hi dave

this is in response to your recent post, found here: http://www.mearsonline.com/news/newsDetail.asp?id=568

let me preface everything by saying that disclosing a conflict of interest is a good thing, while entirely avoiding the conflict is a great thing. it's up to you whether you want to be good or great. as well, there's no doubt in my mind that being great costs more in time, effort, and money than being good. again, it's up to you.

"Folks, let’s face it and be honest about it… If you are running an auction house or selling items on E-Bay or at card show, your goal is to make money….Ouch…dirty as it may seem, it is the truth."

it's not the mere making of profit that folks see as "dirty" or the issue. it's how that profit is made that is the issue. REA, for example, racks up some very substantial auction totals. truly, i can't remember the last, or any, post on here deriding them. rob lifson is a straight-shooter who runs a fine house. noone could care less if he made $100 million a year. conversely, historic racks up paltry totals by comparison and is a constant source of criticism. clearly, folks don't have an issue with an auction house making profit, only with how that profit is made.

"if you expect it to have any impact on our decision making process, you should do more than just complain. Offer something well thought out and constructive. Take for example this golden nugget of knowledge:

“I think the whole authentication business is a scam....I agree with all that Mears is trying to set new levels of standards...but when you compare that level in this industry vs other industries in the REAL world, Mears' standards are still in the horse and buggy stage.”

What am I supposed to do with this? What are the other industries that we should be using as points of reference and what are “the lessons learned” and “best business practices” that we should consider or emulate? And yes, I am looking for specifics that would include some functional assessment as to the impact on both the internal and external operational environment.

Getting back to the sage commentary offered above, I clearly am not sure what the “REAL world” is."

while i don't want to put words into anyone's mouth, i think the "horse and buggy" and "real world" comments may have really referred to this hobby as a whole and it's complete lack of any real, formal oversight, regulations, governing authority, etc. any warm body off the street, with absolutely no training, credentials, or certifications, can open up an auction house for the cost of a business license, cram it full of nothing but ebay junk, authenticate it themselves, shill bid every single item, clear $30k from it, and there's absolutely nothing to oversee or regulate any of it. i'm sure you'd argue that such a house would quickly go out of business but if that were the case, then would lampson be the most prolific authenticator in the industry? it's outlandish that an auction industry that generates tens millions of dollars annually has absolutely no safeguards, standards, regulations or even commonly accepted practices. there aren't even regular, formal audits by an impartial authority for shill-bidding! it's a complete wild-west. having a hotdog cart on the streets of new york city requires more oversight and regulations. here in los angeles, the department of health regularly inspects the hygiene of restaurants and posts grades on the restaurant's front window and it's findings for each and every restaurant on a website. they'll do that for every hole-in-the-wall selling $3 bowls of ramen and generating $10k a year in revenue. conversely, you've got an auction house clearing $30 or $40 million a year and there is absolutely noone or nothing that verifies whether there's shill-bidding, whether the auction house owner is having his buddy, the authenticator, rubber stamp his own items, whether this authenticator intentionally downgrades items submitted to him so he can turn around and buy them cheaply to then stick into his buddies' auction and then jack the grade up and collect the kickbacks from his pal, or even if most of the descriptions are truthful and accurate. there's nothing or noone to mete out any penalties or fines. most other "real" industries don't and can't operate like that. for how many years did mastro tell prospective buyers that "they weren't dealers" and that other auction houses "offered items they owned", only to turn around and admit they consign their own items? how many times has doug allen altered an item, stuck it into his auctions, and not disclosed the alteration? it's lunacy. you know who's policing doug allen and lou lampson? doug allen and lou lampson. doug allen making policies to watch over doug allen. brilliant. it's like lou coming up with "lou's code 'o ethics" to protect folks from himself. doug was once a CPA and in order to obtain that title he had to pass a standard, formal exam (including an exam on ethics) as well as meet several formal, legal requirements in his state of licensure. had he not met those requirements, he wouldn't have been given the title. if doug had been found guilty of certain offenses, a formal, governing body had the authority and ability to yank his title away. dave, who's there to ensure that lou's work is of a satisfactory quality? the auction houses? the same ones that lou himself said "don't want to pay him if he turns an item down".

plumbers, lawyers, architects, cab drivers, nurses, contractors, doctors, accountants, investment advisors, farmers, hot dog vendors, real estate agents, ad nauseum, all licensed and/or certified in some way, all overseen by authorities who regulate their quality of work. that's the "real world". basically, i can think of no other industry that permits the amount of screw-ups, ineptitude, and brazen deception that this industry does.

you asked for industries to examine. here's a good example: a few years ago, there was a big fiasco over investment bankers/analysts. in short, an investment bank has bankers who make their money in banking deals with companies (taking them public, etc), and stock analysts who issue "objective" recommendations. both sides work for the same company. can you already see the conflict? what company is going to sign with a bank whose analysts have been recommending against their stock? you've got Company X, who the analysts (authenticators) feel is a garbage buy (fake jersey) so they say "hey public, this is garbage, don't buy it". job done for them. then you've got the investment bankers (auction house owners) who want to make some substantial deals with this same Company X but Company X tells the bankers that the only way they'll give them a $60million deal is if their analysts upgrade their recommendations. oh oh! the bankers want to make money. the analysts are preventing it. who wins? gee whiz, the bankers pressure the analysts into making rubbish recommendations and money wins out. perfect auction house/authenticator scenario. the only difference? the SEC came down on these firms for their conflicts of interest, forced the firms to change, fined them heavily, and returned money to investors. if you're interested: http://www.sec.gov/news/press/2003-54.htm

"OK then, what is the Cadillac (yes, I still have a thing about buying American) standard in very specific terms and how does MEARS get there?"

off the top of my head:

- a MEARS employee cannot have items, in which they have any ownership stake, evaluated by MEARS, disclosure or not. this includes all evaluations, including private and auction house.

- MEARS employees cannot consign items, in which they have any ownership stake, into MEARS' auctions.

- items submitted to MEARS' auction are evaluated by genuine third-party authenticators who have no interest in the items they've evaluated (read: not MEARS employees).

- lose the grading scale and revert to only 2 verdicts: "Likely to be Game-Used" or "Unlikely to be Game-Used". continue to include your worksheet and all relevant supporting documentation to show how you arrived at the conclusion.

- in it's auction house contracts, MEARS will not evaluate items owned, wholly or in part, by any auction house employees or family members.

- at it's new 15,000 sq ft facility, MEARS will construct wooden stocks for the purpose of humiliating shill-bidding auction house owners and dodgy authenticators. photos of said owners and authenticators with their heads and hands in the stocks will be available for sale on the MEARS website.

- MEARS will implement a "Where's Lou?" function to their website where collectors can report various Lampson sightings.

dave grob and myself would be interested to hear anyone else's suggestions towards improving MEARS.

rudy.