Heritage Live Auction -- Black Swamp debacle

[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.

[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.

[Peter_Spaeth]

Originally Posted by David R

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.

Yes, that's the standard, but in my view it would be very difficult to say anything at all about the cards that wouldn't be misleading if it omitted this clearly material information. And if you said absolutely nothing, surely you would get inquiries anyhow. EDIT TO ADD And even if a good lawyer could successfully make a "no duty to disclose" argument, such as one sometimes sees in securities fraud cases, it's still a lousy business practice for an auction house to conceal material information about a card, and it would not have served Heritage well down the road.

[calvindog]

Corey, my point is that an auction house which clearly is concerned with maximizing its sales numbers by bidding on its own lots and burying this information within a paragraph 21 of its rules is clearly one that is concerned with one thing, and one thing only: maximizing its sales numbers. Very few people on this board believes these practices are ethical.

To suggest then that the same auction house IS ethical due to its handling/marketing of the Black Swamp Find is, with all respect, a bit hard to swallow. Heritage marketed this find with one thing in mind in my opinion: to maximize its chances of getting more consignments in the future. All those TV shows, newspaper stories, etc. did not drive the price of the cards up -- it served instead to get more free publicity for Heritage. My criticism was simply that if this auction house is looking to drive up its numbers it should do so for the consigners first -- instead of for itself.

[Peter_Spaeth]

Originally Posted by calvindog

Corey, my point is that an auction house which clearly is concerned with maximizing its sales numbers by bidding on its own lots and burying this information within a paragraph 21 of its rules is clearly one that is concerned with one thing, and one thing only: maximizing its sales numbers. Very few people on this board believes these practices are ethical.

To suggest then that the same auction house IS ethical due to its handling/marketing of the Black Swamp Find is, with all respect, a bit hard to swallow. Heritage marketed this find with one thing in mind in my opinion: to maximize its chances of getting more consignments in the future. All those TV shows, newspaper stories, etc. did not drive the price of the cards up -- it served instead to get more free publicity for Heritage. My criticism was simply that if this auction house is looking to drive up its numbers it should do so for the consigners first -- instead of for itself.

Huh? Auction houses attract more consignments in the future by getting high numbers for their cards, not merely by what they have for sale. I don't follow your logic here. How was it in Heritage's interest not to maximize value?

[calvindog]

You'd have to ask them. But what I do know is what the point of appearing on television shows and giving dozens of newspapers interviews about the Find was -- to get more future consignments. And the publicity may have made up for inferior numbers from the sale of those cards.

[sycks22]

Confused how by getting national attention to a product it will diminish the price? Goodwin had national attention on his SGC 40 Wagner and it went for a record price.

[benjulmag]

Originally Posted by David R

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.

I'm going to have to politely disagree with this statement as I do not see how Heritage could have in any meaningful way written up this find without mentioning the extraordinary condition of these cards in comparison to the extant population. Omitting that information would be such a conspicuous omission to an experienced collector to as a practical certainty result in someone asking Heritage if there were more cards in the find. If Heritage does though make the comparison IMO they are exposing themselves to legal exposure for failure to disclose material information. Taking all this into consideration along with the public pounding failure to disclose will generate, I believe disclosure was the correct business decision.