The Real Deal New York

Concierge Auctions accused of fraud, as court battle between rival housing auction firms heats up

Grand Estate Auctions is seeking $23 million per claim
By David Jones | April 23, 2013 06:00PM

A competing luxury home auction house has accused Concierge Auctions, a firm allied with Sotheby’s International Realty, of using sham bidders and other fraudulent tactics to inflate its transaction volume, and is seeking $23 million per claim.

Grand Estates Auction, based in Charlotte, N.C., and two couples looking to sell their homes alleged that the Manhattan-based Concierge published auction results for sales that never went through or involved “shill” buyers. The buyers, in collusion with the company, allegedly failed to register for the auction or pay a $100,000 registration deposit. In many of the sales, the deposits were returned, the suit claims. Concierge also allegedly misrepresented its sales numbers and used web crawlers to inflate its Internet traffic.

The suit, filed Wednesday in the U.S. District Court for the Southern District of New York, includes claims of false advertising, deceptive trade practices, tortious interference, mail fraud, wire fraud and violations of the Racketeer Influenced and Corrupt Practices Act, known as RICO. The plaintiffs are asking for $20 million in compensatory damages on each count and $1 million in punitive damages, which would be trebled on each count.

However, a lawyer for Concierge called the lawsuit a “vindictive and baseless attempt” to damage the company’s reputation.

“The filing of a RICO complaint … is simply a continuation of Grand Estates’ well documented course of tortious and illegal conduct towards Concierge Auctions,” attorney Robert Wolf said in an emailed statement. “It is a transparent attempt by a disgruntled competitor to retaliate against Concierge Auctions for its success in the real estate marketplace.”

Concierge Auctions has already sued Grand Estates, alleging the firm set up fake email accounts to publish “false and defamatory” stories about its competitor and steer business to Grand Estates.

Concierge was founded in 2008 by Chad Roffers, who owned Sky Sotheby’s International Realty, a Sotheby’s franchise in Sarasota, Fla. The firm auctioned off luxury homes with a marketing fee of up to $100,000 and a buyer’s premium of at least $100,000 or 10 percent of the sale price, according to the suit.

The suit names Laura Brady, the president; Mike Russo, the chief operating officer; and George Graham, whom the suit says is a former CEO. Roffers was not named as a defendant due to a bankruptcy petition he filed in Illinois, which puts a stay on naming him as a party to this case, according to the complaint. A motion has been filed in that bankruptcy case to lift the stay.

Sotheby’s was not named as a defendant in the complaint.

Plaintiffs John and Nancy Bloeser allege that Concierge agreed to auction their house in Cold Spring, N.Y., for $1.5 million, and claimed to have four bidders when there was only one. The auction fell through, and the couple later sold their home to an unrelated third-party at below market value, according to the complaint.

Concierge had sued the couple in New York State Supreme Court in 2011, seeking $99,500 for allegedly unpaid fees.

The North Carolina Auctioneer License Board issued Concierge a “letter of caution” for allegedly false and misleading advertising, according to the suit.

A spokesman for Sotheby’s was not immediately available for comment, nor was a lawyer for Roffers. Lawyers for the plaintiffs declined to comment. Y. David Scharf, a partner at Morrison Cohen who represented Concierge in the case against the Bloesers was not immediately available for comment.