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Judge defers action on Sotheby's guilty plea
NEW YORK (Reuters) -- Sotheby's Holdings Inc. pleaded guilty on Thursday to a multimillion-dollar price-fixing scheme with auction house rival Christie's, but a federal judge delayed action on the plea to consider whether victims will be adequately compensated.
Sotheby's former president and chief executive, Diana Brooks, 50, is scheduled to enter a guilty plea for her role in the conspiracy later in the afternoon.
As part of Sotheby's plea deal with the Department of Justice, the auction house has agreed to pay a $45 million criminal fine over a five-year period. However, U.S. District Judge Lewis Kaplan said he could not yet accept or reject the plea due to his concerns about a provision in the accord that prohibits the government from seeking restitution on behalf of victims of the scheme.
Kaplan, who is presiding over related civil class-action litigation seeking funds on behalf of victims, said he wanted to ensure that adequate compensation would be available.
The judge said members of the class action have not yet been notified of the $512 million settlement reached late last month by the boards of both Christie's and Sotheby's. He said a fairness hearing must still be held to determine whether the settlement is adequate.
December hearing set
Kaplan ordered the parties to submit information concerning the economic losses caused by the conspiracy and Sotheby's ability to pay both the civil settlement and criminal fine. He set a hearing on December 4 to consider the plea.
Sotheby's released a statement saying it acknowledges its responsibility for Brooks' conduct.
"The behavior that led to today's plea was wrong and is unacceptable," said William Ruprecht, president and chief executive officer of Sotheby's. "On behalf of Sotheby's, I apologize to our clients for this breach of the standards of trust that they have the right to expect from us and assure them that no member of Sotheby's current management played any role whatsoever in these events or was aware at any time that they were taking place."
According to the complaints, both Brooks and Sotheby's are charged with one antitrust count alleging that from April 1993 through December 1999 they and others conspired to suppress competition by fixing auction commission rates charged to sellers.
"Those charged today were engaged in classic cartel behavior," said A. Douglas Melamed, acting assistant attorney general for antitrust, at a Washington news conference. "Price-fixing pure and simple."
The Justice Department said Sotheby's and Christie's control 90 percent of the world's auction business and conspired to fix commissions, instead of undercutting each other's rates.
Auction houses generally accept goods on consignment from individuals and entities for sale at auctions. Sellers make payments, known as commissions, to the auction houses for their services. The commissions are a percentage of the sale price of the goods sold at auction.
During the period covered by the charges, Sotheby's revenues from sellers' commissions were in excess of $225 million in the United States, the charges state.
The court papers accuse Sotheby's and Brooks of agreeing to raise prices by fixing sellers' commissions; publishing non-negotiable sellers' commission schedules and agreeing to the order in which each co-conspirator would publish its non-negotiable sellers' commission schedule.
The defendants are also charged with exchanging customer information in order to monitor and enforce adherence to the commission schedules.
Brooks' lawyer, John Siffert, told reporters that his client is cooperating with the government in its three-year criminal probe that has shaken the multibillion-dollar art auction industry.
Siffert gave no further details, but published reports state that she has agreed to be a witness against her longtime boss, Sotheby's former chairman A. Alfred Taubman, the multimillionaire Detroit shopping center developer.
Copyright 2000 Reuters. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.
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