[benjulmag]

Before I give it, I want to make clear that in no way am I condoning shill bidding or any illicit activities.

Let's talk about prudent business models for ANY business. Businesses typically have lines of credit that they continually tap into. When those lines are withdrawn, ANY business can be without notice thrust into survival mode. I'm in the real estate business. The bulk of my tenants are retailers. With the current credit crunch, I can't overstate how many of them lost their lines of credit and are struggling to survive (and in the process either pulling out of deals or coming to me demanding rent concessions). So what does this have to do with Legendary Auctions? As someone mentioned some time ago in a previous thread, my strong suspicion is they lost their line of credit. Their ability then to borrow against it to pay consignors or cover shortfalls from nonpaying debtors went out the window. When this happened they were holding many consignments for their next auction. Yes, they could have returned the consignments and gone out of business. Or they could have tried to survive by keeping the consignments and continuing as a going entity (under the Legendary banner). They chose the latter and here we are. Almost certainly they have no line of credit. Too I believe what Jay said is correct -- they are owed substantial sums from people who based on reputation and past dealings they had every reason to expect would pay them in timely fashion (which had that happened all consignors would have been timely paid).

Yes, one can argue that a consignor's right to be paid on time should not be subject to the ability of an auction house to properly assess the credit risk of anyone they lend money too. Also one can argue that excessive reliance on a line of credit can be very risky and can cause survival issues if it is unexpectedly pulled. But the point is that many many businesses in all fields operate in similar fashion, and the cash flow problems Legendary is currently having are quite typical in today's unprecedented recessionary economy. I strongly suspect Doug Allen is well aware of the need to as quickly as possible pay his consignors, and that he understands the implications to his company's survival prospects by them remaining unpaid. While I hold no crystal ball as to what the future holds, I'd be surprised if they were not paid in the not-too-distant future.