More Auction House Hi-Jinx

Are there any honest collectibles auction houses? Is anyone surprised by these stories anymore?

A powerful Ohio politician gets busted using public money to purchase mountains of sports memorabilia from Mastro Auctions.

What happens when the investigators turn their gaze toward Mastro Auctions?

"Investigators grew increasingly suspicious as they examined scores of transactions between Noe and the Illinois memorabilia company [Mastro Auctions], according to Lucas County, Ohio, prosecutor John Weglian, and William Brandt, president of Development Specialists, Inc., the company hired by Ohio to liquidate the coin investment. Mastro Auctions, Weglian and Brandt say, may have engaged in shill bidding and other questionable practices that resulted in inflated prices and auction house commissions."

The whole story is below. From the New York Daily News, June 17, 2006.

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It's a flip of 'coin' probe

Investigators have eye on sports auction giant in Ohio collector scandal

Ohio was the decisive battleground in the 2004 election, and President Bush might have been sent back to his Texas ranch if it hadn't been for coin dealer Tom Noe, the Bush-Cheney campaign chairman in northwest Ohio who raised more than $100,000 for the president's re-election bid.

Noe was a powerful political insider for many years, thanks to the mountains of money he raised for Republican candidates in Ohio and elsewhere. Noe's political connections eventually led to his downfall: He convinced Ohio Bureau of Workers Compensation officials to give him $50 million to invest in two rare coin funds. Most publicly held funds shun investments like that as too risky, but Noe argued he could get a better return than traditional stocks and bonds. Instead, according to officials, he used some of the funds to further his political network and bankroll his lavish lifestyle.

Authorities launched an investigation after the Toledo Blade published a series of stories about Noe and the coin funds last year, and state auditor Betty Montgomery reported that more than $13 million is missing from the funds. Republican pols — including Bush, Ohio Gov. Bob Taft and California Gov. Arnold Schwarzenegger — donated Noe's contributions to their campaigns to Ohio charities and rushed to distance themselves from their now-tainted ally.

Now the scandal has even spread to the world of sports memorabilia: Ohio investigators say Mastro Auctions, the world's largest sports auction house, may have played a role in what is being called "Coingate." Investigators who searched Noe's Vintage Coins and Collectibles in Maumee, Ohio, last year found a cache of collectibles — everything from Beanie Babies to 19th-century political banners to Bob Gibson-signed baseballs — worth an estimated $3.5 million. Investigators believe the GOP insider purchased most of the collectibles with state money; the largest source was Mastro Auctions, the Burr Ridge, Ill., company that until recently was known as Mastronet.

Investigators grew increasingly suspicious as they examined scores of transactions between Noe and the Illinois memorabilia company, according to Lucas County, Ohio, prosecutor John Weglian, and William Brandt, president of Development Specialists, Inc., the company hired by Ohio to liquidate the coin investment. Mastro Auctions, Weglian and Brandt say, may have engaged in shill bidding and other questionable practices that resulted in inflated prices and auction house commissions.

"It was something that makes your sense of 'something's not right here' stand up," Weglian says.

Shill bidding works when an auction house knows the maximum price a bidder will pay for an item; if the bidding falls short, the auction house enters dummy bids to drive up the price. Mastro Auctions president Doug Allen says Noe was a "good customer" but he denies the company did anything inappropriate. "There was no shill bidding that went on," Allen says.

Ohio Auditor Montgomery says Mastro Auctions sold at least $1.3 million worth of memorabilia to Noe's two funds. Most of the seized collectibles are political items, but Noe also won numerous sports lots, including Hall of Fame plaques purchased for $16,541, a Mickey Mantle bat ($14,014), a collection of 10,000 baseball cards ($8,603), 100 balls signed by Ted Williams ($29,078) and 12 Walter Payton-signed footballs ($4,016). The memorabilia is currently being held at an Ohio state police facility as evidence and will be sold after Noe's trial.

Authorities are looking into whether Noe paid inflated prices for the items he purchased through Mastro Auctions, but they don't know if the Republican fund-raiser profited from the deals. "What we do know," says Brandt, "is that there are a lot of transactions with unexplained costs, and the real victims are the injured workers and taxpayers of Ohio."

Weglian says his office will turn its focus on Mastro Auctions after Noe's state court trial in October. Lucas County prosecutors will present a complex case against Noe that will require at least four weeks and more than 100 witnesses. Until that case is resolved, Mastro Auctions will remain on a back burner.

Noe has pleaded not guilty to the charges, but last month he pleaded guilty in federal court to illegally funneling money to the Bush campaign and faces up to two years in prison.

The case took a weird twist a few months ago when Allen called Brandt to express interest in selling the seized collectibles for the state. Brandt says Allen's pitch boiled down to this: Mastro Auctions should be a natural choice to sell the sports and political memorabilia because we're familiar with it — after all, we've sold it once already.

"I told him, 'We have these problems we want to talk to you about,'" Brandt says. "Allen indicated he had a different point of view and he would get back to me. I haven't heard from him since."

Allen says Mastro Auctions is not ducking anybody. Ohio authorities have asked for documents and other information, and Mastro Auctions has complied with every request. "If they have concerns and they provide us with requests for information, we will comply," he says.

Brandt, hired by Ohio to recover and liquidate the assets of Noe's coin funds, says his firm will also start seeking more information from Mastro after Noe's criminal case is resolved.

Companies that are uncooperative could face stiff penalties, Brandt says. Authorities believe Noe used transactions with the Spectrum Fund, a rare coin fund he established with a Spanish-owned company called The Escala Group, as a way to cover up his alleged theft. In March, Escala agreed to pay Ohio $7.5 million to "neutralize" concerns about its relationship with Noe.

Several other memorabilia dealers and auction houses also sold pieces that were found in Noe's offices, including Heritage-Slater Americana, Early American History Auctions and Presidential Coin and Antique Co. Brandt says transactions between Noe and Heritage-Slater concern him, too, but Heritage-Slater director Tom Slater says his company never sold anything to Noe's coin funds.

"These were all routine purchases," Slater says. "He purchased things from us for his own collection."

A source subpoenaed by Ohio authorities says Noe had a secret account with Mastro Auctions, and the only person at Mastro Auctions allowed to conduct transactions with Noe was chief executive officer Bill Mastro. "Everything about it was very odd," says the source, who spoke on condition of anonymity.

Allen, however, says it is not unusual for certain customers to deal solely with him or Bill Mastro.

"It is very common — I can think of 50 customers off the top of my head right now — who only deal with me or only deal with Bill. We work with them to build our accounts. I handle certain customers who either don't want to bid on the Internet or want some hand-holding when it comes to the auction process. That is not unusual in the auction business."

Mastro's brother, Randy, was a deputy mayor during the Rudy Giuliani administration and later represented Madison Square Garden in its successful fight to keep the Jets from building the West Side Stadium. But Mastro and Allen have not contributed significant sums of money to political campaigns, according to OpenSecrets.org, the Web site run by the Center for Responsive Politics.

The source says that while Bill Mastro may be impressed with powerful people, he's not that interested in politics. "Money," the source says, "is the thing that motivates Bill."