Upper Yafa Observer

Number 839. Published by the Ministry of Culture, Mahjaba, Upper Yafa. 25th February 2002.

The worldwide stamp market was put into shock in July when seven stamp
dealers were indicted by the States of New York, California and Maryland in the USA for bid rigging at public auctions since the early 1980s. The defendants named in the civil lawsuit are: Anthony Feldman (UK); John Apfelbaum, Earl P.L. Apfelbaum, Inc. (USA); Davitt Felder, Davitt Felder, Inc. (USA); Stephen Osborne (UK); Dana Okey (USA); Etienne de Cherisey (France) and Kees Quirlijns (The Netherlands).
There are one and perhaps more additional U.S. dealers who performed
acts as part of the defendants' conspiracy, but cooperated with the district
attorneys of the three states, and are not named in the indictment.

The three states are seeking treble damages, restitution, disgorgement
(to give up something illegally obtained), compensation for the group's victims,
and civil penalties in addition to injunctive relief. An interesting statement
made as part of the indictment is that "Stamp dealing also constitutes a
profitable business, accounting for nearly $1 billion dollars in the United States sales in 2000 alone. Over $150 million worth of those stamps were sold at public auctions."
The indictment goes on to state that usually less than 100 individuals bid at an
auction, with no more than two or three significant bidders on many lots. The absence of one or two individuals from a particular auction can have an impact on the sold prices of any lot.

The Ring devised a pay-off scheme, whereby the individuals who did not
compete with the "winning" Ring member received a part of the money taken from sellers. Tony Feldman calculated each member's share of that money according to a pre-set formula, and sent out a tally sheet for each auction detailing pay-offs the Ring members needed to make, or the amount of money they were entitled to receive from other Ring members. The price reduction was divided equally, known as the "European method," among those who had bid at the secret auction. Assume that four Ring members, A, B, C and D bid $3,000, $5,000, $7,000 and $8,000 respectively for a certain lot at their secret auction prior to the public auction. The lot sold for $4,000 at the public auction to Bidder D.

Here is how the pay-off worked: Bidder A would receive nothing because
his bid was below the eventual purchase price. Each remaining dealer bid at
least $5,000, so the first $1,000 of price reduction ($5,000 minus $4,000) was divided evenly among the three top bidders. Bidders C and D secretly bid up to $7,000 so the next $2000 was divided among them only. Therefore bidder B received $333, Bidder C received $333 plus $1,000, and Bidder D kept the gains of $1,333. This was changed to the "American method," which gave a greater share of the illegal gains to the winning bidder. Using the same example, bidder D would pay 50% of the first $1,000 in price reduction to bidders B and C ($250 each), and pay an additional 50% of the next $2,000 to Bidder C. Bidder D retained $1,333 via the European system and $1,500 via the American system. The real savings were in the reality that bidder D did not have to compete against his fellow dealers who were interested in that certain lot, and may have had to pay more than his estimate of $8,000.

In the 18 months of investigation, the legal authorities people were very thorough. The government investigators checked the bidding records of every auction house named in the indictment, as well as who was present in the audience, even if they did not bid. This was done through the registration listing for the auction paddle numbers at the auction. The conclusion reached by the investigators was that the actions of the defendants had an effect on interstate and foreign commerce.

The three states demanded a jury trial, a dollar amount equal to three
Times the damages proven at trial, an unspecified amount for violations of the
laws of the three states, civil penalties against each individual defendant,
awarding damages, disgorgement and/or restitution, forbidding the defendants to engage in any activity similar to the anti-competitive actions described, and awarding the three states their costs of this action, including attorney's fees and expert fees, and granting any other relief as may be just and proper. There has been no trial date established as yet.         Update

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