Mastro consignors not paid yet?

[Leon]

Since I am in discussions and contemplation about the immediate future of the Legendary Banner ads, which at this time have been pulled, I need to hear from any board member that has not been paid from Mastro, asap. This is nothing formal at all but I want to see the extent of members not being paid and seeing if we/I can help. I know Gary N has gotten help so far. Doug has promised to help consignors still due money, but doesn't have all of the consignor information from Mastro. Depending on several factors we will make a decision to have their banner back in the rotation or not. I realize the sentiment about not wanting the banner there but it's mainly due to people still being owed money, from what I can tell...which I am in complete agreement with. Please send responses to leonl@flash.net.. Thanks much.....

[three25hits]

Its a shame you have to do this Leon, but I am sure that those who are owed money are thankful you're willing to help.

I hope your efforts are successful.

[barrysloate]

My two cents:

While I do not believe the principals at Legendary have made a conscious decision to not pay consignors, the way they have launched their new business is nothing short of stupefying. On the one hand they apparently had consignments left over from Mastro that they wanted to sell; on the other hand they were not in a financial position to properly conduct business. While I am certain bidders will still participate in their auctions if they see something they need, consignors will surely look elsewhere to place their material. I find this whole thing unfathomable.

[calvindog]

Originally Posted by barrysloate

My two cents:

While I do not believe the principals at Legendary have made a conscious decision to not pay consignors....

Really? Is there a scintilla of evidence (other than self-serving statements) that this is not the case? Who decided not to pay consignors?

[barrysloate]

I am speculating, and I have to assume they have some financial issues. Do you think their business model is to not pay consignors? If it is, that is plain psychotic.

[calvindog]

Barry, at that rate you'll never be a character witness for the Mastr--woops--Legendary guys when the time comes.

[barrysloate]

And that will suit me fine!

[Knuckles]

I really appreciate what you're doing here as it has been just plain wrong to have not received payment yet. An e-mail has been sent to you Leon.

Thank you,

- Garret

[Exhibitman]

There is no real difference between Mastro and Legendary. Silk Road Equity owns them both and simply pulled off a paper shuffle and rebooted Mastro as Legendary. Lazy bastards even used the same promotional language. If you want to ask who is to blame, you need look no further than one rung up the Legendary/Mastro corporate ladder. Similarly, if the powers that be over there wanted to do the right thing for the consignors, they could. The fact that they haven't, that they were perfectly happy to consign their consignors to the "go pound sand" category until and unless someone bitched loud enough to force their hands, tells me that they are not to be trusted. They will never, ever get another consignment from me no matter how many times they relocate their offices and rename their business.

[daviddbreadman]

Barrysloate you are right on in your post #3 in this thread. Your words describe things exactly. It simply makes no sense. I just don't know what they were thinking. I agree that they are not purposely trying NOT to pay people but instead think that they are 1) too dumb to recognize its importance, 2) unable to pay at this time for cash flow reasons 3) too focused elsewhere.

Nevertheless its the worse business decision they could have made.

People will definitely buy from them, no matter what they say to the public. Lets face it if you want the card and its there you'll bid. But WHO will consign to them?

[autograf]

I think maybe they though the problems of Mastro were the problems of Mastro and they could avoid them in the new endeavor but the consignors of Mastro are/would be the consignors of Legendary and the bidders would be the same, so it's hard to divorce themselves of the issues from Mastro. With Silk Road Equity still involved, it gives us all reason to pause a little too. If it'd been the way it was with Mastro, then Doug, Ron & Brian 'bought the assets' and started Legendary with SRE completely out of the picture we could suppose that they were really looking to move forward away from the past though. It's just basically the same minus Bill Mastro at a different physical location with a different website. So....time will tell. I agree with Barry that it'll be tough to get quality consignments going forward. Without consignments, no bidders, no auction. Hopefully, they can right the ship from the Mastro debacle to get the consignors and bidders back on their side. At one point, we all know what Mastro was....we consigned, we bought, we paid, we got paid, we got the goods. It was a pretty well-oiled machine. I think Doug, Brian & Ron will get that back at some point. They just have to take care of the people like Gary but that clouds the issues of the transition a little though, doesn't it? If they are taking care of the obligations of the former entity, that ties them just a little bit more TO it. Don't know. Tough situation for everyone involved......hope it works out.

[oldjudge]

As I understand it there is more to this than has come out on the board so far. From what I have heard, the reason that Mastro Auctions has not yet paid all consignors is that they are owed significant amounts from certain well respected people in the hobby. When these funds come in the consignors can be paid. Without going into names, supposedly two people owed Mastro Auctions about $400,000 each. In at least one case I have heard the matter is being litigated.

[autograf]

hmm......that's a chunka change.......you'd think if someone owes you $400K, their 'well respected' status might be in jeopardy....

[calvindog]

I see. So consignors will have to wait to get paid until after two years of litigation, unrelated to the consignments which were sold and paid for, is completed? Nice.

[barrysloate]

I knew about this fact but I was told it in confidence. I agree with Jeff that Legendary can't wait until these matters are litigated before paying all their consignors. They have to find a way to get some cash quickly.

[slidekellyslide]

Originally Posted by oldjudge

As I understand it there is more to this than has come out on the board so far. From what I have heard, the reason that Mastro Auctions has not yet paid all consignors is that they are owed significant amounts from certain well respected people in the hobby. When these funds come in the consignors can be paid. Without going into names, supposedly two people owed Mastro Auctions about $400,000 each. In at least one case I have heard the matter is being litigated.

Did these 'well respected' people receive their winnings without paying?

[barrysloate]

Well, if Legendary didn't send the merchandise to these well respected collectors, then they wouldn't be having financial problems. Sounds like they apparently did.

[calvindog]

How about this for a business model:

1) consignors give cards to auction company;

2) cards are auctioned off;

3) cards are paid for by the winners;

4) fees are deducted;

5) remaining money is immediately sent to consignors; and

6) auction house fees are used to pay for auction house expenses.

I think this business model works pretty well.

Notice that I eliminated some of the more pesky, troubling steps such as shill bidding, price guarantees to certain consignors, self-dealing, knowledge of ceiling bids by auction house principals and employees, undisclosed restoration and altering, fake winning bids which give the appearance that a lot is sold when in fact it is not, permitting auction house principals and employees to place initial bids on an item during the extended bidding period, lies about checks being in the mail, and finally repeated haughty and false claims of innocence on public chat boards.

[Rob D.]

I notice your business model makes no mention of shipping costs and packing tape.

[oldjudge]

Barry, Jeff--Don't get me wrong. I'm not trying to defend what has been done. I'm just pointing some things out that have not been mentioned so far. I think what has happened is horrible and do not condone any of it. I also think it was a mistake for Legendary to start up before all consignors of Mastro were paid off. They would have a much better chance of success if this cloud were not hanging over them.

[Peter_Spaeth]

Jeff, who would consign to an auction house run that way?

[Leon]

It's kind of hard to compete when we have to use your business model. Scott and I have high level meetings planned to discuss.

[barrysloate]

Leon- you're approaching your 500th post. Time for a celebration!

[calvindog]

Originally Posted by Peter_Spaeth

Jeff, who would consign to an auction house run that way?

Fair point, Peter. When fraud is being committed against the buyer in order to inflate auction prices, the sellers are happy. Unfortunately, when the auction house starts to rip off the sellers too, then auction houses with traditionally great consignments start to have auctions with just crap in them. And sometimes even the crap doesn't sell or gets pulled at the very end of the auction.

[jmk59]

Originally Posted by calvindog

I see. So consignors will have to wait to get paid until after two years of litigation, unrelated to the consignments which were sold and paid for, is completed? Nice.

Unless one of the people that owes them so much money were to declare bankruptcy. Then it wouldn't even be two years. The whole thing might cave in if it's teetery enough now.

[illini805]

What is amazing to me is that there are still people that are probably consigning to them as we speak. Unreal.

[talkinbaseball]

Leon:
I think oldjudge summed it up the best, they should've paid off everyone first before ever starting again.They would've gained alot of respect for that.
-john-

[Exhibitman]

Is to keep all the affected consignors in the dark about what happened. Say they really did suffer a rash of renegs, they would still have these options:

1. If the item has not shipped, (a) give it back or (b) get the permission of the consignor to offer to the underbidder.

2. If the item shipped w/o payment, 'fess up and tell the consignors.

Legendary is where it gets really twisted. If Mastro shipped w/o $ in hand seems to me that you could get law enforcement involved in perhaps going after the reneggers for fraud. Failling that, at the least, they could file suit and seek to grab back the items or other property to satisfy the debt via a writ of attachment (that's what they call it in CA). If they are really dealing with "whale" deadbats, it wouldn't cost much, relatively speaking, to pursue a writ. Since any collections attorney could readily do just that for a creditor client very quickly in a case, my assumption is that there is a secondary reason for not--perhaps not wanting to permanently wreck "important" trade relationships with potential contacts for Legendary.

No matter how many ways you slice it, it is still a turd casserole...

[Jim VB]

Adam,

I'll bet it's not as simple as that. What if these so called "dead-beat renegers" were also consigners. They may owe Mastro for lots won (which should have never been shipped) but they may fear that if they pay for their winnings and Mastro defaults, they won't be paid for the lots they sold. They may be looking for a way to net out the balances owd and due.

There was only one time that I consigned some things in an auction and won some things in the same auction. Because I trusted the auctioneer, I did not ask them to net out my balance. I wrote a check for my winnings and waited (a short period of time) for them to cut me a check. But the amounts were relatively small, both ways. I might have felt differently had the dollars been in the hundreds of thousands and the rumors been flying that the auction company was on shaky ground.

[bijoem]

I'm not so good at understanding law and ethics in the auction industry.....

if bidders shaft an auction house....
that gives the auction house the right to shaft anyone they owe money to?


I know in most any other industry....
if a company gets shafted, they still have to pay their suppliers and meet their financial obligations.

[sb1]

in reference to Jeff's post on page 2, we at B & L already follow the easy to use business plan. Invoices are sent out within 24 hours, winnings are shipped within 1 week in most instances, consignors are ALWAYS paid exactly 14 days from the auction ending, they always pay ZERO commission and Leon and I get whats left after all the bills are paid and the smoke clears.

It's really simple.

Scott

[Peter_Spaeth]

Likely not a matter of ethics -- they simply may not have the cash depending on how much they are owed.

[calvindog]

Either way, that doesn't sound like they're offering "peace of mind" to consignors. More like litigation, bounced checks and false promises.

[Adam]

Originally Posted by barrysloate

While I am certain bidders will still participate in their auctions if they see something they need . . .

I love the use of the word "need."

[barrysloate]

Adam- you know that most collectors are junkies...the good kind, of course.

[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.

[calvindog]

What about personal loans by the Mastro principals to the company to cover the short term cash flow problems? Couldn't that be done? Why should consignors bear the brunt of Mastro's incompetence instead of the owners of the company?

[Exhibitman]

Mastro's silence towards its consignors is inexcusable. Look, we all know that the economy melted down last year and we are all feeling that pinch on one way or another. I have been doing a lot of collections, workouts and modifications for my clients cutting both ways (creditor and debtor). The most important factor in all of these situations is communication. If I do not hear from a debtor I must assume that the debtor has the money and is not paying for some reason. It would not surprise me if some bidders defaulted on Mastro. That does not give Mastro license to default on its consignors, to lie to them, or to ignore their inquiries. What they needed to do at the outset was to come clean with the consignors about those situations.

Now let me tell you my theory: Mastro violated a basic tenet of a consignment (bailment) business--placing its consignors at risk by favoring large bidders with prepayment shipment--and the powers that be over there have been advised (accurately) that if they admit to doing so they will be sued, personally, for intentionally breaching their duties to their consignors. Not disclosing a policy of shipping items without payment is called fraud: concealment of a material fact from a person in order to induce action. And it was a very material omission: would anyone here ever have signed a Mastro consignment agreement if it had stated that they have the right to ship your item to a buyer without receiving payment for it? Of course not, so it remains a dirty little secret. So, they choose to ignore the consignors they feel it is safe to ignore, hope that they can collect on the bad bills, and figure that if they don't guys like us will not bother to sue them.

Again, if it was me, I'd sue Mastro and its chief henchmen immediately and start taking depositions. Then we'd get to the bottom of things--or we'd get a lot of 5th Amendment pleading.

But I'm a professional cynic, so what do I know?

[jmk59]

nm

[RichardSimon]

"I'd sue Mastro and its chief henchmen immediately and start taking depositions."

I would be first in line to buy tickets when the Mastro principals get deposed,,, how sweet.
We can call it "The Revenge of Bill Daniels"

[bijoem]

Likely not a matter of ethics -- they simply may not have the cash depending on how much they are owed.

I respectfully disagree.

How this handled now, and ultimately handled in the end has a lot to do with ethics and character.

[Knuckles]

What makes me most angry is that my consignment was sold and paid for and rather than paying me (after taking 15%) they used the money else where.. paid other consignors with that money.. whatever..

I don't understand how they got screwed out of $400+k. Why would they ship the items to the winner without getting paid first?

- Garret

[LOUCARDFAN]

What I find troubling is that one of the larger consigments I made with Mastro (multiple lots with a total value of $75k+) I was paid in a couple of installments. I received one payment 30-40 days after the auction with a breakdown of the lots that I was being paid for. These were lots that Mastro had been paid for. I was not paid for two lots because the winners had not yet made payment to Mastro. Those two lots sold for $22k and $4k. It stated on the breakdown that Mastro had not been paid for those lots and approximately two weeks later I received a check for those two remaining lots.

If the problem is that they are waiting on money from winning bidders then why would they not just communicate with the unpaid consignors and state that they have not been paid for those lots? The only unpaid consignors should be the ones where those consigned lots have yet to be paid by the winning bidders in those auctions. They should never mix the monies together. Mastro should only pay consignors of those lots that have already been paid for.

Those unpaid consignors should have the right after this long of time to get their consignment back or at least be offered to the underbidder. If these items were sent to the winning bidder before payment had been made then shame on them and they deserve everything that is coming down on them.

The winning bidder holding these items could arrested for theft by deception but since Mastro basically sent these on "credit" terms this could be construed as a civil matter which makes it much more difficult when no jail time is in play.

[Exhibitman]

I retrieved one of my old Mastro consignment agreements today to see whether it said anything about sending out my stuff on spec. Not surprisingly, there isn't a word in there to that effect. In fact, the agreement has this gem:

"If any Buyer does not pay us for any Memorabilia within sixty (60) days after the end of an Auction, you have the option to withdraw the Memorabilia and have us return it to you, at your expense, or you may leave the Memorabilia with us for placement in another Auction."

So, not only did Mastro NOT inform consignors that it had the right to send their stuff out without payment, they affirmatively represented to the consignors that if the item was unpaid for 60 days, it could be reclaimed. By definition, if the item could be reclaimed from Mastro by the consignor after 60 days, Mastro had no right to send it to a bidder without payment first being received by Mastro. Therefore, any item that was not paid for should be in Mastro's possession. If it is not and the consignor is unpaid, it means one of three things:

1. Mastro was paid for it and then misappropriated the funds;

2. Mastro was not paid for it and knowingly sent out the item despite having expressly represented to its consignors that the items would still be there if the items were unpaid after 60 days; or

3. Mastro had the items and transferred them to Legendary when Legendary "bought" the assets, and Legendary has them. I bring up this possibility only because we all know of consignors to Mastro whose unsold items were summarily transferred to Legendary and auctioned off by Legendary.

I don't know what happened, but I have a very strong suspicion that Mastro operated much like a giant confidence scheme in which it allowed certain privileged clients to have items without payment, hence the need for the minimum 45-day float between auction close and payment to consignors so that those bidders could resell and pay off. All the risk of loss was shifted to the consignors instead of on Mastro.

No matter how you slice this turd, it still stinks.

[slidekellyslide]

I think somewhere along the line they started robbing Peter to pay Paul...they also placed too much trust into big customers...this probably was no problem while the economy was humming along. I'm guessing this will eventually go to court and the full story will come out.

[Leon]

Mastro Auctions, Inc. v. Fisher

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Plaintiff:	Mastro Auctions, Inc.
Defendant:	William Fisher
Case Number:	1:2008cv06108
Filed:	October 24, 2008
Court:	Illinois Northern District Court
Office:	Contract: Other Office [ Court Info ]
County:	Du Page
Presiding Judge:	Honorable George W. Lindberg
Nature of Suit:	Contract - Other Contract
Cause:	Diversity
Jurisdiction:	Diversity
Jury Demanded By:	28:1391 Personal Injury
Amount Demanded:	$113,000.00

[oldjudge]

Leon--What does this mean? Do you have any idea what the case relates to?

[Leon]

I am just guessing that by the looks of it Bill Fisher, previously aka Yorkstown on ebay, allegedly owes Mastro money? I have done (a few years ago) a couple low 5 figure deals with Bill and never had an issue...

[Kenny Cole]

It was basically a breach of contract action by Mastro against Mr. Fisher. According to the complaint, he bought $466k or so of items in the April 2007 auction and failed to pay for $112,000 of them. The case was dismissed without prejudice in February of this year, apparently because the defendant filed bankruptcy.

[oldjudge]

This auction business is a mine field.