BALTIMORE — A new Inspector General's report found that Baltimore City has lost out on nearly half-a-million dollars in auction profits.
The investigation focused specifically on one company who ran four vehicle auctions on behalf of the city between June and August of 2018.
One glaring problem was the auction company had been working without a city contract since December 2016, yet the Departments of Transportation and General Services still allowed them to proceed.
Under the agreement, the company was to collect all auction proceeds and deposit money owed to the city into a bank account held in trust. Then, after a complete reconciliation of each auction, the city would send an invoice for the amount due minus administrative fees and commission which was normally 3 to 4.5 percent.
That never happened, instead the company deposited all the money into their own business account with zero city oversight.
Documentation was supposed to be kept on registered bidders and winning bid amounts, but the Inspector General found it was just handwritten and hard to read.
The auctions should've also been recorded for an extra layer of insurance. Unfortunately the company used audio cassette recorders or similar devices, making the sound "antiquated, garbled, and impossible to understand."
In total, the four auctions would have generated $575,299.63 for the city. But the owner said he couldn't pay because two of his employees had stolen money from him. The accused employees were later charged with theft but ultimately acquitted.
Eventually the city filed a civil lawsuit over breach of contract. In May 2021, both parties settled.
As part of the agreement, the company owner forfeited his auction license for 15 years.
Overall the owner ended up paying the city just $95,000 of the $575,299.63 owed to them.
Situations like this are usually investigated by the city's Auction Advisory Board. However at the time, the board didn't have the three members required to investigate. The only member happened to be a friend and mentor to the company owner, which presented a conflict of interest.
According to the Inspector General, this was not the first time the city had lost out on large sums of money from auctions.
Back in 1999, the city took another company to court over its failure to pay $744,636 that was owed. That case resulted in a $708,518 judgment against the company.
The city has since entered into a contract with a new vendor to hold auctions online. Under the new agreement, the city still gives custody and control of its revenue to the contractor, despite repeatedly losing out.
In response to the investigation, City Solicitor Jim Shea said "the City must improve oversight and monitoring of auction contracts issued by the Bureau of Purchases within Finance."
Shea also called for the city to reconstitute the Auction Advisory Board with new members and increase the amount of the surety bond posted annually for an auctioneer’s license to $500,000.
The entire report can be read below.
