Cousin in the Bidder's Row

Pat's conduct raises three related problems. First, Pat failed to disclose a close family relationship with a bidder, which is a conflict of interest that the seller needed to evaluate. Second, Pat recognized a bid that Lena had not clearly made. Calling a bid from a nod, or from nothing at all, creates a false appearance of competitive bidding and is a form of chandelier bidding. Third, Pat's LLC taking an assignment from Lena suggests self-dealing or a hidden path to ownership. The fact that other bidders were active until $295,000 does not cure the false $310,000 call; it may only show that the final price was influenced by a bid that should not have been counted. Pat's desire not to embarrass Lena is not a professional justification.

Before the auction, Pat should have told Harold that Lena is his cousin and that she intended to bid. Pat should have obtained Harold's informed consent in writing and considered whether another auctioneer should conduct the sale to avoid the conflict. During the auction, Pat should have required Lena to bid clearly with a paddle or hand raise and should never have called a bid she did not make. If Pat or his LLC had any ownership interest or plan to acquire the property, that interest had to be disclosed to Harold before the sale and handled through a transparent process. Pat also should not have accepted an assignment from Lena to his own LLC without Harold's knowledge. The safer course was to withdraw from representing either side in the transaction.

The Board should consider the intentional nature of the undisclosed relationship, the false bid call, the assignment to Pat's LLC, and the harm to the seller and competing bidders. Pat's experience and position as the auctioneer of record make the conflict more serious because sellers rely on the auctioneer to manage bidding fairly. Pat can argue that the final price exceeded the reserve and that other bidders participated, but that does not answer the false bid or the conflict. Mitigation might include cooperation, disgorgement of any benefit, and corrective disclosure. Aggravation includes Pat's attempt to explain the conduct as protecting Lena's feelings and the later assignment to his own company. The Board may impose a reprimand, suspension, civil penalty, or revocation, and may require Pat to complete ethics education.