Cash in those compensation certificates

May 15 marks the day when the vendor certificates, issued during the settlement of the Sotheby’s-Christie’s price-fixing case, will finally mature.

Some $125m worth of certificates were issued in 2003 but it appears the vast proportion have not been used and can soon be redeemed in cash.

It emerged in June 2003 that part of the compensation package would be made in the form of transferable certificates that could be used only to pay future vendor charges. Compensation was due to both buyers and sellers at Sotheby’s/Christie’s during the period 1993-99 when the two parties were deemed to have colluded on charges.

Regular sellers at Sotheby’s or Christie’s found the vendor’s vouchers useful, but according to James Tharin, CEO of Chicago Clearing Corporation, the US firm approved to trade in auction house class action certificates, only around $31.5m worth of certificates have been redeemed – $27.5m of those traded by his company.

Accordingly, the two major auction houses (who share equal liability) can now expect a rush to the door as the remaining $93.5m mature to their face value.

Sotheby’s balance sheet shows they wrote off the full amount at the time, although it is uncertain if they have either allocated the funds for repayment or have the administrative capabilities to cope with a multitude of claims. CCC estimate there are in the region of 60,000 certificate holders.

Converting vendor certificates to cash is relatively straightforward although, given that the settlement was made in New York, non-US citizens must have their applications rubber stamped by the US Embassy (at a cost of about £75).

Accordingly, some voucher holders may choose to sell them to CCC who are currently paying 94 cents in the dollar with no administration charges.

Those who received monies from the price-fixing settlement also have until June 15 to retrieve the tax charged by the US Internal Revenue Service. In 2003, when compensation cheques were issued to those who had bought and sold in North America, many were surprised to see that the US Federal tax authorities had deducted a withholding tax from the awards on the grounds that the partial repayment of buyer’s and seller’s premiums constituted earnings in the US.

As previously reported, CCC devised a scheme to enable European dealers and collectors to recoup the tax of around 30 per cent from the IRS. So far more than 200 non-US residents have taken advantage of this retrieval service, amounting to more than $3m, but an estimated $30m is still unclaimed. The CCC charge a fee of 15 per cent of the total recovery up to a ceiling of $2500.

By Roland Arkell