RV Dealers Allege Auction Defrauded Them
“There’s a big divide between how their telemarketers or salespeople presented the auction program and how it was in the contractual agreement,” said David Webb, marketing director for Theodore, Ala.-based Johnny’s RV Discount Center, which filed complaints in the past two weeks against Midwest Public Auction with the Missouri Attorney General’s office and the St. Louis BBB branch.
Johnny Bowen, owner of Johnny’s RV, claims his dealership lost more than $50,000 at an Aug. 12 sale by Midwest Public Auction because of the company’s business practices.
Donnie M. Smotherman, owner of Midwest Public Auction, said his company hosts one auction per month and has worked with more than 200 companies. He said in 20 years of doing business he has never been contacted by the Missouri Attorney General’s office or any federal police investigators for deceiving customers.
“If (Bowen) is bitter that his product didn’t bring much money, then I’m sorry, but that is not a crime. That’s an auction. That’s what happens. That’s the way it is,” Smotherman said.
The story told by Johnny’s RV is similar to nine other complaints catalogued by the BBB dating back to last year from dealers in Kentucky, West Virginia, Montana, Maine, Iowa, Tennessee, and Colorado.
The complaints “pretty much are similar in that the sellers were being promised, or felt they were being promised, that either their items would be sold for pretty much close to what retail would be, or slightly below retail,” said Bill Smith, an investigator with the BBB.
The BBB began investigating Midwest Public Auction and Smotherman this week after the nonprofit trade group reopened all nine claims made against the company. Midwest Public Auction had an A-minus BBB rating prior to the investigation. That rating, now in question, has been removed from the company’s online profile.
Chris Thetford, vice president of communications for the St. Louis BBB branch, said the geographical range of the complaints leveled against Midwest Public Auction is noteworthy.
“What that would tell us is there is potential here that there is a nationwide pattern and it’s not just a local pattern involving businesses just in our service area,” he said.
Smotherman repeatedly denied all allegations made in dealers' complaints. He said they signed auction contracts that specified an “absolute” auction, instead of a “reserve” auction. A reserve auction is when a product can only sell once bids reach a minimum price as specified by the seller; an absolute auction offers products with no minimum dollar amount to the highest bidder.
“My job as an auctioneer and our company is to try to bang the public and everybody that’s there for as much money as we can get out of them,” Smotherman said. “We can only get what the market will bear and then we have to drop the gavel and move to another piece.
“These guys don’t want to pay the freight (to get their product to the auction). They don’t want any risk at all. They want me to eat all the freight, they want me to throw money back at it and they just want to hope and pray it does good. And if it doesn’t, then I’m the devil and they want to write a bunch of bad stuff (online) about it,” Smotherman said.
Smith, the BBB investigator, said there’s a possible link between Midwest Public Auction and another group of powersport auctioneers currently under indictment in Georgia for theft, fraud and racketeering relating to their auction business. Leon McGregor, one of those indicted, was registered earlier this year as the owner of the Midwest Public Auction website, MidwestPublicAuction.com. The website has been taken down.
“It looks like the website that they were using at the time, MidwestPublicAuction.com, has changed, which is what we still have as their website on our report,” Smith said. “But that has changed to InvoiceProtectionPlan.com.
“It’s clear that MidwestPublicAuction.com was the web domain they were operating under and it is MidwestPublicAuction.com that is registered to Leon McGregor,” he added.
Smotherman denied any ties to McGregor or the other auctioneers under indictment in Georgia.
“I’m nowhere near linked to those guys. I’m my own separate entity,” he said. “I pay my people, where (those under indictment) would take the product, get the title and never pay them, file bankruptcy and all that crap.”
The BBB expects to finish reevaluating all the reopened claims against Midwest Public Auction by next week. At that time it will make a decision on the company’s rating.
Johnny’s RV vs. Midwest Public Auction
Bowen, the owner of Johnny’s RV, originally signed a contract to auction nine RVs at an Aug. 12 Midwest Public Auction sale. However, he backed out of that contract after reading reports from powersport dealers online who said to avoid doing business with the auction company. But then Bowen changed his mind again when he said Smotherman persuaded him to remain in the auction during a phone conversation.
“He called me on the phone. We talked for 30 minutes and he promised me all this stuff,” Bowen said. “I said, ‘How do you guarantee you’re going to get all this money?’ He said he had bidders in the audience and they would bid our stuff up if it doesn’t bring the money. He was enthusiastic and convincing.”
Smotherman denies ever speaking with Bowen.
“The man has never spoke to me a day in my life. Ever,” he told RV PRO.
Bowen decided to only auction five items at the Aug. 12 sale and sent dealership employee Mark Peters to the auction to ensure his RVs – a 2012 Alpine 3600, a 2012 Raptor 410, a 2012 Sprinter 327, a 2007 Sun Seeker and a 2010 Damon Challenge motorhome – netted somewhere near the $218,040 total he said he expected and discussed with Smotherman. The four trailers, with an estimated value of $153,040, sold for just $98,000 and Peters successfully removed the Challenger from the auction before it could be sold.
“When the Sun Seeker sold first for $10,000 less than the ($33,500) price we expected, I yelled at the auctioneer to stop the auction,” said Peters, who added he was then approached by Smotherman, who offered to help remove the remaining RVs from the auction block.
“(Smotherman) said he was just an employee. I didn’t even know he was the owner. I found out later that the ‘employee’ was him when I saw his picture online,” he said. “He had no paperwork on our RVs and said he knew nothing and was just the guy there to run the sale.
“While I was speaking with him in another room, they moved the other trailers up on the run list and auctioned them quickly,” Peters said. “I got the keys for the motorhome and drove it off the lot.”
Smotherman told RV PRO that he did meet Peters at the auction, but denies misidentifying himself and said the events unfolded differently. He said Peters didn’t actually attempt to stop the auction until the motorhome was the last item available from Johnny’s RV. His account actually paints Peters as being helpful to those who purchased the RVs.
“He helped one customer find the remotes to the TVs, the manuals and some keys (in the RVs that sold),” Smotherman said. “She [the customer] bought two of them, and he’s helping her walk through the RV, looking through doors and helping her find them.”
Midwest Public Auction marketed the Aug. 12 auction as being replete with 1,500 items and hundreds of customers, according to Bowen. Smotherman also told RV PRO that 400 motorcycles were at the Aug. 12 auction. Peters said neither was the case during the sale.
“They maybe had 20 motorcycles, if they were lucky,” he said “They had about 30-40 lawn mowers and ATVs, a few motor bikes, motors for lawn mowers and go-karts, and round hay bales.”
An auction item run list acquired by RV PRO from the Aug. 12 sale shows only 64 items were available. Smotherman declined to go into detail on what was for sale that day.
“I don’t have that information in front of me. We have 20,000 square feet there,” he said, adding that the auction room was filled wall-to-wall with products on Aug. 12. “I don’t know why that’s relevant information unless you’re an FBI agent.”
While Peters spoke with Smotherman in another room, he said the auctioneer sold three more of Johnny’s RV’s units for a fraction of their value.
Johnny’s RV is waiting on a $73,250 payment from Midwest Public Auction for the RVs that sold. Smotherman said the dealership should receive payment for three of the trailers sometime this week. The payment for the fourth trailer may have to wait, he said, because it was grouped with the motorhome that Peters drove off the lot.
“My attorney is going to get back with me on the other one to see what we’re going to do because (Peters) breached the contract,” Smotherman said. “Nobody ever says anything about my pay. I pay everybody. If I didn’t, the Attorney General would arrest me in Missouri. I pay everybody. That’s not the issue.”
Johnny’s RV also filed a police report in Mobile, Ala., against Smotherman for theft of property by deception. Smotherman said the detective who filed the report, Officer Travis Smith, told him the case had been dropped. However, the Mobile Police Department said the case is still under investigation.
“(Officer Smith) won’t call me back. I think there’s some old good ol’ boy stuff going on there,” said Smotherman, who said he is planning to sue Johnny’s RV for filing a false police report and for libel relating to claims it made against Midwest Public Auction on several websites.
“You can’t go around telling people that I stole a quarter million dollars’ worth of RVs when I got contracts that he signed giving us permission to sell them at absolute sale,” he said.
Invoice Protection Plan
Dealers who feel they were victimized by Midwest Public Auction’s practices say they were enticed to sell units through the company because of its rebate program, marketed as the “invoice protection plan.”
“They present it as a very glossy, shimmering program that in reality is a debacle,” said Webb, of Johnny’s RV.
The invoice protection plan promises up to $40,000 to dealers if their auctioned units don’t reach a desired amount. That desired total is invoiced by the dealer on a document provided by Midwest Public Auction prior to the auction contract being signed. The auction company stamps “approved” or “denied” next to the units on the invoice and returns it to the dealership. Only the approved units are allowed to go to auction.
“That is where the deception happens,” said Sherry Dickerson, president of Big Boys Toys in Bozeman, Mont.
Dickerson said the dealership expected to receive almost $60,000 for two ATVs and six snowmobiles from a Midwest Public Auction sale earlier this year, but only got $20,000.
“Midwest Public Auction says they are not a reserve auction, and somewhere in little print on the contract it says that. But where they get everyone is when they stamp ‘approve,’ and at that point you’re thinking it’s all a great deal,” she said. “Then they give you the impression that the invoice protection plan is basically insurance and they will cover that amount of money. So, no matter what, you think you’re going to get that amount of money because of their protection plan.”
The invoice protection plan implements a tiered system that decides how much money each dealer receives after a sale. Three tiers divide dealers into three categories: those selling two to four units; five to nine units; or 10 or more units. It’s only the dealers in the 10 or more unit tier that are eligible to receive the maximum rebate of $40,000 – and that’s if their products auction for more than $251,000.
Smotherman said dealers are provided specifics on the invoice protection plan before they sign a contract and they shouldn’t always expect the $40,000 maximum rebate.
“(The invoice protection plan is) not designed to make you whole. If that was the case, every dealership in the country would send us their product and we’d just guarantee them money no matter what it brought. How dumb would that be?” he said.
Doyle Richardson, owner of Highview Truck & RV in Webster City, Iowa, said he wished he paid more attention before he signed his auction contract.
“The way they were selling it to me, the invoice amount was supposed to be the bottom dollar amount that each one of those units would be sold at,” said Richardson, who filed a complaint with the BBB against the auction company last year.
Richardson agreed to auction three units – a 2009 Palomino Sabre fifth wheel, a 2011 Palomino Gazelle travel trailer, and a 2008 Timberland Wedge travel trailer – through Midwest Public Auction last year. He expected the units would earn $46,500, which was the total he said he wrote on the auction invoice form. The units actually sold for $22,200 and he purchased the Sabre unit back from the buyer to mitigate the losses he incurred by the sale.
“I lost close to $15,000 to $16,000,” he said, adding the sale almost forced him out of business. “The only thing that really saved me is that campers began selling again about a month or two later. I also ended up having to borrow money against my home to pay the difference so I could pay off my floorplan on those units.”
Richardson said after the sale he told Smotherman over the phone that the invoice protection plan was deceiving.
“Smotherman basically told me, ‘Well if you want to fight it you can come down here,’ and he said, ‘I guarantee you’ll lose; our contracts are ironclad,’” he said. “I almost blocked this out of my memory because I feel like an idiot for falling for it.”