Mastro/Legendary Article in Today's NY Daily News

[Exhibitman]

Originally Posted by oldjudge

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.

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.