Bill Mastro and Two Other Former Mastro Auctions Executives Indicted for Allegedly Defrauding Bidders

FBI Press Release, July 25, 2012:

WILLIAM MASTRO AND TWO OTHER EXECUTIVES OF FORMER MASTRO AUCTIONS INDICTED FOR ALLEGEDLY DEFRAUDING BIDDERS IN ONLINE AND LIVE AUCTIONS OF SPORTS MEMORABILIA AND OTHER COLLECTIBLES

Fourth former Mastro Auctions employee charged with lying to FBI agents 

CHICAGO—Online and live auctions of sports memorabilia and other collectibles conducted during the 2000s by the former Mastro Auctions, which was based in suburban Chicago, routinely defrauded customers, according to a federal indictment unsealed today. William Mastro, who owned the former business that once billed itself as the “world’s leading sports and Americana auction house,” together with Doug Allen and Mark Theotikos, both former executives of Mastro Auctions, were indicted on fraud charges for allegedly rigging auctions through a series of deceptive practices, including so-called “shill-bidding,” designed to inflate prices paid by bidders and to protect the interests of consignors and sellers at the expense of unwitting bidders.

According to the indictment, in advertising portraying Mastro Auctions as the premier seller of valuable items, including the world’s most expensive baseball trading card, a Honus Wagner T-206 card, Mastro allegedly failed to disclose that he had altered the Wagner T-206 card by cutting the sides in a manner that, if disclosed, would have significantly reduced the value of the card. The charges allege that Mastro and Allen caused the sale of certain items knowing that their authenticity and condition were misrepresented to customers, including purported hair of Elvis Presley; and a purported 1869 Cincinnati Red Stockings trophy baseball.

“Consumers might be lured to the auction market for sports memorabilia and other collectibles by an emotional attachment to an item or purely as a calculated investment, but, as the allegations in this case demonstrate, bidders must remain mindful of the maxim, ‘Buyer Beware,’” said Gary S. Shapiro, Acting United States Attorney for the Northern District of Illinois. “Consumers have a right to be protected from deceptive and dishonest sales practices, and we will prosecute those who fraudulently rig auctions at the expense of bidders as the indictment alleges in this case.”

Mr. Shapiro announced the charges with Robert D. Grant, Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation, and Thomas P. Brady, Inspector-in-Charge of the U.S. Postal Inspection Service in Chicago.

Mastro, 59, of Palos Park, who owned Mastro Auctions until 2004 and was its chairman and chief executive officer from 1996 until February 2009, was charged with one count of mail fraud.

Allen, 49, of Crete, who was president and chief operating officer of Mastro Auctions between 2001 and February 2009, was charged with 14 counts of wire and mail fraud.

Theotikos, 51, of Addison, who was employed by Mastro Auctions between 1996 and February 2009 as vice-president of auction operations and, later, vice president of acquisitions, was charged with six counts of wire and mail fraud.

Both Allen and Theotikos are currently executives of Legendary Auctions, based in south suburban Lansing. Mastro, Allen and Theotikos will be arraigned on dates to be determined in U.S. District Court in Chicago.

The 16-count indictment, which was returned by a federal grand jury yesterday, was unsealed today following the arrest of a fourth defendant, William Boehm, 63, of Ballwin, Mo., who was Mastro Auction’s director of information technology. Boehm, who was charged with one count of making false statements to FBI agents investigating Mastro Auction’s practices, had an initial appearance today in Federal Court in St. Louis.

According to the indictment, Mastro Auctions, which also operated under the names Mastro Fine Sports and Mastro Net, specialized in sports memorabilia but also featured such items as coins, art, and Americana collectibles. Most items were consigned to Mastro Auctions for sale by their owners, but Mastro Auctions also sold items that it owned. Between 2001 and 2009, Mastro Auctions’ offices were located at different times in Oak Brook, Willowbrook, and Burr Ridge, Ill.

In conducting online and live auctions, Mastro Auctions typically charged a “seller’s fee” or a “commission,” usually a percentage of the price that an item sold for on consignment, and required potential bidders to pay a one-time fee of $75 that enabled them to participate in auctions. Successful bidders were assessed a “buyer’s premium,” usually a fee of 15 to 22 percent on top of their winning bid, which was known as the “hammer price.” Bidders could place bids online through Mastro Auctions’ website or by directly communicating with a Mastro Auctions’ employee by telephone or fax machine. Bidders could place either “straight bids” that incrementally increased the value over the last bid or “ceiling bids” that raised bids by established increments until the maximum a bidder was willing to pay was reached.

Between at least 2001 and February 2009, Mastro, Allen, Theotikos and others allegedly caused and made false representations and omissions in Mastro Auctions’ catalogs, advertising, promotions, and other media, and in the bids placed in certain auctions. Those three defendants allegedly intended to deceive bidders into believing that Mastro Auctions conducted auctions according to practices that ensured fair and competitive auctions for all participants. They further intended to deceive participants into believing that greater market demand existed for some items than actually was the case, the charges allege.

As part of the alleged fraud scheme, the indictment charges that Mastro, Allen and Theotikos made false statements regarding the conduct of Mastro Auctions, including the following:

  • each Mastro Auctions catalog represented that “items are sold to the highest bidder.” In fact, Mastro, Allen and Theotikos allegedly knew that certain items were not sold to the highest bidder because they canceled sales and engaged in and facilitated shill-bidding to fraudulently inflate prices to the detriment of bidders;
  • consignment agreements prohibited consignors or their agents from bidding on an item and, if the consignor violated this provision and had the highest bid on an item or lot, the consignor would be required to pay the commission and buyer’s premium. In fact, the three defendants knew they permitted certain consignors to bid on their own items, and at times those consignors did not pay commissions or premiums when they placed the highest bid; and
  • the three defendants represented at various times that Mastro Auctions did not implement undisclosed “reserves,” meaning prices, not disclosed to bidders, at which Mastro Auctions would not sell an item if the bidding failed to reach the “reserve” price. In fact, in certain auctions, they canceled sales instead of allowing the highest bidder to purchase an item, in order to prevent the sale of the item at a price lower than the consignor desired.


In October 2007, Allen allegedly created a “Code of Conduct” for Mastro Auctions. Despite the code’s assurances to the contrary, Mastro, Allen and Theotikos knew that Mastro Auctions frequently did not disclose true ownership of items or that several employees with bidding privileges, including Mastro and Allen, had access to information about the ceiling bids, including the bid amounts. Further, contrary to the code’s assurances, employees, including Mastro, Allen and Theotikos, bid on items consigned by related parties.

Among allegedly fraudulent auction practices, the indictment charges that the three defendants and others placed fictitious shill bids for the sole purpose of artificially inflating the price of items being auctioned. They allegedly placed shill bids at various times using a corporate bidding account, their own personal accounts, and accounts of employees and friends. The defendants then ensured that when a shill bid was the highest bid, the shill bidder would not be required to purchase the item; instead, they canceled the sale and offered the item to the next-highest bidder, the charges allege.

The Code of Conduct also provided certain assurances that Mastro Auctions would disclose information about auction items that were altered or restored. After the code was published, Mastro and Allen allegedly failed to disclose alterations and caused restoration work to be done on baseball trading cards, despite assurances that no such work would be performed.

Mastro and Allen also allegedly knew that they had misrepresented the authenticity of the purported hair of Elvis Presley. In April 2003, Mastro Auctions sold hair purportedly of Presley. The initial purchasers later returned the hair along with the results of DNA testing, which called its authenticity into question. In June 2004, Allen provided a refund to the purchasers. In December 2005, August 2006, April 2007, and August 2008, Allen again sold portions of the purported Presley hair to Mastro Auction bidders. In each instance, he allegedly made false representations in catalogs, such as asserting that the hair was “bone fide” or that it would be sold with “documents attesting to the veracity,” without disclosing the results of the DNA testing.

In August 2002, Mastro Auctions sold to Purchaser A what it claimed was an 1869 Cincinnati Red Stockings trophy baseball, which was described as an actual game ball played with by the first professional team, decorated following the game, and presented to the winning team. In October 2006, Purchaser A submitted the ball for laboratory testing, which indicated that the paint on the trophy ball contained a material not used in commercial paint until after World War II, thus clouding the authenticity of the ball. A month later, Allen provided a refund to Purchaser A and the ball was returned to Mastro Auctions, the indictment states. In December 2006, Mastro allegedly contacted Victim A about purchasing the trophy ball and failed to disclose information about the paint test results. On Dec. 27, 2006, Victim A purchased the trophy ball from Mastro Auctions for approximately $62,000, according to the indictment.

The false statements count against Boehm alleges that he lied to FBI agents in July 2007 when he stated that he had disabled the Mastro Auctions bidding account of Individual D because Individual D was having financial difficulties, and he had created a bidding account in the name of “Craig Helling” to catch a Mastro Auctions employee suspected of stealing company information. In fact, Boehm allegedly knew that the accounts in the names of Individual D and Craig Helling were used to place fictitious bids.

Assistant U.S. Attorneys Nancy DePodesta and Steven Grimes represent the government.

Each count of mail and wire fraud against Mastro, Allen and Theotikos carries a maximum penalty of 20 years in prison and a $250,000 fine and restitution is mandatory. The Court may also impose a fine totaling twice the loss to any victim or twice the gain to the defendant, whichever is greater. The false statements count against Boehm carries a maximum penalty of five years in prison and a $250,000 fine. If convicted, the Court must impose a reasonable sentence under federal statutes and the advisory United States Sentencing Guidelines.

The public is reminded that an indictment contains only charges and is not evidence of guilt. The defendants are presumed innocent and are entitled to a fair trial at which the government has the burden of proving guilt beyond a reasonable doubt.

#####

Read Bloomberg News' coverage, with a short statement from Bill Mastro's attorney: http://www.bloomberg.com/news/2012-07-25/honus-wagner-baseball-card...

Views: 4151

Tags: ", ,, , Bill, Doug, Legendary, Mastro, , ,Fraud,, Allen, Bidding, Bidding", Mastro Auctions,, Shill, William

Comment by DB on July 26, 2012 at 1:08pm

What would make Mr. Bills auction different (presuming he used the words as-is) such as Kaptan Kirk's auction verbiage I published on the other thread (putting aside the focus areas for sake of argument)?

It also says in that NY Article; “The (Wagmer_ Card” quoted Bill Hughes, a member of the Professional Sports Authenticator team that graded the card, admitting he knew the card had been altered."

and if that is the case and they slabbed it don't they also have the responsbility to establish the grade and and "defects".  By not doing so, and presuming there is liability, doesn't thise now put them into Fraud as well?

even though I touched on this below; Card collectors have long believed that the Gretzky T206 Wagner was cut from a sheet and trimmed, which is taboo in the hobby and would significantly reduce its value.  In their 2007 book “The Card,” Daily News reporters Michael O'Keeffe and Teri Thompson reported that the card had been cut from a printer’s sheet and was further trimmed by Mastro to make it appear as if it had come from a 1909 pack of cigarettes.

Consumers have a right to be protected from deceptive and dishonest sales practices, and we will prosecute those who fraudulently rig auctions at the expense of bidders said Gary Shaprio.  Maybe someone can send him some names of other auction houses who are way worse.



Comment by stu deitcher on July 26, 2012 at 1:31pm

It's a real shame about MastroNet Auctions.  I always enjoyed their catalogues.  They always had "The Best "         " Autograph on Earth". They used this hyperbole when listing a James Dean Autograph.  I guess the catalogues read like a National Enquirer of collectables.  Everything seemed almost beyond belief in originality or its effect on the history of a country or a hobby. Nevertheless, they were always a fun read. As a matter of fact I have the Catalogue from October 2001 balanced on the sink of my master bathroom just waiting for more perusal----perhaps that is appropriate.

Comment by DB on July 26, 2012 at 1:37pm

The question become Stu is how many of the "tangible goods" are actually tainted?  Throwing the "baby" out with the bath water may not be the best course of action since the indictments are very limited to a few specific items with the majority focus on shill bidding (which could mean alot more) but since they have most likely "flipped" someone into cooperating they might have a better handle in that arena).   I would think that after a 5 year investigation if there were more tangible goods then they would be listing them.

Comment by Bill Panagopulos on July 26, 2012 at 1:42pm

Or, Stu, you could use it to wrap fish...

DB - Not sure what you're referring to, but an (autograph) auction has the option of selling some or all of its items items fully guaranteed, guaranteed with a time limit, or strictly as-is. It's up to the bidder to be aware of the terms of sale. We sell such "dubious" relics with only a thirty day time limit, which falls within the consignor payment period...and we still won't sell anything that doesn't have a pretty strong chain of ownership unless we REALLY make sure it's explained in the description as such.    

Claims have been made that PSA was aware that the card was trimmed. If so, I understand that that had an obligation to grade it as simply "authentic" versus giving it a numerical value. 

Just another example of this hobby going to hell. 

Comment by Lou reves on July 26, 2012 at 2:18pm

Is that the Elvis hair that was on the tv show Final Offer a few weeks back?

Comment by Bill Panagopulos on July 26, 2012 at 2:43pm

Yup, Louie...

From a "Final Offer" fan site:

It was a good chunk of hair. It was in a seal[ed] container since 2004. It is from the collection of Gil (I forget his last name) that would cut Elvis' hair sometimes and he collected all the clippings because he thought someday he would be able to sell it.

There's an ass for every seat.

 

Comment by DB on July 30, 2012 at 4:09pm

Thanks Mr. Bill, that's what I thought as I was confused on what Steve was stating...   speaking of confusion - The Gov't Claims a decrease but according to a recent NYDPost; “The value of the card increased by $500,000 as soon as the indictment was unsealed,” said one memorabilia executive who requested anonymity.

Although if PSA/DNA knowing graded the card a PSA8 and w/o any qualifications while knowingly according to the reports it had been trimmed.  If that True - that is either incompetent or criminal .  As you said Mr. Bill they could have easily just said "authentic"

The Post goes on further to say; The PSA/DNA company’s website says it “will not grade cards that bear evidence of trimming,” but one of its graders has acknowledged that he knew the Gretzky T206 Wagner had been altered when the company examined it more than 20 years ago.   PSA president Joe Orlando did not return a call for comment.   A spokeswoman for the United States Attorney’s office declined to comment when asked if PSA officials might face criminal charges.

But who is gonna testify as to whether the value when up or down presuming there isn't some sort of "plea" that avoids everything but the publicity.

Comment by Bill Panagopulos on July 30, 2012 at 7:44pm

DB - That's a good one - a trimmed card is worth more! Go figure. 

If PSA knowingly graded a card without disclosing the fact that it had been trimmed when they had in fact prior knowledge, then they are, at least in my opinion, complicit in a fraud. If they profited from it in any way, all the worse. 

If I was their "Damage Control Officer", a "no comment" would be a certain kiss of death. I used to be in the tanker business and one thing you do when the oil hits the fan is have a spokesperson ready to address the issue. PSA seems totally unprepared (as always) for yet another disaster, and when Mastro rolls over on his ex-partners, get a bucket of popcorn and sit back to watch the show. 

As I said earlier. this hobby has gone to hell in order to line the pockets of a few profiteers who have cloaked themselves in an air of "respectability". I opined a long time ago that PSA/DNA was a joke, profit-driven, and guaranteed nothing, that auction houses were hiding behind their "opinions"...and bit by bit the truth is coming out. It's all about money and who they can convince that unqualified  "opinions" are legitimate. 

In my humble opinion, this is what happens when millions are thrown at glossy ads and road shows touting dubiously qualified experts with perhaps hidden agendas. 

Comment by DB on July 31, 2012 at 7:44am

I hear ya loud & clear Mr. Bill even if it was done 20 years ago as reported.

Let's however not get too caught up in a card or trophy as the main emphasis is the Shill Bidding and who knows how many "$$$$" were fraudulently obtained as a result.  Is this a Legendary practice as well or any number of auction sites and how can anyone believe what any are saying w/o and independent auditors statement.  Certainly has cascaded significant credibility into the cesspool IMO no matter how much Auction Owners Claim. 

Comment by Brandon Mysinger on July 31, 2012 at 4:23pm

I really got caught up in reading all of this...What amazed me was the fact that PSA ( once certain person's name in particular ) keeps being mentioned.  It makes me wonder. Wouldn't a grader be able to tell if the card of this age had been cut or trimmed recently?

It seems like a fairly cut and dry question.  Maybe it's not. I have no interest or knowledge in graded cards. The cutting / trimming though, that seems to be a specific, almost scientific variable that is much like authentication. Knowing if a card has recently ( vintage trims v.s. modern trims ) been trimmed seems to be essential.

As far as the hair goes. Like many of the "relics" we have seen. What responsible collector would even dare chance that the hair is authentic?  Even if it was, who cares? 

Baseball card dealers...go figure!

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