For the most part, auctioneers all over the United States are ethical, moral, upstanding citizens of their communities and run their auctions accordingly.
It’s unfortunate that a small percentage commit bid-rigging, shill bidding, fraudulent inducement, and similar schemes.
Such behavior may rise to a claim of fraud which is illegal and actionable in the United States.
With property selling via online auctions as well as live auctions beginning in the later 1990’s, bid-rigging, shill bidding, fraudulent inducement, and similar schemes have been taking place at a materially higher rate online.
The main reason online auctions have more fraud is that bidder identities can be concealed and/or easily misrepresented.
As an auction expert witness, we’ve been privy to several high-profile cases with this exact issue.
Further, it’s much easier to prove fraud in an online auction as all the bids, registered bidders, property descriptions, etc.
are recorded and can be subpoenaed in a court case.
The additional issue with online bidding and fraud is that the Internet is being used to perpetuate the fraud, which can rise to wire fraud — prohibited by federal law per 18 U.S.C.
section 1343.
Courts interpret wire fraud slightly differently, but the basic tenets of wire fraud (per United States v.
Profit, 49 F.3d 404, 406 n.
1 (8th Cir.)) are:
- That the defendant voluntarily and intentionally devised or participated in a scheme to defraud another out of money;
- That the defendant did so with the intent to defraud;
- That it was reasonably foreseeable that interstate wire communications would be used; and
- That interstate wire communications were in fact used
What are the implications for auctioneers selling online? If property is intentionally misrepresented, fictitious bids are placed or bidder identities are disguised, it’s possible wire fraud is being committed.
The penalties for wire fraud can be fines as much as $250,000 for individuals and up to $500,000 for organizations and imprisonment of individuals involved up to 20 years.
The National Auctioneers Association produced an official statement concerning proper procedures for online auctions with notations on fraudulent behavior: https://mikebrandlyauctioneer.wordpress.com/auction-publications/official-statement-of-the-national-auctioneers-association-concerning-the-licensing-of-businesses-that-sell-property-via-internet-auctions/.
It would seem clear for any auctioneer selling online to avoid wire fraud for his own welfare as well as that of his client and his livelihood otherwise.
In fact, it’s easy and prudent to conduct an online auction without committing any fraud …
Daxdi, Auctioneer, CAI, CAS, AARE has been an auctioneer and certified appraiser for over 30 years.
His company’s auctions are located at: Daxdi, Auctioneer, RES Auction Services and Goodwill Columbus Car Auction.
He serves as Distinguished Faculty at Hondros College, Executive Director of The Ohio Auction School, an Instructor at the National Auctioneers Association’s Designation Academy and America’s Auction Academy.
He is faculty at the Certified Auctioneers Institute held at Indiana University and is approved by the The Supreme Court of Ohio for attorney education.
For the most part, auctioneers all over the United States are ethical, moral, upstanding citizens of their communities and run their auctions accordingly.
It’s unfortunate that a small percentage commit bid-rigging, shill bidding, fraudulent inducement, and similar schemes.
Such behavior may rise to a claim of fraud which is illegal and actionable in the United States.
With property selling via online auctions as well as live auctions beginning in the later 1990’s, bid-rigging, shill bidding, fraudulent inducement, and similar schemes have been taking place at a materially higher rate online.
The main reason online auctions have more fraud is that bidder identities can be concealed and/or easily misrepresented.
As an auction expert witness, we’ve been privy to several high-profile cases with this exact issue.
Further, it’s much easier to prove fraud in an online auction as all the bids, registered bidders, property descriptions, etc.
are recorded and can be subpoenaed in a court case.
The additional issue with online bidding and fraud is that the Internet is being used to perpetuate the fraud, which can rise to wire fraud — prohibited by federal law per 18 U.S.C.
section 1343.
Courts interpret wire fraud slightly differently, but the basic tenets of wire fraud (per United States v.
Profit, 49 F.3d 404, 406 n.
1 (8th Cir.)) are:
- That the defendant voluntarily and intentionally devised or participated in a scheme to defraud another out of money;
- That the defendant did so with the intent to defraud;
- That it was reasonably foreseeable that interstate wire communications would be used; and
- That interstate wire communications were in fact used
What are the implications for auctioneers selling online? If property is intentionally misrepresented, fictitious bids are placed or bidder identities are disguised, it’s possible wire fraud is being committed.
The penalties for wire fraud can be fines as much as $250,000 for individuals and up to $500,000 for organizations and imprisonment of individuals involved up to 20 years.
The National Auctioneers Association produced an official statement concerning proper procedures for online auctions with notations on fraudulent behavior: https://mikebrandlyauctioneer.wordpress.com/auction-publications/official-statement-of-the-national-auctioneers-association-concerning-the-licensing-of-businesses-that-sell-property-via-internet-auctions/.
It would seem clear for any auctioneer selling online to avoid wire fraud for his own welfare as well as that of his client and his livelihood otherwise.
In fact, it’s easy and prudent to conduct an online auction without committing any fraud …
Daxdi, Auctioneer, CAI, CAS, AARE has been an auctioneer and certified appraiser for over 30 years.
His company’s auctions are located at: Daxdi, Auctioneer, RES Auction Services and Goodwill Columbus Car Auction.
He serves as Distinguished Faculty at Hondros College, Executive Director of The Ohio Auction School, an Instructor at the National Auctioneers Association’s Designation Academy and America’s Auction Academy.
He is faculty at the Certified Auctioneers Institute held at Indiana University and is approved by the The Supreme Court of Ohio for attorney education.
