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Apfelbaum pleads guilty to bid-rigging conspiracy

Source:
linns.com
John D. Apfelbaum, one of the biggest names in American stamp collecting, pleaded guilty Jan. 28, 2002 to two felony counts of violating the Sherman Antitrust Act in a criminal probe of bid rigging at stamp auctions.
John D. Apfelbaum
Charles Reilly, a prosecutor in the U.S. Justice Department Antitrust Division field office in New York City, told Linn's that the Apfelbaum family firm, Earl P.L. Apfelbaum Inc., also pleaded guilty to the same two felony counts.

Earl P.L. Apfelbaum Inc., founded by John Apfelbaum's grandfather in 1954 as the Discount Stamp Co., is Philadelphia's largest stamp store. Both public auctions and mail-bid sales are mainstays of the Apfelbaum business.

"The defendants and co-conspirators engaged in a combination and conspiracy in unreasonable restraint of interstate and foreign trade and commerce in violation of Section 1 of the Sherman Act," said a complaint filed in U.S. District Court in New York.

The conspiracy lasted from the early 1980s to 1997 and resumed for several months in 1999. "During the period . . . approximately $20 million in stamps were sold at public auctions at which the defendants and co-conspirators rigged the prices bid," the complaint stated.

In a plea agreement with the government executed also on Jan. 28, Earl P.L. Apfelbaum Inc., received a fine of $130,000 and was ordered to pay restitution of at least $150,000. John Apfelbaum, who is executive vice president of the company, was personally fined $20,000. He is free on his own recognizance after being photographed and fingerprinted.

Apfelbaum could be sentenced to federal prison for a term of up to six months, according to a recommendation made to the court by prosecutors under federal sentencing guidelines. Or he could be spared prison entirely, Reilly said. The decision will rest with a judge. A sentencing hearing is tentatively set for July 26.

"I am grateful to put this matter behind me," Apfelbaum said in a statement given to Linn's on Feb. 4. "I have acknowledged my participation, and I look forward to cooperating with the authorities in addressing what unfortunately has been a longstanding practice in the stamp business."

The criminal prosecution of Apfelbaum and perhaps others yet to be named parallels a civil antitrust case brought in New York federal court July 23, 2001, by the attorneys general of New York, California and Maryland.

Apfelbaum and seven other stamp dealers, by agreeing not to bid against each other, are accused of swindling collectors and auction houses. The other defendants in that case are Lewis Berg of Miami, Etienne de Cherisey of Paris, Davitt A. Felder Jr. of San Francisco, Anthony "Tony" Feldman of London, Dana Okey of San Diego, Stephen J. Osborne of Vermont and the United Kingdom, and Kees Quirijns of the Netherlands.

The suit accuses the dealers of collusion and restraint of trade. It seeks a jury trial and treble damages to compensate swindled consignors. Cited are alleged violations of the Sherman Act, the California Unfair Competition Act and California's antitrust Cartwright Act, the Maryland Antitrust Act and New York's Donnelly Act, involving restraint of trade.

New York City auction houses on which the group allegedly preyed include Ivy & Mader, H.R. Harmer, Christie's (later Spink-America), Sotheby's and Robert A. Siegel. Other auction houses the lawsuit named as victims are Matthew Bennett, Baltimore; Daniel F. Kelleher, Boston; and Harmer-Schau, San Francisco.

The conspirators called themselves "the Ring," according to the lawsuit, and specialized in buying collection lots.

Apfelbaum, de Cherisey, Felder, Okey, Osborne and Quirijns "placed bids and purchased stamp lots at auctions held in New York, California, Maryland and elsewhere, and participated in rigging bids for those auctions," the suit said. " . . . Other individuals not named in the action conspired with defendants to carry out their illegal scheme, and performed acts in furtherance of defendants' conspiracy. These individuals participated in rigging bids at stamp auctions at various points in time during the Ring's existence . . ."

The individual who alerted authorities to the activities of the alleged conspiracy is stamp dealer Gregory Stolow. Stolow is the son of Julius Stolow and the nephew of Henry Stolow, both deceased. Operating as J. and H. Stolow, the brothers were among the world's biggest stamp dealers from the 1940s to the 1970s.

The lawsuit did not say how Stolow learned about the ring. "Stolow did not participate directly in the Ring, but bid for stamp lots through one or more Ring members," the suit said. "At some point after June 1997, Stolow wrote letters or spoke to Ring members, and sought money for refraining from disclosing the Ring's activities to others. The Ring members were unable to reach an accord with Stolow. Nonetheless, Stolow initially kept his allegations within the Ring, and later, within the community of stamp dealers."

Before helping the government spin its web, Stolow complained to the American Philatelic Society where Apfelbaum served as treasurer on the elected board of directors. Stolow also complained to the American Stamp Dealers Association, where Apfelbaum had served as a member of the law and ethics committee.

"This is not a nice story," Stolow told Linn's in 1999. "What has happened in our industry will be a devastating revelation. I had hoped that someone in the industry with some weight, such as the ASDA or the APS would step forward in an effort to show the collecting community that it can clean its own house. And want to.

"Instead all that has been demonstrated so far is that we would rather sweep it under the rug and hope no one notices. When I am forced to do it, the rest of the collecting community . . . will see it as self-serving. And any faith that may be left, or could have been garnered if the appropriate organizations took the first step forward, will have disappeared."

Joseph Savarese, executive vice president of the ASDA, wrote to Stolow May 17, 1999: "The allegations and counter-allegations raise extremely serious issues which if proven to be true could have grave civil and even criminal consequences. It is our counsel's opinion in which we concur that at this stage the American Stamp Dealers Association should not become involved in this controversy."

Robert Lamb, executive director of the APS, responded to Stolow July 16, 1999, saying in part: "These are very serious allegations . . . The society is not in a position to investigate suspicions of wrongdoing, which arise from an individual member . . . The activities you describe are illegal and can be prosecuted."

In January 2000, Stolow contacted the office of New York Attorney General Eliot Spitzer. Six months later, on June 9, 2000, three state agents interrupted a Matthew Bennett auction at the Four Seasons Hotel in New York City to enlist the Baltimore auctioneer's cooperation in the investigation.

Linn's asked APS executive director Lamb about Apfelbaum's membership status, in light of his guilty plea. "We do not act on the basis of press reports," he said. "We have contacted the New York Justice Department people and asked them for documentation. We'll take action when we've seen that."

Apfelbaum served 10 years as an officer of the APS. He was elected to two terms as an at-large director from 1983 to 1987, served as a vice president from 1993 to 1995 and as treasurer from 1995 to 1999. A spokesman for the ASDA said Apfelbaum had "tendered his resignation," but the association had not yet acted on the matter.

Prosecutor Reilly said restitution from Earl P.L. Apfelbaum Inc. would be handled through the civil antitrust suit against the dealers. The Antitrust Division field office in New York brought the recent price-fixing case against art auctioneers Sotheby's and Christie's. The two auction houses agreed to pay aggrieved customers more than $512 million. Sotheby's pleaded guilty to price fixing and was fined $45 million.

On Dec. 5, 2001, Alfred Taubman, Sotheby's ex-chief, was found guilty of a criminal charge to fix buyer's premiums and seller's commissions. The shopping-center tycoon faces up to three years in prison and millions of dollars in fines.

When word of Apfelbaum's criminal prosecution reached London Jan. 28, BBC News broadcast the British reaction: "The normally placid, gentlemanly world of stamp collecting has been rocked to its foundations by allegations of massive fraud."

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