

James G

[tbob]

The way things are going this might be a perfect storm for Mike Baker to regain a foothold for his new GAI company in the grading business. I'll guess we'll just have to see how this plays out.
Even though I have regularly used SGC for my card grading, I have to agree with the posters who state that if this story involved Orlando and PSA (instead of Forman and SGC) there would be a storm of outrage.

[Wite3]

Got my usual , "please consign with us email today" from Legendary...aside from the really poor taste in my mouth about their trustworthiness, the email had two different spelling errors...maybe they should use some of their stolen money and pay for a spell check program.

Joshua

[sox1903wschamp]

Originally Posted by rhettyeakley

However, when reading this story for the first time earlier today what WAS surprising to me was he Dave Forman/SGC thing. I literally thought to myself after reading it "Holy crap, this is NOT going to go well for Forman". The Mastro stuff isn't as surprising to me because none of what was in there was "new", most of it had been at least alluded to over the past several months. The SGC/Forman thing is "new" and it is rightfully being scritinized based on the information that we have. I must admit though it doesn't pass the smell test.

I am far from a PSA apologist but if this was Joe Orlando/PSA the pitchforks would already be out. It does seems like a bit of a double standard from many here.

This was the first thing that hit me about Dave Forman and I think I also exclaimed "holy crap" or something close to that. I do not know Dave but I sure know his company. Not ready to boycott them but I would like to see many more facts on this case.

[clamendo]

The solution is simple. People who own, run, or work for grading companies should stick to grading - not price guides (PSA -SMR), or prices realized (on the SGC home page). Becasue as soon as they stress the monetary aspects - they should not be allowed participate in bidding on any graded cards. They are indirectly generating "buzz" and it is self serving and a conflict of interest. Let the people who advertise in their magazines do that.

Here is the definition of a shill from Wikipedia.

A shill is an associate of a person selling goods or services or a political group, who pretends no association to the seller/group and assumes the air of an enthusiastic customer. The intention of the shill is, using crowd psychology, to encourage others unaware of the set-up to purchase said goods or services or support the political group's ideological claims. Shills are often employed by confidence artists. The term plant is also used. Shill bidding, found on many auction sites such as eBay, is punishable by law[1] and may result in fines and or prosecution.

Shilling is illegal in many circumstances and in many jurisdictions because of the frequently fraudulent and damaging character of their actions. However, if a shill does not place uninformed parties at a risk of loss, but merely generates "buzz", the shill's actions may be legal. For example, a person planted in an audience to laugh and applaud when desired (see claque), or to participate in on-stage activities as a "random member of the audience", is a type of legal shill.