The FBI & Fraud Cases: Slam Dunks Required

[marzoumanian]

It has been 17 months since the FBI visited the National Sports Collectors Convention in Chicago and issued subpoenas to online auction house PWCC and a number of card dealers. It's looking into allegations of altered slabbed cards. No one knows where this investigation stands today and the FBI isn't updating anyone, as usual. But last September The Detroit News released an FBI search warrant affidavit used to justify a raid on Don Henkel's home in Traverse City, Mich.
Who's Don Henkel? And what's the connection between this affidavit and the alleged altered slabbed cards inquiry? It's all about understanding the FBI's process and how it applies to any of its fraud investigations.
PWCC, a major online auction house in the trading card industry, was one of those subpoenaed, based on evidence that slabbed cards sold on its website had been altered. It quickly hired Jeffrey Lichtman, a collector of baseball cards himself, as its attorney.
Seventeen months have passed since then and silence rules. What’s going on? The FBI doesn’t discuss ongoing investigations. But I believe this one will continue for some time. Why am I so confident?
First and foremost, there’s the evidence that has already been gathered by the sleuths at Blowout Cards forum. The work that they’ve done on outing altered slabbed cards (with accompanying photographic evidence) on their website is admirable and eye-popping. I believe the FBI saw this and said, “Enough is enough. We have to do something.”
Second, the FBI isn’t going to bother with baseball card fraud totaling $10,000 or even $50,000. In the past few years altered slabbed sports cards have sold for a total of easily over a million dollars. A lot of people have been duped and to this day might not even be aware. The FBI probably concluded the dollars involved were big enough to merit an investigation.
Third, if the FBI has interviewed all the people that they subpoenaed and decided to drop the investigation, I believe the hobby would have heard about it by now what with PWCC’s attorney being Lichtman.
But what brings this case again into focus is an FBI search warrant affidavit published by The Detroit News (TDN) in late September. Last July the FBI used the information it gathered in this affidavit to raid an alleged art and sports memorabilia forging operation run by Traverse City, Mich., resident Donald Henkel. Why is this affidavit noteworthy? Because reading it thoroughly reveals many of the records the FBI has the power to gather. It sheds light on the process. Are records of this kind available from PWCC and anyone else the FBI has subpoenaed in the slabbed card case, including third-party graders and card dealers? The answer is yes.
Let’s detail some of what the FBI can gather:

1) Phone records
2) Bank records
3) Secretary of State records (driver’s license)
4) Tax records
5) Wire transfers
6) E-mails
7) Internet provider records
8) FedEx shipping records
9) Victim’s records
10) Property records
11) Online trade press articles
12) PayPal records
13) “Trash search” evidence

Just who is Henkel? For at least 20 years he has been fooling a lot of people as an alleged forger. So why did it take him so long to be caught? In May 2019 the Hirschl & Alder gallery bought a George Ault “painting” (Henkel specialized in the styles of American artists Ault, Ralston Crawford and Gertrude Abercrombie) from one of Henkel’s partners. But upon close inspection the gallery suspected that it was a fake. It had it scientifically analyzed by pros. It turns out that the materials present in the paints used revealed that the piece couldn’t have been painted when it was dated. Bingo. The FBI had a definitive starting point to build its fraud case.
This also allowed the it to pursue Henkel’s previous dealings in sports memorabilia. One highlight is the sale of Henkel’s Babe Ruth Model 125 bat. This is a good example of how the FBI uses its access to records to prove its cases.
On December 27, 2017, William Eatinger, a popular baseball coach (now retired) in California and a friend of Henkel’s, entered into a contract with Heritage Auctions to sell this Ruth bat in its February 24-25, 2018, auction. It sold for $60,000 with $1320 subtracted from this total for grading fees and commission for the authentication taken out. According to Wells Fargo records, on April 11, 2018, Eatinger received a check from the victim for $52,680. He gave Henkel and his brother (Mark) approximately 85 percent of the sale’s proceeds.
The bat was PSA/DNA-certified. JT Sports authenticates MLB bats for PSA. The analysis notes that the bat lacked a model number and its measurements were smaller than other bats used by Ruth, TDN reports. So was this bat fake or real? The FBI doesn’t say. PSA and JT Sports were contacted about this by email but didn’t reply.
The FBI’s affidavit also reveals that between January 2016 and January 2020 Henkel bought vintage pens from the 1950s through the 1970s, Babe Ruth 1933 and 1949 reprint baseball cards, a baseball bat blank, a 1933-1939 William Harridge baseball, and a Joe Jackson-signed baseball bat.
Even if FBI special agents with expertise in art and sports memorabilia fraud know in their hearts that someone is guilty of acts that are punishable, if they can’t prove it--if they don’t have a rock solid case to bring to a prosecutor--it doesn’t mean a thing. Agents know that prosecutors have to agree with them or all their work is for naught. But if the federal government makes its case, its win rate is extremely high.
Unquestionably the biggest concern the FBI has in these fraud cases can be summed up in three words: statute of limitations. In sports memorabilia/card fraud this is usually five years. I’m sure exceptions exist. But think about this. The FBI accused Mastro Auctions of shill bidding between 2001 and early 2009. It started its investigation in the summer of 2006. If Mastro had had the discipline to stop his illegal activities, cold turkey, as soon as he first heard that the FBI was looking into his operation and started running it clean, he would still be in business today, making tons of money. Remember, he wasn’t indicted until July 2012. The fact that he didn’t stop cheating his customers between the summer of 2006 and February 2009 (when the auction house closed down) was a key component in his demise. It gave the FBI the opportunity to continue to gather records to prove its case.
So, does the FBI have card-altering evidence in this current investigation? Plenty. Does it have enough to make a case that will stick when presented to prosecutors? I have no idea. It must make a slam-dunk. What I can say is if what it went through with the Mastro Auctions investigation is any indication whatsoever, we won’t be hearing a peep for at least another year, if not longer. I’m sure the COVID-19 pandemic has put a crimp in this investigation. But remember: The statute of limitations clock never stops ticking.