Mastro/Legendary Article in Today's NY Daily News
 

Without commenting further; it's a real doozy! And note the familiar people quoted in the article.

http://www.nydailynews.com/sports/ba...er.html?page=0

Regards
Rich

"But that is no longer Jim and Liz Murphy's concern. On the morning of June 8, Liz Murphy started repeatedly calling Allen's cell phone, Legendary's main office number and Allen's accountant. The goal was to tie up Legendary's phone lines until the final payment would be resolved. After two or three hours, Allen agreed to send a postdated check for the balance of the account.
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Allen says he decided to write the check to the Murphys not because he was legally obligated to do so but because he wants to resolve his old firm's obligations as quickly as possible."

I don't know why everyone is making such a big deal about this - it seems pretty easy to get your consignment money.

incredible.

One heck of an incredible story. Looks like O'Keeffe has added lots of fuel to the Mastro fire as these people continue to go down in flames. Anybody want to send a consignment to Legendary now???

Legendary Auctions will not survive this. No way.

You would have to be crazy to send a consignment to Legendary Auctions, at least as one of the "little guys". Perhaps the big guys will still be able to do so and Legendary will stay afloat. I don't see them recognizing great prices, however.

I find it strange that the President of a grading company would be actively purchasing massive amounts of collectibles that he couldn't afford. Was it an addiction? It doesn't make any rational sense.

I am sure they did engage in shill bidding, but it might be hard to prove. All in all, it is really sad that it is the "little guys" who did not get paid, as they need the money more than anyone else. Mastro/Legendary is toast. I'm not sure I'd even risk buying from them since they do not seem honest. Will stick to Mile High, SCP, Mem Lane, REA, Goodwin, etc.

Forman seems to get involved in some major hobby lawsuits. I hope he has a half way decent attorney.

I think he does.

I don't think this could possibly get more interesting.

And if, as Doug says, they did everything legally and the obligations of Mastro remain with Mastro, then why is he still involved in making arrangements and trying to pay off Mastro consignors and saying that Legendary wanted to get the Mastro business wrapped up as quickly as they could?

Which is it? If the debts are legally not Legendary's, as they claim, then why the ongoing involvement in those payments?

Go back to Adam's post above about personal liability. That's the only context in which this makes sense.

J

In my opinion this article points out that if Dave Foreman had paid even part of his debt many consignors could be taken care of. Makes me wonder if there is any facet of the hobby that is not tainted.

Too many for my liking!

Can a lawyer answer this: If a judgement is made against Foreman, can cards being held by SGC for grading be attached by Mastro?

If Dave is such an active seller in the hobby, um... what exactly prevents him from making sure that his cards are in the very highest SGC grade possible?

Conflict of interest?

Jay
 

No, for two reasons. One, SGC likely is not an "alter ego" of Dave and could not be held liable for his personal debts, and two, even if it could, SGC doesn't own the cards it holds for grading, they are not its assets.

I think that if Forman was buying cards raw, then that would certainly open it up for speculation. I know he sold some stuff at REA http://www.robertedwardauctions.com/.../2009/280.html, though it explicitly stated that Forman had purchased it on the open market. He probably knows he can't buy raw cards.

That Forman ran up such a debt, failed to pay it when card prices crashed, and apparently had a close friendship with Bill Mastro, known for allegedly shill bidding and card trimming, is disturbing. It's really hard to know what to think. I'd like to think the best of everyone. Those of us who do are bound to be disappointed (but probably happier for it).

:Edited to note that Forman bought the T206 Bresnahan SGC 96 on 12/13/07 - that must have been the date that the trouble started with Forman buying too many cards. That was right before the recession hit.

Jay...

Seems to me that if I own a card, and I consign it to an auction house, I still own the card and the auction house has a consignment contract, an interest in the card. When the auction occurs I still own the card until my agent, the auction house, is satisfied with the winner's payment, at which time the winner owns the card and the auction house owes me money. The idea is that the auction house is an agent, they NEVER own the card.

If the auction house sends a card I consigned off for grading, I still own the card. So to answer your question, I think the owner of the card still has rightful title and ownership. The auction house, their creditors, the grader, all of those folks may claim some sort of lien on the card, but I don't see how title / ownership would pass without notifying the rightful owner and then proceeding on the lien. Mere possession of the card does not convey title to anyone.

When I send a card to an auction house, I'm not conveying title. I'm entering into an agreement that I will convey title if certain things happen... ie an auction, and payment. And I'm agreeing to convey ownership to the winning bidder, not the auction house nor anyone else.

All of that would be subject to Lord knows what that might have been put in micro type in some contract.

Mastro
 

I just sat down and read the article in the daily news. To me it still leaves more questions unanswered than answered. I think finally when the other "SHOE" drops that no matter how much damage control Doug does to try and save face it wont matter. One of the only good parts in keeping Legendary an auction house is the possibility that if Doug is serious about making everyone "Whole" the only way to have that happen is to be able to stay in business. If not then all the consignors will have a very long drawn out legal battle and probably walk away with nothing.So in the end it may be a love hate relationship with the Devil!

If Mastro did indeed "sell" assets to Legendary, as opposed to it being a paper transfer by Silk Road, then what consideration did Mastro receive from Legendary? If none, or if insufficient, fraudulent conveyance laws could come into play -- a transfer for less than fair value that leaves the transferor unable to pay its creditors in the ordinary course.

If the intent was to have Bill step out of the picture, then why not just rename the enterprise and say that Bill had left? The fact that it was not done this way, but was done through creation of a new entity that is now expressly disclaiming the liabilities of the old even though it acquired its assets, certainly raises questions.

Its simple for me:
I would not consign a thing to Legendary.
I would not bid on a thing from Legendary.

Not until every Mastro consignor gets paid.
Closing one company and opening under a new name to avoid responsibilities is just deplorable.

Yes, but if Mastro was in considerable debt, then the business itself would have minimum value. Like cards, it is only worth what someone is willing to pay for it. With a large debt, one could see how it would go really cheaply.

I looked at Legendary's last auction, and they had a bunch of low-grade drums that went in the $2000-3000 range, which is pretty good. They also had a 52 Topps Wings set go for over two thousand bucks. I am guessing that eventually they will make enough money to pay off the consigners and recover. It could take years, though.

I'm looking at this excerpt from the article:

Lichtman also says that Forman was the victim of shill bidding and other fraudulent activities under investigation by the FBI. "It is an open secret in the industry that Mastro Auctions engaged in massive shill bidding and other fraud against the public and we would want the balance to reflect that," Lichtman says. "We look forward to seeing the bidding records and seeing the truth about Mastro's fraud."

Is it actually known what the FBI is investigating? I thought that could only be inferred, since they haven't disclosed it. And can Mastro be made to reveal the bidding records for any or all of their auctions? I certainly want to know if I got ripped off by shill bidding at any point in the past 7 or so years, but isn't the burden of proof on the bidder?

On another note, this is a well written piece of journalism. It details the story, provides substantiated quotes from the people mentioned (minus Bill Mastro) and the writer doesn't provide his own conclusions, but lets the readers do that for themselves. There have been some shoot-the-messenger attacks on O'Keeffe here in the past, but it looks to me like he's doing his job.


Bill

Okeefe and I talk every now and then. I used to not really care for him but now I like him. Things change. He's just doing his job. I hope he goes to the National as I would love to meet him.

SGC Reads These Boards
 

...And I am sure is watching this one closely. About now someone from SGC ought to explain what, if any, safeguards are in place to honestly review the cards of their President.

Agreed, this isn't exactly third-party grading is it? This assumes "raw" cards are being graded for him which may not be the case. A fair query nonetheless.

If SGC does grade cards Dave owns, and Dave (directly or through others) is selling them, then there is at least a troubling appearance of a conflict of interest, even if SGC represents that it grades the cards as it would anyone else's.

We should not pre-judge the situation, but at the same time we should be vigilant to get the facts.

If the rumors I have heard are true, there is another bidder who owes Mastro Auctions about $400,000. If this amount and Dave's amount were paid I would guess that all the consignors could be paid and at least part of this ugly saga put to rest.
One thing I don't understand is that if Silk Road holds an ownership position in both Mastro Auctions and Legendary Auctions why, if the amounts still owed consignors are not too large, doesn't Silk Road advance Mastro the funds to pay off the consignors and lift the cloud off Legendary. Then at least their investment in Legendary might have a chance of paying off. Otherwise, I agree with the other posters who are not optimistic about Legendary's chances of survival.

or graded cards that are then bumped up. The incentive ($$$) is there no matter if it's actually happening or not which is enough for me not to feel very good about it.

According to a court papers filed in the Northern District of Illinois, Bill Fisher owes Mastro a number in the low 6 figures, but has declared bankruptcy. I don't know if that is who Jay is referring to, or if there is yet another debtor in the picture.

If I can read into this correctly, is it possible that on 12/13/07, Dave Forman placed a number of max bids, and then after "winning" the cards, felt that he had been shilled, and refused to pay for them?

I think it's fair to question the ethics of card grading company staff, but in this instance I don't see how it applies, since Forman was the buyer of graded cards. I think Joe Orlando owns cards, too; it's hard to imagine that a President of a grading company wouldn't have a passion for cards and not want to collect them. That in itself is not a sin. There seems to be no evidence that Forman bought anything raw and had it graded; that would certainly be hazy, but it wouldn't lack integrity unless the grading that became unobjective. But to buy graded cards, I think is okay. These people have a right to collect.

I don't think this does anything to damage the integrity of SGC's grading. I just think it's a real embarrassment for its President, which might affect SGC's image. I feel bad for him.

Disclosure: I own no high value SGC cards.

I don't think we know for a fact that Dave bought only graded cards out of the Mastro auctions.

appearance of impropriety
 

Look, the people at SGC are smart, business savvy individuals. They can't possibly be stupid enough to grade their own cards for resale or otherwise. I would just like a public disclaimer to that effect to avoid the appearance or potential for improper self-grading.

My take from the article is....

Dave owes them money, but they also owe Dave money and they are not mentioning money they owe Dave when discussing the overall figure.

Sort of like if hypothetically you owe me $100, and I owe you $90.... but all I talk about is the $100 you owe me (ignoring the $90 I owe you).

As far as he shilling, I guess Dave is also questioning whether or not he was shilled on the amount owed to Mastro.

Doug Allen
 

This guys flip flops more than Obama! (sorry for the political position there LOL) He puts out self promoting article in the PSA SMR stating how the new Legendary is tops with ethics and etc etc. Behind the scenes he's telling people "too bad you're out the money, you are too small for me to worry about (at $250,000 at that!! too small???). Then he gets roasted and panics and sends emails trying to do damage control and selectively paying people (I do hope that the individual did get his $5k recently).

There is no doubt the tomfoolery in essentially closing Mastro and reopening under Legendary was done for two reasons. Bill Mastro had to go, easy enough, but just to dump him and be left with Mastro without Bill Mastro is still a problem, so lets also get rid of the debts and create a new name, screw those we owe, the people we need for our business, so we can make more money for ourselves.

Conflicts of Interest
 

Not sure when Jeff was hired but if it were even 10 minutes prior to Legendary filing the suit against Forman that would have been sufficient time for him to agree to a settlement on behalf of his client. The hobby is incredibly forgiving due to collectors' obsession but this is not going to be good for Dave or SGC.

Greg

Joe--If Dave won cards, then thought he had been shilled, and then decided not to pay for them why did he keep bidding in the first place? If the bidding was getting to an unrealistic level why didn't he question things then and just stop bidding? I guess that it is possible that these were left "up to" bids but, if Dave was suspicious of Mastro Auctions, why would he leave these?
Was Dave intending to pay these debts off through grading services? Did this strategy fall apart when Mastro Auctions went belly up forcing Dave to have to come up with the cash? These are questions I would like answers to. Also, I wonder if you can be completely objective in grading cards for someone that you owe a lot of money to?

I'm hoping there isn't a settlement.
 

Just me, but I'm hoping that none of the parties settle, as I'd love to see this one aired out in the public.

Wow, I gotta admit this is pretty disturbing to me in regard to Dave Forman and SGC.

I always thought that the heads of grading companies shouldn't be actively involved in buying/selling/etc. while they are at the helm of the grading company. While in college I minored in Archaeology/Anthropology and there isn't a respected Archaeologist in the country that also collects antiquities (if they want to be taken seriously by their collegues), it seems to me the same type of conflict of interest would exist here.

-Rhett

This was one of the observations I also had from the article.

Peter--Another individual supposedly owes Mastro the roughly $400,000

,

Excellent questions...

There are so many excellent questions to ask Mssrs. Mastro and Allen that who would know where to begin? I think our Mr. Lichtman might :).

The glaring omission from this article and from everyone's replies, is the fact that the consignments were sent out before they were paid for. This entire situation is hinged on the fact that Mastro/Legendary sent out consignments without being paid first... otherwise, there is no story whatsoever. The items would be returned or re-auctioned. The fact that they sent out consignments without being paid makes it entirely their fault/problem. Another thing, if the guy from SGC bought items from them, never paid and resold the items he won, how could he not have the funds to pay for his winnings??? And if he didn't sell them, why has he not returned them? That is as shady as it gets and he (and anyone else that did this) should go to prison for theft for not returning the items he never paid for. I guess what I'm saying is, these people should go to jail. This shouldn't be a "you owe me money" situation. This is a "you stole my items" situation.

You might want to go back and search the archives regarding REA sending items to high bidders before payments were received. Pay particular attention to the adulation and fawning from Net54 board members over this business practice.

I was going to bring that up in one of my posts, but was not certain that was the case, but apparently after rereading everything here, it certainly is.
What a way to run a business!! Here take this and pay me when you can, my consignor won't mind,,, I thought Wolffer's was the only one that did something like that to such a degree.

That is exactly what I was wondering. What would the big deal have been if the items were not paid for.....simply return the item to the person who consigned the item or re-auction. How crazy is it that the items were sent prior to payment being received...who does such a thing?

.

I have never bid or consigned with either of these auction houses, but I would believe, judging by all that I have read on this board, that REA had the money on hand to pay their consignors.

And why no legal action demanding the items back or immediate payment? Especially if the items were sold again after the fact. That is theft, and should be dealt with as such.

Personally, I think people are barking up the wrong tree here. The auction house, by sending out lots to winners before payment is received, is simply making a credit decision that they are willing to trust that bidder. If they are wrong they must suffer the consequences. Credit is extended in all businesses. When you charge something on a credit card the bank is allowing you to take delivery of goods before they are paid for. Our society is built on people getting items before they pay for them. Mastro obviously made some poor credit decisions. REA may send out some items early but, if they are better at assessing the creditworthiness of their customers, they may not be subjecting themselves to any appreciable risk while at the same time generating considerable good will.

They are not the ones suffering the consequences.

If they are selling their own product, this would make sense. But this is consignment, the items are not theirs to take such outlandish risks. This has nothing to do with credit.

Of course it does. Once the auction house sends out the lot/lots they are implicitly taking on the responsibility to pay the consignor. If they do not they are legally liable. This is exactly a credit decision.

extending credit
 

I agree with Jay. I am sure, at the time, Mastro had good reason to extend credit to Dave, for many possible reasons as to which I would be speculating. It is only in hindsight that, of course, it looks bad. Indeed, it may be unrealistic to run an auction house at that level without extending credit to certain bidders.

Okay, so if they don't pay, they should go to prison for theft. The consignee is the one that the theft is perpetrated upon. To simply have them go through the court system to get their money back is preposterous. If I go to a casino and they offer me credit, and decide I don't want to pay, I go to jail. They don't simply keep asking me for the money I owe them.

The moral of the story is, if you don't want to get screwed over by people who like to pass off blame (auction houses), don't use them. I know I never would.

Sorry but that is an inaccurate analysis of the contract relationship
 

An auctioneer can do what it wants with stuff it owns. It cannot do the same with stuff it does not own. Mastro did not own those lots; the consignors did. They furnished them to Mastro under certain contractual terms, none of which included the right to send the items to bidders without payment. One of the actual contract terms stated that unpaid items could be reclaimed 60 days after auction (go check your small print in your consignment contract). If Mastro agreed in its contract that the consignors of unpaid items could ask for their return, then Mastro undertook the duty to hold those items, not send them out in the hope of future payment.

What is being described here is looking more and more like a Ponzi scheme where current sellers' proceeds were used to pay earlier sellers and/or where current sellers' items were used to fund large customers' businesses as no-cash-down inventory.

Btw
 

Is anyone else thinking that this is going to be a real interesting National dinner?

And how would anyone know if Mastro/Legendary isn't in on the whole thing? "Hey, buy this from us for $500,000, don't pay us. Then sell it somewhere else and we will split the money." Sound crazy? Sounds like easy money to me.

On SGC's website, their home page has a section for "Prices Realized", touting the high prices paid for SGC graded items. Seems harmless enough, unless a grading company employee or owner is a bidder/owner of said item.

what Dinner?
 

The way it's going there will be like 10 people at it.....:eek:

Well if there are truly only going to be 10 people at dinner
 

Then Leon can spring for Steaks for all of us :D

Hi Everyone,

Hopefully everyone had a nice, safe holiday weekend. I wanted to take the time to address some questions that have arisen on the board. It's unfortunate that Dave Forman and Mastro Auctions could not resolve their differences outside of court, but this personal matter between these two parties does not impact SGC's day to day operations or policies.

I want to stress the fact that SGC employees and/or owners are not able to submit cards for grading. All grading decisions and policies are under the sole discretion of the Director of Grading and his senior grading team. SGC has the industry's only "real" guaranty and stands behind every single card that we've graded.

Anyone having any further questions or concerns is welcome to contact me during normal business hours.

Thank you,

Brian Dwyer
SGC
1-800-742-9212 x114
bdwyer@sgccard.com

I could be wrong but....
My take from the article is that Dave owes Mastro money.... but Mastro also owes Dave money. Yet... Mastro is asking for the entire money Dave owes them (ignoring the amount they owe to Dave).

Again - if you owed me $100, and I owed you $90.... would you send me the entire $100 and then 'hope' to receive the $90?

Where the shilling comes into play is....
At this point (now that this is a legal matter) why not question whether or not the money owed to Mastro is legitimate? If the items were shilled, should Dave pay the entire amount to Mastro? I think not.


And.... MOST IMPORTANTLY....
Mastro has an obligation to the consignors regardless of any money's owed to them by other people. I cannot operate a business and shaft my suppliers if I get shafted.

IMO -
Opening up "Legendary" and running away from Mastro - is just about as crappy as it gets.... and on top of that.... they must think everyone in the hobby are morons.

Adam--If the consignment agreement says that the consignor has the right to request the return of unpaid items after 60 days I still don't see where that prohibits Mastro Auctions from sending out the lots before payment is received. However, by doing this they are taking on the responsibility to pay for the item regardless of whether the buyer pays or not. By sending it out they are implicitly saying two things:

1-Consignor has been paid and we owe the consignor his money
2-We have entered into an interest free loan (or perhaps not) with the buyer to pay us the amount due

Therefore, if the consignor is not paid his or her claim is against Mastro, not the buyer. Mastro must file claim against the buyer.

Adam--Obviously, I am not a lawyer and I didn't even stay at a Holiday Inn last night, but where am I wrong?

Dave is a very successful and seasoned dealer and hobby veteran. I think the shill bidding defense is weak unless of course the FBI investigation goes someplace. Right now it has not been proved they have shill bid.

As far as Mastro running a Ponzi scheme that is also a bit absurd. I don't think Mastro was engaged to do business simply to pay off past consignors. However they may have exercised poor judgment in extending credit to certain customers to the detriment of certain consignors. In both Bill Fisher's and Dave Forman's circumstances I suspect both showed the ability to make good on the credit which was extended to them. Not a unique situation where one day someone is a good customer and the next a bad creditor and as an auction house it can be tough to know when that is going to take place. I think Mastro got caught up in the feeding frenzy and was attempting to get the most they could for their items and the best way in which to do that is to extend credit.

I too would like to understand the arrangement Dave had with Mastro. Something very unsettling about this whole thing.

I thought I read on this board or maybe another years back when Forman took control of SGC that he was divesting his collection so as not to have any conflicts of interest as a collector/dealer and grading company owner. Am I wrong about that?

It goes without saying that if Mastro wasn't liquid enough to pay consignors before receiving payment from buyers, then it was incredibly stupid to deliver items before receiving payment.

But for people to post today how terrible such a practice is in theory when previously praise was heaped on REA for doing the exact same thing (that is, shipping before receiving payment), that's the very definition of Monday morning quarterbacking.

"...that's the very definition of Monday morning quarterbacking. "

Agreed. But that's what we do best, so we're sticking with our strengths!

If you grant a consignors the contract right to exercise an option to recall their items after 60 days, you are impliedly representing that (1) the items will still be there and (2) you won't do anthing to make the right unenforceable. Sending out an item w/o payment in that context removes the item from Mastro's possession and destroys that right, which is precisely what happened here. If Mastro knew that it routinely sent out items without receiving payment, then it knew that it did not comply with the terms of its contracts on a regular basis, yet it told none of its consignors and certainly never obtained their permission to repudiate portions of their contracts. Or, to put it another way, show me the part of the Mastro contract that says Mastro had the right to send out the items w/o payment and to pay the consignor "whenever." It doesn't say that because no one would be stupid enough to agree to it. Yet if that is what Mastro was doing, which appears to be the case, any consignor would have wanted to know. Or, to place it in a slightly different context, what happened is the equivalent of if you listed your house with a realtor and the escrow agent then gives the keys and title to a buyer without getting the money for the house. The fact that the escrow agent may be able to rustle up the cash from somewhere else to pay you off doesn't make it right.

As far as a Ponzi scheme goes, the essence of the colloquial term "Ponzi scheme" is taking funds earmarked for one purpose and using them to pay off earlier "investors." I am not saying Mastro was a pure Ponzi scheme; it did more than simply pay earlier investors with money from later investors. However, it appears to me that given the increasing scale of unpaid but shipped items as the deals worsened/soured in 2007-2008 Mastro increasingly relied on credit lines and/or consignors' money to paper over its unpaid consignments. The extent to which that happened could be untangled from its accounting records. What is apparent is that at the end the cash needed to pay the last group of consignors and their items both went missing. I know some of the consignors who are unpaid have been told, in effect, "tough ***t, no money and no item" and have to watch their items being resold on Ebay.

Rob--What Mastro did was working when they had credit lines they could draw on. I would guess that they went out of business when these lines dried up and Silk Road would not advance any more money to make good on these obligations. So, that would imply that this mess is a function of bad credit decisions and some exogenous factors.

The primary factor was endogenous, not exogenous: breaching their own consignment contracts by sending out unpaid items. BTW, had to look up "exogenous"; good one!

Don't forget the fact that when things got hot, they simply closed down shop and started anew while saying "Sorry about your bad luck!" to those they owed money too. It WREAKS of Ponzi scheme. Maybe not in the true definition of the phrase, but it is something very close.

By no means am I trying to say that Mastro was in the right when it shipped items before being paid. I'm not. All I'm saying is comments like the ones below, which demonize the very practice of shipping before receiving payment, are pretty comical when in fact another auction company is praised for having great customer service for doing the same thing.

"The glaring omission from this article and from everyone's replies, is the fact that the consignments were sent out before they were paid for."

"I was going to bring that up in one of my posts, but was not certain that was the case, but apparently after rereading everything here, it certainly is. What a way to run a business!!"

"How crazy is it that the items were sent prior to payment being received...who does such a thing?"

Why are you lumping in my quote when I have never applauded the practice?

Adam, I still don't agree. Let me flesh an example:

Buyer A wins a lot in Mastro auctions
Mastro makes a loan to Buyer A for the amount due
Buyer A takes the loan money, agrees to the loan provisions, and hands the money back to Mastro (Mastro has thus received no net funds)
Mastro sends out the lot to Buyer A
Two things have happened; Mastro has been paid and Buyer A owes Mastro the loan amount
Because Mastro has been paid he owes the Consignor and since the lot has been paid for the Consignor has no right to recall it
The Consignor is now due only funds from Mastro and, if not paid, their only recourse is to sue Mastro

This is effectively what happens every time any lot is shipped before a check is received. In some cases there is an interest bearing loan due at some point in the future. In some cases it is a very short term zero interest loan.

lol, which can all be avoided by holding the item until it is paid for. When all you have to do is close up shop and change your name to relinquish your debt to your consignees, it is now simply a fraud perpetrated upon unknowing victims. So, you are sticking up for a fraud.

Wrong again--I think that Legendary starting up before all Mastro consignors were paid is very wrong (and very stupid). What I am defending, subject to good credit analysis, is the practice of shipping lots before a check is received.

It is quite evident you have never lost items of value to Mastro. I'm sure your tune would change if you lost your collection because the auction house shipped it all away without receiving payment and closed up shop telling you you are crap out of luck. Tell us you like the practice of shipping before payment then.

Plus, even if no lot was shipped before payment was received, this problem may not have been eliminated. Remember, major auction houses pay cash advances for new consignments (and pay salaries, returns to equity holders, rent, etc). The auction business is a dynamic process. Before, after and during auctions money is going out for these advances so that material comes available for the upcoming auctions. Once the credit lines dried up, even if every lot auctioned off up to that point was paid for, there may have not been sufficient funds to pay consignors. The credit lines were the safety net to overcome cash flow timing issues. Poor credit decisions only exacerbated the problem.

I would be angry and would contact my lawyer if the amount was significant. I fully understand how an aggreved consignor would feel. I doubt, however, that I would be against the practice (see prior post).

If I ran an auction house, it would be 10% or more up front and pay in full within 60 days or the item gets returned or re-auctioned at the discretion of the consignee. You don't get your item until it's paid in full and lose your down payment if after 60 days you haven't paid, no questions asked. See how simple that is? It's called running a legitimate business with your bread and butter in mind first and foremost. Your customers are the consignees, NOT the buyers/bidders.