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Posted By: Corey R. Shanus

This again might be a point on which we agree to disagree.

Commiting fraud may be a perfectly rational economic decision to make (though ethically reprehensible). Ever see the movie "Class Action"? In it an automobile manufacturer makes a cold-hearted decision not to order the recall of a car with a propensity to explode under certain conditions. The company knew that down the road people would die and they would have significant legal payouts. However, they rationalized that the present value of those payouts would be less than the cost of the recall. So too (though thankfully on a much less morbid scale) with an auction house's non-disclosure policy. The anticipated future legal payout, factoring in the evidentiary problems of proving the auction house knew the card's grading history and the reluctance of people to sue due to the inhibiting legal expense, could be insignificant compared to the hit to inflowing income.

So you see from this perspective one could forcefully rebut the presumption of non-materiality created by industry practice of non-disclosure by establishing the economic rational behind the fraud. And it seems to me it would be one terrific argument. "So please, Your Honor, do not give this greedy auction house a windfall by not imposing on them the legal payment they rationally expected to pay when they made the decision to commit the fraud!"