Taubman and Sotheby's
As inches are to length, and pounds are the weight, money is to success. It is not uncommon to measure an individual’s success not only by how much money one has, but also by how quickly they made it. Someone who has earned a lot of money quickly can arguably be described as more successful than one who has doesn’t have much money, or worked laboriously for their fortune. In some instances however, fortunes made can be at the expense of others, or, in some cases, entirely against the law. Examples of this are all too prominent today in America’s already sickened economy. From WorldCom’s accounting 101 fraudulent practices to Enron’s earning cover-ups to home-maker idol Martha Stewart’s insider trading. Are our Rockefellers, Fords and Carnegies gone forever? Have the days of being able to earn an honest buck disappeared - possibly. To add to the list of corporate crooks, consider the case of Sotheby’s largest stockholder Albert Taubman. Born into a middle class family in Michigan during the depression, Taubman bought 22% of the auction house Sotheby’s in 1983 from fortunes made in shopping mall construction in Michigan (at least he can claim to have earned some honest money), making him the company’s primary class B share holder. Regarded as on the of the world’s finest auction houses, its only real competitor of rare-second hand valuables is Christie’s auction house. Both over 200 years old, their domination of controlling 90% of the market for art created a duopoly. Up until 1995, art prices had been at an all time high, and the houses decided to take advantage of it. Both Sotheby’s and Christie’s (allegedly at the request of Taubman) created a sliding-scale commission which basically said that the more a painting sold for, the more commission the house would receive. Although both houses came out with this policy at the same time, it was labeled as a coincidence and not many took notice – except for the US Justice Department. This policy was the corner stone of the price fixing scandal. With a way to boost their profits in place, both companies shared information with each other that included lists of current clients and their salaries. This way no one bidder would be perused too much. Equipped this kind of insider information, the companies were able to set the prices of their paintings higher, raise their revenues and earn more money for the shareholders than ever before. As paintings started to sell at record prices, would there be an end to the fruits of such a scam? Oh yes. In 1999, documents containing incriminating information, such as the source of the colluding in prices and the plan behind it, were brought to the attention of Christie’s Auction Houses’ lawyers. The law firm turned the information over the US Department of Justice, and the scam between the two houses began the crumble. With undisputable evidence and a mound of civil suites brought on, both Sotheby’s and Christie’s paid 256 million dollars in damages to people who claimed to have been ripped off (a small price to pay considering paintings from artists such as van Gogh were selling for over 70 million each, at the time). Taubman, 79, claimed his innocence and ignorance in the matter. He did have to pay half of Sotheby’s 256 million dollar fine and, being the primary share holder, lost quite a bit of money when the company’s stock tumbled from 40 dollars a share to 16 dollars a share after the news of the scandal broke. His personal profits from the price setting scandal were quoted at around 43 million dollars, although that number is not concrete. On April 22, 2002, he was conviced of price fixing and sentenced to a year in jail and another 7.5 million dollars in fines. In reality, one year in jail is a small price to pay when you figure that if Taubman had just robbed a bank and stolen 40 million dollars, he’d probably get life in prison. Why, then, do white collar criminals face such a lesser sentence? Is there something wrong with the justice system that they get off more easily than their blue collard counterparts? Many people, including myself, think so. Penalties for white collar fraud cases such as this one should be increased substantially. Thankfully, it is in the process of happening right now thanks to the current publicity over such crocked CEO’s and company owners such as Taubman.