Heritage Live Auction -- Black Swamp debacle

[Matthew H]

Originally Posted by calvindog

I think it was 27 in one set, the Wagner in another lot and then 9 in the last lot.

Ok, forgot about the green lot... Anyone know what that went for?

[iggyman]

If one is to believe the internet. Initial press releases had the Black Swamp E98 near set estimated at $500,000. As per an associated press article....

"The best of the bunch -- 37 cards -- are expected to bring a total of $500,000 when they are sold at auction in August during the National Sports Collectors Convention in Baltimore. There are about 700 cards in all that could be worth up to $3 million, experts say. They include such legends as Christy Mathewson and Connie Mack."


I didn't see any press releases from Heritage promising a million for the E98 Wagner PSA 10 card.

"Recently discovered in a Defiance, Ohio house attic with over 700 other well-preserved 1910 era E98 series baseball cards, this card of Hall of Fame player Honus ("Hans") Wagner has been certified PSA Gem Mint 10 and is expected to sell for $200,000 or more in an auction conducted by Heritage Auctions on August 2, 2012."



Heritage predicted a 3 million dollar windfall for the entire enchilada. They probably won't make it to the three million dollar mark, but with a bunch more cards to sell......................well, I will go out on a limb and say that the consignors are happy people at the moment and the grand kids college trust fund is saved (as long as it's not for an ivy league school.......have you seen the tuition rates?......wicked!).



Lovely Day.

[benjulmag]

So now Heritage is being criticized for being transparent and upfront?! Talk about being between a rock and a hard place...I can only imagine the blistering comments on this board had they chosen to sell the cards piecemeal. In addition, EVEN IF they wanted to sell them piecemeal, how then were they supposed to respond to the inevitable question an experienced collector was apt to ask as to whether there were more cards in the find? Lie? If not, then wouldn't they have ended up right back to where they were by disclosing all material info at the start?

As to the point that they had no legal obligation to disclose the extent of the find, perhaps so. But isn't that why business ethics is taught in business school...to encourage businesses to take the business high road, even at the expense of SHORT-TERM profits?

I for one applaud both Heritage and the family that consigned the cards for the manner in which they have offered to the market this spectacular find.

[Griffins]

well said Corey.

[calvindog]

Originally Posted by benjulmag

But isn't that why business ethics is taught in business school...to encourage businesses to take the business high road, even at the expense of SHORT-TERM profits?

So it's ok for Heritage and its employees to bid on lots against other bidders but not ok for them to seek to legally maximize the profits made for their consigners? Do they teach that in business school too?

[Peter_Spaeth]

Is it ethical to withhold material information?

[calvindog]

Depends what is material in this case. I don't think it's ethical or legal to do so.

[Peter_Spaeth]

To Corey's point, I'm not so sure there is no legal duty to disclose. I know material information that directly affects the value of the card and that is not otherwise knowable -- that I have 25 more in the pipeline. It's just as much fraud to omit a material fact as to misrepresent a fact. Why isn't that fraud? At the very least, it's dubious ethically.

[Peter_Spaeth]

Originally Posted by calvindog

Depends what is material in this case. I don't think it's ethical or legal to do so.

It bears directly, and substantially, on the market value. How is that not material?

[Peter_Spaeth]

Jeff are you seriously saying it would not have been deceptive for Heritage just to say here's a Wagner 10 and a Cobb 9, knowing what it did about the extent of the find? If that's your position I disagree. Sure, Heritage has an obligation to maximize return for its consignor, but not if that means committing fraud or acting unethically -- thus your opposition to shill bidding.

[calvindog]

It's a close call and a good point. I don't think it would be ethically wrong (certainly not legally wrong) to say nothing -- unless asked if they were part of a larger find. Real slippery slope should that loose thread be pulled.

[Peter_Spaeth]

Originally Posted by calvindog

It's a close call and a good point. I don't think it would be ethically wrong (certainly not legally wrong) to say nothing -- unless asked if they were part of a larger find. Real slippery slope should that loose thread be pulled.

Well we can agree to disagree; I agree with what Greg and Corey said earlier. I think it's highly material information and it's deceptive not to disclose it, at least in a civil case.

[botn]

So to my point earlier, why is HA being called out in the first place? Makes no sense. Hobby is turning to a good old fashioned witch hunt.

[Peter_Spaeth]

Partial witch hunt.

[benjulmag]

Originally Posted by calvindog

So it's ok for Heritage and its employees to : on lots against other bidders but not ok for them to seek to legally maximize the profits made for their consigners? Do they teach that in business school too?

All the more reason to applaud them for taking the high road with this find. Seems to me hypocritical to blast them for it.

As to Peter's point that they might have had a legal duty to disclose it as it was material info as to value of the cards and was in their exclusive possession, at the very least I don't see how an auction house can be criticized for taking that as a credible legal argument.

[calvindog]

Originally Posted by botn

So to my point earlier, why is HA being called out in the first place? Makes no sense. Hobby is turning to a good old fashioned witch hunt.

So the Mastro indictments are a witch hunt?

[calvindog]

Originally Posted by benjulmag

All the more reason to applaud them for taking the high road with this find. Seems to me hypocritical to blast them for it.

As to Peter's point that they might have had a legal duty to disclose it as it was material info as to value of the cards and was in their exclusive possession, at the very least I don't see how an auction house can be criticized for regarding that as a credible legal argument.

Honestly, I'd love to hear their thinking (if there was any) on the determination of whether or not to grade the whole find at once. Surely they had to know it would lower the prices realized of the consignment. I would find it dubious that the decision to grade them all at once was rooted solely in a legal determination and not, at least in part, to the publicity garnered from the "Black Swamp Find."

[CobbSpikedMe]

Can someone please help me with this.

The family had 700 high grade cards. Auctioned off 37 of them for over $500K. And they still have 640+ cards left. Is this correct?

I'd be pretty stinking ecstatic if I were them if this is the case.

[Peter_Spaeth]

So Jeff, your approach would have been to withhold material information from the initial round of bidders about the true card population, let them bid it up to levels reflecting a 1 pop, and when faced later with the inevitable charge that you manipulated the winning bidder into overpaying by many multiples, say tough luck?

[calvindog]

I think first I would have been mostly concerned with maximizing the profit for my consigner rather than using the Find as free publicity to garner future consignments.

And I don't think I would have auctioned them off in the chronology of how Heritage handled it. Considering how Heritage handled announcing that it bids on its own lots I suspect they have plenty of lawyers who give them legal opinions on how to run their auctions. I don't think the determination on how to announce the Black Swamp Find was based solely on a legal determination.

[Peter_Spaeth]

Jeff, you are sort of side-stepping the question by saying what you would not have done. What would you have auctioned first, and what would you have disclosed, if anything, about the rest of the cards from the find at that point.

[Runscott]

Originally Posted by benjulmag

But isn't that why business ethics is taught in business school...

Haha - I got my MBA before business started pretending to have ethics so I'll have to take a guess as to what you're talking about:

Business Ethics = maximizing profit without doing anything so illegal that you can't get out of it.

[Runscott]

Originally Posted by CobbSpikedMe

Can someone please help me with this.

The family had 700 high grade cards. Auctioned off 37 of them for over $500K. And they still have 640+ cards left. Is this correct?

I'd be pretty stinking ecstatic if I were them if this is the case.

This is simple math: just have the remaining 640+ re-graded until the new estimated value covers what was lost from selling the first 37.

[calvindog]

Honestly it's hard to say without researching whether or not facts withheld are material. But considering Heritage bids on their own lots and buried it in paragraph 21 of its rules, I suspect they have some pretty aggressive lawyers. Of course I'm not suggesting that their paragraph 21 is illegal.

[calvindog]

Originally Posted by Runscott

Haha - I got my MBA before business started pretending to have ethics so I'll have to take a guess as to what you're talking about:

Business Ethics = maximizing profit without doing anything so illegal that you can't get out of it.

LOL basically. I like the pipe dream, however, that business ethics and baseball card auction houses are not mutually exclusive. Considering Corey's history he's clearly an optimist.

[GasHouseGang]

I don't know about the legal arguments. However, I'm sure the family wanted to receive money from these cards now rather than later. All of the family members look to be a bit older. It would take a considerable amount of time for them to slowly sell off 600+ cards over multiple auctions. It seems it would have made more sense for them to offer the cards as a group to the auction house for say $1.5 million. Since they had estimated the value of the collection at around $3 million they would still be getting a deal. Let the auction house take the risk and do the work of slowly selling these off over the next 5 years while the family divides up the money and gets on with their lives.

[atx840]

SCP did the same thing with the 42 red Hindus and 2 t210 Jackson's, not on the same scale but I'd think they could have easily kept the find quiet and auctioned them off slowly over a few years. I'm sure the publicity and bragging rights had a big part of it.

[bijoem]

Originally Posted by Leon

When I spoke with the executor of the estate one of his main concerns was for transparency with this find. He made it very clear to me that he didn't want hobbyists to get burnt by releasing some cards very slowly. I thought that was very classy of him and it was indicative of our conversation and the way the family is. I believe they were happy with the bidding where it was when the live bidding opened. Sure, everyone hopes to get more for the valuables but there are actually some kind and good people in this world. I wish our hobby was so nice sometimes. Sometimes it's not about going for the jugular it's about doing the right thing.

that is awesome to hear.
very cool perspective they had - and nice of them to want transparency.

[Matthew H]

Originally Posted by CobbSpikedMe

Can someone please help me with this.

The family had 700 high grade cards. Auctioned off 37 of them for over $500K. And they still have 640+ cards left. Is this correct?

I'd be pretty stinking ecstatic if I were them if this is the case.

500K Doesn't include the green ones auctioned today, just the first two lots.

I think the only obvious mistake here is Heritage thinking they could get a million dollars for a partial set of e98's. I'd like to know their logic behind that estimate.

[botn]

Originally Posted by calvindog

So the Mastro indictments are a witch hunt?

When certain people are targeted to the intentional exclusion of others, it just seems like a witch hunt. Obviously I am in the minority of those who feel this way.

As an aside, I am not dismissing shill bidding as a problem but the more rampant and detrimental issue facing the hobby has always been the sliced up, recolored cards in high grade holders and the grading companies who have decided to look the other way.

[calvindog]

Dude, it's all bad, I agree. But the Feds don't have the resources to investigate every shop. And taxpayers can't afford to regulate the industry. I'm a criminal lawyer who fights the government at every turn but I have to say how appreciative I am of any law enforcement effort to clean up the hobby. And there have been some major efforts by a select few people.

[wolf441]

Originally Posted by Leon

If cows shi* butter we wouldn't have to churn.

If my uncle had boobs he would be my aunt.

Good thinking Leon!

WTT: 1 butter shi**ing cow for E98 Wagner. Condition not important (in regards to the cow, not the Wagner)...

[T206DK]

Originally Posted by calvindog

Honestly it's hard to say without researching whether or not facts withheld are material. But considering Heritage bids on their own lots and buried it in paragraph 21 of its rules, I suspect they have some pretty aggressive lawyers. Of course I'm not suggesting that their paragraph 21 is illegal.

Jeff has a great point. I thought most members on this board understood Heritage bids on their own lots. I'm pretty sure it has been brought up before

[bbcard1]

As someone who is in the business, I can attest that attention whoring is fun, but often not profitable. They got the find on the Today Show and stuff, but while it is interesting to a lot of people, the real market is rather thin. I added a great card to my collection today and while my friends at the office were happy for me and at least feigned interest, none of them would have given a $20 bill to own it.

[tbob]

Three thoughts now the dust has settled:
1) I am going to patiently wait for the singles to eventually be released because I think the prices are going to be lower than initially thought.
2) Prices for low and middle grade E98s will stay relatively stable because of their scarcity in general. I know that there will be some collectors who buy the Swamp Find E98s to upgrade and release the lower graded condition ones to the collecting public, but it may be that people buying the SF cards are investors or collectors who don't have E98s in their collections.
3) The E98 Lajoie card bears watching. Not one single Lajoie found among the 700 Black Swamp E98s and Lajoie was a tough card anyway.

[Matthew H]

Tbob, there was only one SF Matty too.

[ls7plus]

Collectors and investors are not mutually exclusive categories, and there's always some hard feelings as fallout when a large find of what was formerly a scarce to downright rare item occurs. Reminds me of the Dormand Gil Hodges I bought in NMt in the early-mid '90's for $400 or so, when only about 3 dozen were thought to exist, mostly in much lower grades. Then the Dormand estate comes up with 1200+ in NMt/Mt which Gil apparently simply forgot to pick up! Instantly, my $400 item is worth $40-$50--maybe!!! Unfortunately, that's simply the risk the collector who is also concerned with value and potential appreciation takes.

As a fellow lawyer, I do agree it would have been a fraudulent representation to have marketed just a very few of these at a time, representing them as extreme condition rarities, while knowing that was not in fact the case. But like anyone elses,' lawyers' opinions vary from one to another. That's why the judiciary system is there for civil cases.

Best,

Larry

[bh3443]

I hope all my Net 54 friends are enjoying the National. I want to thank my pal Mr. Fowler for those great photos!
Our member Frank Barning sent me an interesting link for a good opinion on the Black Swamp find. Check out Keith Olbermann's blog (Baseball Nerd) for his insight into the find as well as his feelings on this particular issue.
I want to thank Frank for linking me to Keith's site, as I have read every single blog from start to finish. The Baseball card content is truly amazing and his Baseball blogs are great, too.
I truly hope you all enjoy the weekend at the show (and for those of us at home we're enjoying it on here!). Have a safe trip home everyone!
God Bless,
Bill Hedin

[tbob]

Originally Posted by Matthew H

Tbob, there was only one SF Matty too.

Matt- I missed that. Matty has always been a toughie too. Interesting that in 700 cards there are no Lajoies and only 1 Matty....
With so many of the SF cards being red backgrounds, and with the red Lajoie being almost impossible to find, I guess it makes sense that no Lajoies surfaced although you would have thought a green Lajoie would have reared its head.
tbob

[David R]

Originally Posted by Matthew H

How is "this is the only high grade example" truthful here? There were 700 high grade examples found. They could've stretched the truth by saying "This is the only highly graded example" if they only graded one in the find. Thankfully, since they weren't "in" the hobby, the odds of them being scumbags was lower then we're used too.

"this is the only highly graded example" was my example of an affirmative statement that would be untruthful when selling these cards and could be considered fraudulent. But if the seller doesn't make any untruthful statements about the cards and doesn't answer any questions untruthfully, there is absolutely no affirmative duty to disclose to a buyer that you have a lot of other high grade examples of the card you are selling.

We are talking about an arms length transaction between two third parties. There is no special relationship between the buyer and seller that would give rise to any affirmative duties of disclosure as far as I am aware.

[benjulmag]

Originally Posted by calvindog

I think first I would have been mostly concerned with maximizing the profit for my consigner rather than using the Find as free publicity to garner future consignments.

So the key thing is to legally maximize the profit for the consigner? Then why is it wrong for an auction house to place house bids on lots? Doesn't that maximize the profit to the consigner by giving them the benefit of one extra bid? Can't you see the inconsistency in your argument, as well as the hypocrisy?

[calvindog]

Originally Posted by benjulmag

So the key thing is to legally maximize the profit for the consigner? Then why is it wrong for an auction house to place house bids on lots? Doesn't that maximize the profit to the consigner by giving them the benefit of one extra bid? Can't you see the inconsistency in your argument, as well as the hypocrisy?

As long as there are no misrepresentations to the bidding community is all I said. As David pointed out above, if the cards were marketed as "the only high grade card in existence!" then it is misleading. What is hypocritical is your pointing out how ethical Heritage is by its poor handling of the Black Swamp Find due, according to you, to its strong ethical considerations -- but ignoring the seeming lack of ethics by Heritage of burying the fact that it bids in its own auctions and hides that info in paragraph 21 of its rules section.

[Pat R]

It seems that some people are confused on what was sold in the auction.
Go to the share your national photo's thread, post #17 by gashousegang
and watch the youtube link he has, none off the BSF cards you see in
the display cases (there are two of them at the PSA booth both with about the same amount of cards in them) were in the HA auction. I was at the
show and to see that many in that condition was amazing.

[Leon]

The card lots were 1 card (Wagner), 27 cards *(high grade near set) and 9 cards (different colors). A total of 37 cards were sold. There are still over 700 left to the best of my knowledge. I have communicated more with a few of the family members SINCE the auction was over. The family is happy with the prices so far. As I have said, and this is being reiterated, this family is freaking awesome. They actually care about people. In determining what to do they have even been concerned about how others' collections will be affected. I think Heritage has done a fine job with they way they have been handled. I have not seen more media coverage of any find since I have been in the hobby, a scant 17 years ago. As auctioneers all we can do is bring the cards to market, do the best we can to advertise them to everyone interested, and let them sell. One going sentiment has been to wait and see where they end up, value- wise before buying, which is absolutely a reason the cards haven't soared. There are just so many. But, the family is taking the high road. It's a great feel good story and one that the family is having a ton of fun with. Quite honestly, any person would be lucky to have a family like this one. Good things will continue happening for them, I am sure.

[benjulmag]

Originally Posted by calvindog

As long as there are no misrepresentations to the bidding community is all I said. As David pointed out above, if the cards were marketed as "the only high grade card in existence!" then it is misleading. What is hypocritical is your pointing out how ethical Heritage is by its poor handling of the Black Swamp Find due, according to you, to its strong ethical considerations -- but ignoring the seeming lack of ethics by Heritage of burying the fact that it bids in its own auctions and hides that info in paragraph 21 of its rules section.

Material omissions are as much acts of fraud as are material misrepresentations.

Also, when did I say anything about the practice of an auction house bidding against its own customers? For the record, I am against such a practice as I don't believe an auction house should be wearing two hats. I'm simply pointing out the inconsistency and hypocrisy of you criticizing them for not maximizing the return to the family that consigned this find, while simultaneously criticizing them for maximizing it through the practice of house bidding.

[Runscott]

Originally Posted by Leon

But, the family is taking the high road. It's a great feel good story and one that the family is having a ton of fun with. Quite honestly, any person would be lucky to have a family like this one. Good things will continue happening for them, I am sure.

+1 ...and... like

There are people like them out there, but for those who don't think/act like they do, it's probably tough to believe. I wish I were more like the Black Swamp people.

[Peter_Spaeth]

Originally Posted by calvindog

As long as there are no misrepresentations to the bidding community is all I said. As David pointed out above, if the cards were marketed as "the only high grade card in existence!" then it is misleading. What is hypocritical is your pointing out how ethical Heritage is by its poor handling of the Black Swamp Find due, according to you, to its strong ethical considerations -- but ignoring the seeming lack of ethics by Heritage of burying the fact that it bids in its own auctions and hides that info in paragraph 21 of its rules section.

Fraud by font?

[ullmandds]

Are the final auction prices available...or is this hidden info????

[David R]

Originally Posted by benjulmag

Material omissions are as much acts of fraud as are material misrepresentations.

Also, when did I say anything about the practice of an auction house bidding against its own customers? For the record, I am against such a practice as I don't believe an auction house should be wearing two hats. I'm simply pointing out the inconsistency and hypocrisy of you criticizing them for not maximizing the return to the family that consigned this find, while simultaneously criticizing them for maximizing it through the practice of house bidding.

Actually "material omissions" are not fraud unless you have some duty to disclose the facts. You might have such a duty if other things you have said would be misleading without further disclosure but absent an untrue or misleading statement or some special relationship with the buyer, there is no duty to disclose a fact like this (i.e., that you found a lot more of these high grade cards). In any sale, there are lots of facts the buyer or seller would want to know that would affect the price. We may think it's nice that the family left a lot of money on the table by having/letting Heritage disclose the existence of the other cards in the find, but it would not have been illegal or unethical not to have made such disclosures. Personally I think it was foolish but I understand why others feel it's admirable.

[CW]

Originally Posted by Runscott

+1 ...and... like

LOL! A +1 and a like? Now that's agreement!

See, but you did follow up with a cool insight, and in interesting reflection on your life's wishes, which, imo, added to the discussion....

Originally Posted by Runscott

There are people like them out there, but for those who don't think/act like they do, it's probably tough to believe. I wish I were more like the Black Swamp people.