Heritage Live Auction -- Black Swamp debacle

[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]

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]

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.

[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 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."

[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.

[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.

[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?

[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.

[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.

[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.

[E93]

They sold about 5% of the cards for a half a million dollars. Heritage estimated the whole group was worth 2-3 million dollars. My guess is they are about right.
JimB

[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.

[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.