Heritage Auctions’ co-chairman fires back at former consultant’s lawsuit

Heritage being sued by former consultant

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Written by Catherine Saunders-Watson – Auction Central News International   

In the face of a lawsuit that questions the integrity of the company he co-founded, Heritage Auction Galleries’ co-chairman Steve Ivy is making his point clear: "We do not place shill bids…and we have nothing to hide." Furthermore, Ivy said, the lawsuit that has been filed against Heritage by a former consultant is essentially a smokescreen to divert attention from "the real issue at hand" – the plaintiff’s refusal to pay Heritage an alleged debt in excess of one million dollars.

In an exclusive interview with Auction Central News, Ivy responded to allegations contained in a May 22, 2009 lawsuit filed against Heritage Auctions and its executives by an attorney representing Civil War memorabilia expert Gary Hendershott. Allegations against Heritage, presented from the plaintiff’s point of view, appear in a press release distributed earlier this month by Hendershott’s attorney, Mark S. Senter, of the Dallas law firm John H. Carney & Associates.

The original suit – which subsequently was amended – asserts that, on past occasions, Heritage had used a nonexistent bidder represented as "N.P. Gresham" to defraud other bidders by artificially increasing auction prices. The amendment to the original motion expands the allegations of fraud and RICO violations against Heritage.

Ivy said that, rather than expanding the lawsuit, Hendershott is supposed to be participating in court-ordered arbitration overseen by a neutral party. Instead, Ivy said, Hendershott "has chosen to violate that agreement and resorted to smear tactics. Three judges in three courts have already dismissed allegations made by Hendershott’s attorney. Hendershott is legally bound, as are we, to resolving these disputes in arbitration. Since his first series of allegations against us, Hendershott has dodged subpoenas, court appearances and discovery. He and his attorneys have instead decided to file a new series of allegations in a fourth court. Heritage has, in turn, filed a Motion for Sanctions for misconduct against Hendershott for this latest move. We remain confident that [Hendershott’s] latest effort will meet with the same demise as the other three."

According to the press release issued by Attorney Senter, the amended lawsuit "sets forth in detail the [alleged] tactics Heritage uses at its auctions to obtain an unfair advantage in bidding against unsuspecting bidders, including shill bidding and using insider information."

Hendershott, a resident of Little Rock, Ark., who began working as a full-time consultant for Heritage in late 2006, tendered his resignation in April of 2008. "Two days later, he filed a lawsuit against us," said Ivy. "I thought it was pretty audacious that someone who owed us over a million dollars would sue us. He claims we owe him more than he owes us for advances and loans, which is why we’re now in arbitration, but he refuses to give us specifics."

Ivy said that prior to, and at the time of, Hendershott’s resignation, the former Heritage consultant made no mention of having a grievance or complaint involving "N.P. Gresham," which is an in-house name used to identify bids lodged on behalf of Heritage Art and Collectibles.

"Heritage, and its affiliates, in addition to being the largest collectibles auctioneer in the world, is also one of the largest collectibles dealers (i.e., buyers and sellers) in the world," Ivy explained. "Heritage Auction Galleries is almost unique in that regard within the fine art field, as most fine art auction houses aren’t dealers, don’t have dealer affiliates, and thus don’t bid in their own auctions. Most coin and many collectibles auction firms, however, do bid in their own auctions. The fact that we bid in our own sales is fully disclosed online and in our auction catalogs. We state: ‘The Auctioneer or its affiliates may consign items to be sold in the Auction, and may bid on those lots or any other lots.’ Even if we didn’t fully disclose it – which we do – it would be perfectly legal for an auction house or its affiliates to bid in their own auctions so long as the bid is made with the intention of buying the item.’

"Frankly, it wouldn’t be fair to our consignors for us not to bid in our own auction the same amount we would gladly pay for the same item in a competitor’s auction," Ivy observed. "Neither Hendershott nor his attorney have offered a scintilla of evidence to support their frivolous shill-bidding claim, and they’ve grossly mischaracterized testimony in order to gain what they obviously perceive to be a tactical advantage."

Asked where the N.P. Gresham name originated, Ivy replied, "On our client list, when we enter an entity, it asks for a contact person in addition to the company name and address. Probably as far back as 30 years ago when an account was created for Heritage, an employee entered ‘N.P Gresham.’ N.P. stands for ‘New Purchases.’ I have no clue why ‘Gresham’ was chosen. There was never anything covert about it; it’s just an internal name to represent new purchases for Heritage. We also used it when we consigned house-owned items to auction. Hundreds of people working at Heritage would know the name ‘N.P. Gresham’ and what it stands for. If it were ever a secret, as Hendershott suggests, it’s one of the worst-kept secrets in history."

Ivy continued: "Hendershot sued us because he decided he didn’t want to pay what he owed us. He owes us for loans – one of which was for $550,000 – shared losses we took on joint ventures, and advances we had paid him toward his own auction consignments, which ended up not selling for enough to cover the advances. He also made a lot of purchases he did not pay for. It totals over one million dollars."

In the press release distributed by Attorney Senter, Hendershott states, "…I only learned the true identity of [N.P. ]Gresham in January of this year, when Jim Halperin, co-chair of Heritage, admitted it in open court."

Ivy said the testimony to which Hendershott refers was given during a court proceeding in which Heritage attempted to foreclose on paintings Hendershott had purchased from the auction house but allegedly did not pay for. "He sought an injunction in February so we wouldn’t be able to sell them. They’re significant artworks, and we’re still holding them," Ivy said.

In the aforementioned press release, the plaintiff’s attorney, Mark Senter, said: "It’s obvious Heritage doesn’t want N.P. Gresham revealed…"

Ivy flatly denies that Heritage has ever involved itself in shill bidding, either under the guise of ‘N.P. Gresham’ or any other name. "Our viability depends on trust," Ivy said. "If we were ever foolish enough to begin placing shill bids – which we simply would not do – the savviest collectors and dealers would quickly figure that out, and word would spread like wildfire, which could well destroy our business…The notion that Hendershott did not know ‘N.P. Gresham’ is the bidder name for Heritage is hogwash. He’s just trying to confuse the matter with this lawsuit. What he wants is to walk away from his debt."

Hendershott was joined in the lawsuit on Sept. 9, 2009 by Montana businessman Chris Kortlander, who alleges that Heritage failed to sell his extensive collection of historical items related to Custer’s Last Stand, and has not returned them in more than two years.

"In April 2007, I consigned to Heritage my extensive collection of historical items, including the Town of Garryowen, Mont., on the site of the Custer Battlefield at the Battle of the Little Big Horn, as well as thousands of items in the Custer Family Collection," Kortlander said. "Heritage has not sold the collection and refuses to account for it, or return it to me."

When asked about Kortlander’s claim, Ivy responded that Kortlander and Hendershott "have been friends for many years" and that Hendershott handled Kortlander’s consignment while a consultant for Heritage. "They are clearly working together on this," Ivy said.

Ivy said Kortlander "never delivered the majority of the items promised and consigned, and additionally, he still owes Heritage almost $100,000. It’s just more of the same nonsense."

Auction Central News will continue to follow and report on this story if and when further developments unfold.

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