On or around February 15, 2012, we started getting solicitations over the phone and facsimile by Midwest Public Auction to sell some of our RV inventory at their Missouri auction facility. In July, their telemarketer, Melissa, told our Sales Manager that we couldn't loose by placing our inventory in their auction because items always sell for the invoice amount that we want prior to any sell as long as it is within reason AND they approve the amount. She added that if for some reason it does not sell for the agreed upon amount, their $40,000 Inventory Protection Plan would cover any difference between the sold price vs. the invoice price up to $40K. She pushed the fact that it could all be done within a few days max with payment going out within 24 hours of the auction. She faxed us a reference sheet that says: Full Payments Available Within 24 Hours of Auction End. Dealer references included:
Chase Motor Sports, Paducah, KY
Dylan Thompson, Owner
And a bank reference:
Greg Whittaker, VP
Dylan Thompson with Chase Motor Sports was very high on Midewst. He offered a glowing description of how there is nothing to worry about. You always get what you need out of your inventory. You always get paid within 24 hours after the auction too. He also mentioned that the owner of Midwest, Donnie M Smotherman, was a millionaire and that Midwest was a great place to do business. He was quite convincing to say the least; it was in his best interest as you soon will see.
When we called US Bank, we were told that the only information they could divulge was that Midwest Public Auction was a depositor at the bank in good standing and that's it. They would not offer one more word beyond this and seemed irritated that they had been included as a reference for Midwest to start with. Other supposed references were contacted but no one returned our calls. We called and spoke to Donnie Smotherman, Midwest's President and Owner. He was very energetic and sold us on their protection program and the auction process. He even admitted to us that he has people in the audience for every auction that whip up the price of every unit.
As a consequence of Melissa's verbal sales presentation of their Inventory Protection Plan trigger, along with the guarantee of selling our units for potentially even more than the invoice amount, we decided to engage with them by offering up 5 recreational vehicles for their upcoming auction. They reviewed every single unit and stamped each one as APPROVED for their $40K Inventory Protection. The original contract had been for 9 units and was signed by our sales manager on
August 6th, 2012. We subsequently modified the number of units to be sold down to 5 on Friday, August 10th. This voided the original contract. We asked for a new contract but they did not send one to us to execute. Their drivers were waiting in our showroom Friday morning so we let them pick up our RV units which were to be sold at their auction facility in Poplar Bluff, MO on Sunday, August 10th.
Seeing that we were not under contract with Midwest, we had an employee attend the auction on that Sunday to make sure the process was in our best interest. He was very surprised to see that the auctioneer did not have any information on us, our units being sold, or APPROVED invoice amounts that Midwest had authorized prior to the auction's start. Our first unit sold for less than half the agreed upon invoice amount. At that point, our employee told the auctioneer to HALT any more sales of our property. He was then escorted inside the office to make a cease and desist request known to Midwest management. While our employee was in the office, away from the action, the auctioneer broke from the printed selling schedule and sold all but one of the remaining units for pennies on the dollar. They purposely deceived our employee by tricking him into moving to another part of the premises while they auctioned off our property behind his back. Once this was brought to our employee's attention, he immediatelytold the buyers NOT to take our Rvs from the lot for any reason. However, the units disappeared within minutes after the auction was over, again, behind our employee's back. When he asked Midwest's management where the units had gone, he was told they are being taken across state lines and there's nothing you can do about it. Besides, I just work here! We found out later that it was Donnie M. Smotherman (Midwest's Owner) who said these words to our employee. We had no idea what he looked like previously so he purposely withheld his identity.
And who was it that bought the units that disappeared? Chase Motor Sports; the same group that was listed as a reference by Midwest's telemarketer. Donnie M Smotherman, the President of Midwest Public Auction, and Dylan Thompson the owner of Chase Motor Sports (and possibly others) work in tandem. It is our understanding from other dealers that Chase is the main buyer at all Midwest auctions.
From a criminal perspective, we are alleging theft by deception and fraud by Midwest Public Auction which culminated in a total loss of $118,663. They acted in such a manner that we lost considerably under false pretenses resulting from Midwest Public Auction's verbal misrepresentations and deceptive actions during their auction process. Now that our units have been transported to destinations unknown and presumably across state lines (according to Midwest management), we are asking the Federal Court to consider criminal proceedings against them. We've also asked for Missouri's State Attorney General to commence with an immediate investigation into their business practices. The FBI was notified as well at 573-335-2511. We were encouraged to discover that the FBI was firmly aware of Mr. Smotherman and Midwest Public Auction.
From the Civil side, we are in communication with over 20+ motorsports, marine, and RV dealers from around the country that feel they have been scammed by Midwest Public Auction. In fact, Dealernews.com penned an in depth article about Midwest Public Auction and its owner, Donnie M. Smotherman, and other accomplices that have been indicted for criminal actions in other states as it relates to scam auctions. The link is located here: http://www.dealernews.com/dealernews/article/retailers-urged-tread-carefully-when-dealing-small-auction-houses
We have asked for our property back but Midwest has declined any assistance. They are withholding all our money at the time of this writeup. Moreover, we have been allowed only $5,000 from their $40,000 Inventory Protection Plan. Since the Protection is not underwritten by a 3rd party insurer, as they would want you to believe, but rather by Midwest themselves, they can divvy and parse the $40K as disclosed in the small print of their contract.
Be extremely cautious with Smotherman and Midwest Public Auction. They have, what others term The Perfect Scam and have hurt many business owners in the process. Millions of dollars have been lost by dealers using their auction services according to the dealers we've talked to. They are considered a predator and scam artist on many blogs and complaint forums on the web as well. Any search for Midwest Public Auction in Google will yield such conclusions.
If after searching through the net for information, and you still want to use their auction services, this is a 10-step process of what you should expect:
1. They will entice you up front via telemarketing and fax advertising with their $40K Inventory Protection Plan. That is their hook. It will make you think you are protected from any loss, or a substantial loss. Understand this: it's not an insurance policy for loss or damages! There is no policy. It is a Midwest program not overseen or administered by a 3rd party. And worst of all, it is a rebate program that comes with limitations and teared constraints.
2. Once you believe their Protection hook above, they will then casually ask you to send them a list of items you think could sell in one of their auctions. They will then see if the items will qualify for their $40K Inventory Protection Plan.
3. They will send back a sheet with the majority of your units stamped APPROVED for the protection. Don't be surprised when the cheaper items are declined. They do not want to deal with cheaper items because of small commissions.
4. When you see APPROVED stamped all over the place, it will look like you are privileged that your inventory actually qualifies. There is no way you can loose, right? So you decide to proceed.
5. Then comes their contract via fax; no original documents sent thru FedEx. Take heed, their contract is incredibly deceptive and worded to protect themselves from all kinds future litigation with disgruntled dealers. It looks like a simple 2-page, 17 point contract. But beware, there's all kinds of creative language and monetary structures that you need to pay close attention to. Here is their contract in its entirety. See our notes for each section: (note: they are the ones that used bold face font in section 2.)
Terms of Service (page 1 & 2)
1. I, we authorize the below signed (pg2) Auction Company, (Auctioneer) to accept
deposit on purchase price and to execute a binding contract of sale for the owner(s).
It is further agreed that the seller guarantees that if a titleable vehicle is listed as
part of the Auction, the vehicle falls within the guidelines allowed by the Motor Vehicle
Commission for the State of Missouri. Why Missouri? Because the laws of that state
allows Midwest to auction your items WITHOUT a title being present! Most other states
require an auction house to have titles in hand PRIOR to any sell. This plays a huge
part for Midwest's process because it supposedly binds all parties of the auction
without any substantial paperwork being involved.
2. The property known as (see complete list attached INCLUDING APPROVED ORIGINAL
INVOICE PRICES as page 4 of this Exclusive Auction Listing Contract) is to be sold on
the following terms: absolute with Invoice Protection Plan that states: If the dealers
NET check does not meet or exceed 100% of the original agreed upon invoice
total, the auction agrees to give the dealer a rebate of up to $40,000 for protection
per its Invoice Protection Plans terms of service on pg3 of this contract. SEE
APPROVED INVOICE LIST ATTACHED. This section is incredibly distracting because of
the bold face font. The KEY WORD here is absolute that appears just before the bold face
font. Absolute does not mean reserve. Absolute means they can sell your item for
whatever the auction will produce regardless of the invoice price they approved prior
to the auction. In other words, they can sell your item for whatever it will bring! Page 4
is the sheet where they've stamped APPROVED all over everything. Page 3 contains
the fine details of their Protection plan (more about that below). But understand this:
they can sell your units for any amount under an absolute auction. The protection is
predicated on the GROSS SALES PRICE TOTAL $$ amount of what they liquidated
your inventory. As they sell for pennies on the dollar, your $40K protection whittles
down to practically nothing.
3. I, we, will pay Auctioneer a commission of____ % & PRO* (2-4%) of the total selling
price of the property. The commission % fluctuates with the number of units you put in
the auction (as listed on page 3). The PRO fees are a joke. It's supposedly for
Advertising Expenses that they incur prior to the sell for promoting your
merchandise. Do they really advertise your stuff? Who knows unless their local paper
counts. We asked to see what they produced but they couldn't produce a thing.
Regarding the PRO* fee, you're paying them for word-of-mouth advertising basically,
4. The commission and buyer's premium is still due after advertising schedule is started if
the sale is canceled or fails to close due to the sellers failure to comply to this
agreement. This is the section they will use against you if you decide to pull out of the
auction after signing their contract. Since theiradvertising schedule is left to
interpretation, they enforce their contract the minute you fax it back to them with
your signature. They can basically sue you for FULL commissions on the invoice
amount they stamped APPROVED if you decide to pull out of the scheduled auction.
5. If this listing contract contains personal property as items for auction, the Seller states
that the Missouri Bulk Sales law will be complied with, if applicable.
6. The seller guarantees that the item or items to be auctioned are free of any liens or
7. The seller agrees that the merchandise intended for the auction will not be sold off or
pulled from the auction prior to the auction. Or you will pay dearly later!
8. The seller authorizes the Auction Agent to sign any Auction related documentation on
his/her behalf via limited power of attorney.
9. There will be a standard buyer's premium in effect.
10. If any seller, or affiliates of the seller, purchases any items on the day of the sales,
they will be responsible for the buyer's premium, commission, and proration on
such items as stated in the Terms of Sale and Exclusive Auction Listing
Contract. The auction company has the right to withhold the premium from the
seller's proceeds. So, if you find yourself trying to buy back your stuff in the auction
because you see it being sold for pennies on the dollar, be weary. You will be
responsible for way more than you think.
11. The necessary paperwork to transfer ownership (i.e. Bill of Sales, Manufacturer's
Statement of Origin, Titles) must be in our offices no later that 10 business days
after the sale date or seller agrees to forfeit the full rebate amount earned (if
applicable) and agrees to reimburse 100% of the actual freight charges. If you
decide to hold your titles because you were taken to the cleaners, they will sue
you for them. You will not get paid any protection allotment (if any) and now you
will pay for freight charges Midwest incurred getting your stuff to their auction.
12. Seller acknowledges and agrees that Missouri Law shall apply to this transaction
and to any dispute that may result from same. In the event of Court action
initiated by either party, the parties agree that Missouri shall have exclusive
jurisdiction and that the appropriate venue for all causes of action shall be Butler
County, Missouri. Seller agrees to compensate the Auctioneer for all legal fees
and expenses associated with pursuing its rights pursuant to this agreement. At
this point, you should show this contract to YOUR attorney before you sign it!
He/she could enlighten you further as to why this section is in here. Missouri Law,
especially Butler County, has tort laws that will protect Midwest because of the
language used in this contract. You may not have any recourse filing for criminal
or civil court proceeding anywhere else except in the state of MO, Butler County
13. The Auctioneer agrees to release all monies due to the seller within (5) days of
receipt of all titles and MSOs overnight using UPS. This flies in the face of Full
Payments Available Within 24 Hours of Auction End. Even if they have your titles
prior to the sell, getting your money the next day is questionable.
14. Seller or signor listed on this contract agrees that he/she is selling based on the
*Invoice Protection Plan and terms of service listed on page 3 of this contract.
Look closely at page 3's content and you will find a labyrinth of qualifiers as to
how much protection you are actually APPROVED for.
15. Seller also agrees that he/she is relying on his/her own good judgment and not
on any statements or comments made by any member or associate of Auctioneer.
This is where they disavow any and all statements made during the sales
presentation by their telemarketing team at any point in time prior to you signing
their contract. Whatever you were told by Midwest verbally is now null and void
under this section according to their perspective. There are telemarketing laws
that strictly prohibit sales presentations that are negated later under contract.
16. If the seller fails to load the number of units agreed upon for discounted shipping
and/or *Invoice Protection Plan Coverage without prior auction approval the
seller forfeits both shipping discounts and total rebates earned if any. You
better not change your mind and pair down WITHOUT GETTING THEM TO
ACKNOWLEDGE IT. Be VERY careful in this process. They will modify
the APPROVED invoice $$ sheet by possibly denying some units for their
protection plan that had been previously approved.
17. Seller further agrees if this contract be breached by the seller or if the seller fails
for any reason to complete sale of said items or property in accordance with the
terms set forth in this contract that the seller shall pay to an amount equal to
the commission, Buyer's Premium, sales related expenses, reasonable attorney
fees and costs. This is their silver bullet clause for any litigation that you
would throw in their direction when things go south.
Seller agrees to pay ________________ shipping. This is usually FREE which
entices you further to go along with the transaction.
Seller Authorization _________________________________________
X I have received a copy and understand this 4 page contract including page 3
containing the Invoice Protection Plan structure. They harken back to page
3 because it tells you in black and white that their protection has all kinds
of qualifiers, intricacies, and nuances that basically show you their $40,000
can turn into much less.
Page 3 (which is basically a flier)
Everything We Touch Turns To Sold!
WE STAND BEHIND OUR SERVICE GUARANTEED!
If the dealers NET check does not meet or exceed 100% of the INVOICE TOTAL attached the
auction agrees to initiate the *INVOICE PROTECTION PLAN BELOW...
INVOICE PROTECTION PLANS TERMS OF SERVICE (Where the auction agrees to give the dealership
protection of up to 40,000 dollars back towards the original invoice.)
Commission % based on # of units
Invoice Protection Plan: Based on gross sales price total Comm% #Units Rebate (up to $94,999) ($95,000 - $250,000) (251,000+)
5% + (PRO 2-4%) 2-4> $5000 $10,000 $20,000
4% + (PRO 2-4%) 5-9> $8,000 $12,000 $30,000
3% + (PRO 2-4%) 10+> $10,000 $15,000 $40,000
*(PRO 2-4%) represents advertising expenses
The rebate dollar amount arned will be added to the bottom line of the net check if applicable.
After submitting a list of inventory Midwest will put this plan into writing for your review. All commissions and *Invoice Protection will be determined by the scales above. FAX 1.866-778-5686
223 N Main St Suite 202 Sikeston, MO 63801 Office 1-866-336-9497 Fax 1-866-778-5686 Page 3 basically spells out that the $40K worth of Inventory Protection ONLY applies to dealers supplying 10+ units to the auction AND bringing over $251,000 in total sales. So, the $40,000 protection that you have been sold over and over again comes with constraints and limitations.
Unless YOU bring it up, they will not divulge this table. You will be left with the assumption that $40K in protection is waiting in the wings if your stuff doesn't sell for the invoice amount.
And remember, this is an ABSOLUTE auction. They will sell your property for whatever the auction will bring. If you thought you could get $251,000+ for your items, don't be surprised when they sell it for half that; because they certainly can. YOU have given them that right in this contract.
Page 4 is basically a list of your inventory that they have looked at andstamped APPROVED on all the units they think will sell at the invoice amount you listed. All the entries not stamped APPROVED have been denied (which are usually the cheaper units).
6. Once the contract above is signed by you, and it is faxed back, you are now stuck in a business transaction from their perspective. If you modify the terms in any way, make sure you get a new contract. They will point back to the original but demand a new one.
7. They will coordinate shipping with a 3rd party. These drivers inspect all the units and will very quickly load your property for immediate departure. From this point, if you do not go to the auction
yourself, the rest of the transaction is in the hands of Midwest.
8. If you elect to go to the auction, and you see your stuff being sold for way less than the APPROVED invoice price, good luck stopping them from selling what they can. They will misdirect you through a bureaucratic maze while they sell your property behind your back if possible.
9. If you try to stop buyer's from hauling off your property, good luck with that too. The buyers, especially if they are insiders to Midwest like Chase Motor Sports supposedly, will quickly move the units off the lot and to destinations unknown.
10. You will be left with nothing from this point except litigation which will most likely
fall in the jurisdiction of Missouri, in the same county as Midwest's auction house.
Hope this writeup helps you make an informed decision. In our opinion, save yourself a HUGE
headache and sell your inventory in a different forum.