Sotheby’s Ex-Chief Pleads Guilty in Collusion

NEW YORK —  The former chief executive of Sotheby’s auction house, Diana D. Brooks, pleaded guilty Thursday to violating federal antitrust laws by conspiring for more than six years to fix fees with rival Christie’s to “suppress and eliminate competition.”

In the first criminal cases stemming from a three-year Justice Department investigation into the $4-billion auction industry, lawyers for Sotheby’s Holdings Inc. announced that the auction giant itself also would plead guilty to a single criminal count.

The company’s plea was held up, however, when a federal judge asked for more time to review a plea bargain with prosecutors under which Sotheby’s would pay a $45-million fine.

Brooks, who personally conducted many of the glitzy auctions at Sotheby’s Manhattan headquarters, could be sentenced to up to three years in prison when she returns to U.S. District Court here Jan. 5. But she is expected to get leniency in return for her testimony against the firm’s multimillionaire former chairman, A. Alfred Taubman, who resigned last February, along with Brooks. He has not been charged.

Setting the stage for an eventual courtroom showdown of two of the biggest names in the auction world, Brooks said during her plea before U.S. District Judge Richard M. Berman that she was acting “at the direction of a superior” when she colluded with Christie’s officials to fix prices.

But Taubman--who is the only person who fits that definition, as Brooks’ sole superior--gave a different version of events in a statement Thursday. A Detroit-based shopping center developer, and still Sotheby’s leading shareholder, the 75-year-old Taubman indicated that he is not ready to take the brunt of any criminal case.

“Whatever Ms. Brooks chose to do, she did completely on her own without my knowledge or approval,” Taubman said. “If the need arises, I will vigorously defend myself against any charges.”

Thursday’s criminal charges came just two weeks after Sotheby’s and Christie’s agreed to pay $256 million each to settle class-action civil suits similarly accusing them of fixing fees charged to clients who have used their services to buy and sell art, antiques and other items, from French wines to Hollywood memorabilia. In the civil case, Taubman agreed to pay $156 million of Sotheby’s damages.

Although Christie’s faced liability in the civil suits filed by former clients, it is not expected to be the target of any criminal charges because of a deal with federal prosecutors, reached last winter, under which it began cooperating--and turned over incriminating evidence--in return for “conditional amnesty.” Christie’s former chief executive, Christopher M. Davidge, has been cooperating with prosecutors since he resigned last December.

Details of the plea bargains reached by Sotheby’s and Brooks emerged during a long day in federal court here, which began in magistrate’s court, where the company and its former president waived the right to have their cases presented to grand juries for possible indictment. Instead, they agreed to the filing of a criminal “information,” accusing them of a single count each. Their cases were assigned to different judges to take their formal pleas.

“Do you understand what you’re doing?” Brooks was asked.

“Yes,” she said. “I will be pleading guilty.”

The case has tarnished the carefully crafted image of the big-ticket auction houses, which use tuxedo-clad auctioneers to peddle multimillion-dollar artworks to the rich and famous packing their halls or bidding anonymously from the privacy of sky boxes and via banks of telephones.

Although the auction houses have long been viewed as fierce rivals in some respects--as in how they compete to sign up heirs who inherit world-class collections of art--they also have drawn suspicion for their pricing policies.

Until 1993, for instance, winning bidders paid a flat 10% surcharge to both auction houses above the “hammer price.” Then, within less than two months of each other, Sotheby’s and Christie’s adopted the same sliding scale--15% on the first $50,000, and 10% for amounts above that.

While the firms’ dealings with both buyers and sellers came under review in the Justice Department investigation, the criminal “information” to which Sotheby’s and Brooks agreed to plead guilty formally charged them only with fixing commissions charged to sellers. The conspiracy was portrayed as a long one, however, “beginning at least as early as April 1993 and continuing until at least December 1999,” when Davidge resigned from Christie’s top post.

During that time, the document states, Sotheby’s alone took in $225 million off the proceeds paid to sellers in the United States.

In accusing Sotheby’s “and co-conspirators” of engaging in “unreasonable restraint of interstate and foreign trade” in violation of the Sherman Antitrust Act, the criminal complaint detailed eight different practices used by the auction houses to increase their take at the expense of customers. These included “agreeing to publish nonnegotiable sellers’ commission schedules,” “agreeing to the order in which each co-conspirator would publish its . . . schedule” and “exchanging customer information for the purpose of monitoring and enforcing adherence to the . . . schedules.”

In a news conference in Washington, acting Assistant Atty. Gen. A. Douglas Melamed summed up the allegations by saying, “Those charged today engaged in classic cartel behavior, price-fixing pure and simple.”

In a prepared statement, the current president and CEO of Sotheby’s, William F. Ruprecht, did not downplay the day’s developments. “The behavior that led to today’s plea was wrong and is unacceptable,” Ruprecht said. “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.”

Ruprecht also insisted 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.”

Brooks’ plea was accepted by Judge Berman late Thursday. Sotheby’s was assigned to appear before U.S. District Judge Lewis A. Kaplan, who also has presided over the civil class-action case, and is reviewing the proposed settlement in that matter.

Kaplan said he wanted to review the company’s plea bargain as well, because of its imposition of the $45-million fine--but no restitution to victims.