July 18, 2014
 Bill Mastro leaves a Chicago courthouse after pleading guilty to one count of mail fraud tied to a massive shill-bidding scheme (Chicago Tribune Photo) |
When former hobby kingpin Bill Mastro appeared in a Chicago Federal courthouse last October and plead guilty to one count of mail fraud, his plea agreement included details of the auction house improprieties which contributed to his possible five-year sentence in a Federal prison. Mastro was scheduled to be sentenced last December, but papers filed in court postponed the sentencing until June when it was again pushed off until October. Mastro’s co-defendant, Mark Theotikos, was also scheduled to change his plea to guilty in June but on Wednesday his hearing was again postponed from July 28th to August 6th when he is expected to enter a guilty plea. Mastro’s other co-defendant, Doug Allen, is scheduled for trial in September.
Mastro’s plea agreement stipulates that he must cooperate with the Government in its case against his co-defendants but it also details the elaborate shill-bidding scheme that prosecutors allege Mastro and his employees engaged in from 2002 to 2009 at Mastro Auctions.
In Mastro’s plea agreement, filed on October 10, 2013, by Judge Ronald Guzman in the United States District Court of Northern Illinois, the government states that Mastro has admitted his guilt and that he and his employees Doug Allen and Mark Theotikos and others unnamed “knowingly devised and intended to devise, and participated in, a scheme and artifice to defraud the customers of Mastro Auctions, and to obtain money and property by means of materially false and fraudulent practices.” Mastro, as the CEO of Mastro Auctions, admits to misrepresenting and deceiving bidders and to misrepresenting his auction house as a company that “always conducted competitive auctions” and that “greater market demand existed for some items sold by the auction house than actually was the case.”
The plea agreement also alleges that Mastro’s co-defendants Allen and Theotikos and others “engaged in practices designed to protect the interests of consignors and sellers which had the effect of artificially inflating the prices paid by some bidders.” The court papers describe how Mastro and his associates “placed shill bids, meaning fictitious bids placed without the intent to win the item, which had the effect of artificially inflating the price of an item in the auction.” Mastro says that in doing so he believed that this practice “attracted more bidders” and also protected consignors items from realizing “a sales price below an item’s estimated market value.” Mastro admitted that the shill-bidding scheme “stimulated bidding and increas(ed) the number of bidders” as well as inflating prices “resulting in bidders likely paying more for an item than what they otherwise would have paid.”
Mastro’s plea agreement describes an episode that transpired in 2002 when Mastro “placed shill bids to drive up prices” on items bid on by Tom Noe, a coin dealer and Republican fundraiser from northwest Ohio. Back in 2006, Michael O’Keeffe of the New York Daily News reported that Ohio investigators suspected Noe had made purchases at Mastro Auctions with state money and that in the course of a probe called “Coin-Gate” discovered that Mastro Auctions “may have engaged in shill bidding and other questionable practices that resulted in inflated prices and auction house commissions.” Ohio State Auditor Betty Montgomery estimated at the time that Mastro had sold Noe “at least $1.3 million worth of memorabilia” and in 2012 Noe was sentenced to 18 years in state prison for theft, money laundering and other charges.
In one specific instance noted in Mastro’s plea agreement, the government details Mastro’s shill bidding in his 2002 Spring Americana auction against Noe who had contacted Mastro “directly in order to place ceiling bids in the auctions.” In 2006, an anonymous source told the New York Daily News that “Noe had a secret account with Mastro Auctions, and the only person at Mastro Auctions allowed to conduct transactions with Noe was CEO Bill Mastro.” The Mastro plea agreement states that Noe placed “up to 100 ceiling bids through defendant depending on the auction.” Mastro then utilized “a shill account belonging to a friend of an auction house employee to drive up Individual T. N.’s ceiling bids.” Mastro’s shill bidding ultimately inflated the prices of several items Noe won including “a 1924 John W. Davis Jumbo Campaign Display Badge for $2,338″ and a “set of 1960 John F. Kennedy and Richard Nixon Campaign Posters for $2,205.” The government states that the bidder would have won those auction lots for for a lesser price had Mastro not shilled him. Mastro also sent invoices and the auction lots to an associate of Noe thus creating the basis for his plea of guilty to one count of mail fraud.
Bill Mastro (inset left) plead guilty to shill bidding former Ohio Republican fundraiser and convicted felon Tom Noe (center). The plea agreement also alleges Mastro and partner Doug Allen (inset right) shill bid a customer on a rare set of Mayo football cards from the 1890s. (bottom).
The government documents show how Mastro “repeatedly shill bid” customers like Noe and also “had access to ceiling bids because of his position” and also detailed how sometimes bidders placed those ceiling bids directly with Mastro and his partner Doug Allen and how Mastro says both men would ”drive up the bids of certain bidders, by placing shill bids below the bidders’ ceiling bids.” In another specific instance the court papers state that Allen knew a certain bidder had “placed a ceiling bid of $80,000 on a Mayo football card set” and that Mastro “observed as Allen, using a paddle belonging to Owner A, placed shill bids on the Mayo Football card set knowing that his bids would not win and would trigger Individual C. L.’s ceiling bid.” The set sold in the 2006 auction for $91,535 including Mastro’s buyers premium.
In addition, the plea agreement details how Mastro masterminded the scheme by utilizing a network of shill bidders including auction house employees, friends of the auction house, the auction house’s corporate account and even an account of a member of Mastro’s own family. Mastro, the papers reveal, “concealed his participation in certain auctions and his shill bidding by using accounts other than his own” and that Mastro and his associates “placed shill bids using accounts not in their name.”
In other instances the plea describes how Mastro, Allen and Theotikos “ensured that when they placed a shill bid and that shill bid was the highest bid at the end of the auction, that item would not be purchased by the shill bidder.” Mastro and his associates “sometimes cancelled, or caused cancellation of, the sale of the item.” The government claims that this scheme allowed Mastro and his employees to “bid in the auctions without risk” and that Mastro published “false auction results.”
But the shill bidding scheme didn’t end there as the plea agreement also reveals that Mastro “knowingly permitted five consignors to place bids on the consignors’ own items, using shill bidding accounts belonging to nominees of these consignors to protect the value of those items, which had the effect of artificially inflating the sale price of those items.” The records seized in the case apparently revealed that, “Between 2002 and 2009, the five consignors placed hundreds of bids on items the consignors owned, using shill accounts.” Mastro facilitated this shill bidding option and in instances where the consignor’s shilling resulted in a winning bid, “Mastro sometimes directed auction house employees, including mail room employees, to return the auction item to a consignor, rather than delivering it to the nominee who had “won” the item.” In these cases Mastro is said to have “waived fees due to the auction house” giving consignors “an advantage over legitimate bidders because defendant enabled those consignors to bid, and shill bid, in auctions without risk.”
Bill Mastro sits at the phone banks of his "Best of Yesterday" phone auction in 1996, years before computer and online bidding became the norm in the industry.
Additionally, Mastro also violated a 2007 “Code of Conduct” established by the auction house whereby he “failed to disclose items that were owned by the auction house” and another company “Historical Collectibles” which was owned by the auction house and had its “merchandise, records and other assets” stored at the Mastro auction house. The agreement reveals that between 2008 and 2009 “Mastro knew that the auction house failed to disclose ownership of over 1,000 items owned by Historical Collectibles” and also engaged in placing “ceiling bids on several hundred items owned by Historical Collectibles that Mastro had previously owned.
The shill bidding by consignors described in Mastro’s plea agreement is the “dirty little secret” that has been kept under wraps by auctioneers and sellers extending well beyond Mastro Auctions. In September of 2007, convicted felon and ex-drug dealer Leon Luckey, also an auctioneer (Brockelman & Luckey Auctions) and moderator of the collector internet forum Net54, revealed on his forum the inner-workings of the scheme. Said Luckey, “This scenario happens in every single auction…REA, Mastro, SCP, etc. etc. It’s just done through friends bidding for other friends and, no, I have never done this on either side. I know folks that do, and have, though. So then I say, OK, then lets get it out in the open, total disclosure, but I understand some won’t agree with this mode of thinking.” Luckey also claimed to have purchased “80% to 90% of (his) best cards” from auction houses and considered Mastro executive Doug Allen a hobby mentor and friend who he defended in 2007 calling him, one of “the greatest guys in the hobby” and “a class act and honest person.”
Contrary to Luckey’s claims that he did not engage in this bidding practice, several sources allege that Luckey was a prime example of this activity and was included in the circle of friends both Mastro and Allen knew engaged in such bidding agreements with other friends and associates. Sources also indicate that since Mastro allegedly destroyed bidding records from the pre-2007 auctions, Luckey felt confident his bidding would not be recognized in the FBI investigation into Mastro. Between 2007 and 2009 Luckey vehemently defended Mastro and Allen and attacked other forum members who criticized and leveled accusations against the auction house and its principals. Luckey claimed New York Daily News reporter Michael O’Keeffe had “a vendetta” against Mastro and banned a forum member named Aaron Michiel for calling him “Mastro Monkey” in his online posts.
Net54 moderator Leon Luckey (left) banned a member who called him "Mastro's Monkey" for his support of Bill Mastro and Doug Allen. The collector "Aaron M." posted his reaction to Mastro's guilty plea on another forum (right).
Another member of the Net54 forum has been an outspoken critic of Mastro and Allen and has also called Luckey “Mastro Monkey,” but only jokingly. New York defense attorney, Jeffrey Lichtman, well known for his defense of mobster John Gotti Jr., has seriously ridiculed Luckey in the past for his support of Mastro Auctions and after the guilty plea was entered made a very public accusation against fellow members in Luckey’s group. Said Lichtman, “I have seen some of the Mastro bidding records. And wouldn’t you know it, even some consignors shill bid their own lots. Even some people on this thread. Can you imagine that?”
After Mastro’s guilty plea Aaron Michiel took to the Vintage Non Sports Cards chat board after Mastro’s guilty plea stating that back in 2007 he “grasped the scope of (Mastro Auctions’) criminal activity” and reiterated how Luckey was “completely in Bill (Mastro) and Doug’s (Allen) back pocket and defended them at any chance.” Feeling vindicated even more Michiel referred to Luckey in another post last week writing, “The Mastro Monkey finally turned on his master.” Aaron then posted Luckey’s recent comments about Mastro’s posting on Paul Lesko’s CardBoard Connection article in which the disgraced auctioneer showed little remorse for his misdeeds. Luckey responded to that post saying he found Mastro’s statement “disgusting” and promised that he would be writing a letter to Mastro’s judge to voice his displeasure.
One thing that Leon Luckey and Aaron Michiel have in common is that both say they believe they are victims of Mastro’s shill-bidding scheme. There are scores of Mastro customers and collectors who believe they were shilled as well as others who suspect they were but just don’t know for sure. The one’s who know for sure were contacted by FBI agents in the course of the Mastro investigation and were told the details of the shill-bidding process.
Last year, Paul Lesko published two of the letters written by Mastro’s victims that were sent to Judge Ronald Guzman, but sources indicate that many other letters were sent by victims chronicling their personal stories and thoughts on the ex-hobby kingpin. Last year Hauls of Shame secured another letter written by Mastro shill-bidding victim Stephen Cummings, a forensic psychologist from Seattle, Washington. Cummings was contacted by one of Mastro’s attorneys to write a character reference letter to the Judge in support of Mastro but instead decided to write a letter he describes is “quite different from the version his attorneys had suggested.” In the letter, which was made public by the court on Wednesday, Cummings offers his personal analysis of how Mastro was “sociopathic and abused the trust of his customers.” Cummings also suggests to the Judge that Mastro “has a severe Narcissistic Personality Disorder with Antisocial Features” and that he became “addicted to money and power, and enjoyed the process of ’screwing’ unwitting customers.” Cummings also requested a refund for “22% over charges incurred during the shill bidding process.” Cummings’ letter appears in its entirety (below).
Shill-bidding victim Stephen Cummings sent this "character reference" letter to the Judge in the Mastro case.
The government’s case against Mastro to combat shill-bidding in the sports memorabilia auction industry may have prevented other auctioneers from continuing similar schemes but it is clear that shill-bidding is still a problem, especially on eBay. (If you have other letters sent to the Judge in the Mastro case, send them to: tips@haulsofshame.com )