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Saying that final resolution of the criminal antitrust case charging Sotheby’s Holdings Inc. with price-fixing was “inextricably intertwined” with a pending class action, Judge Lewis A. Kaplan of the U.S. District Court for the Southern District of New York refused to accept the auction house’s guilty plea Thursday. In the plea agreement with the government, the company admitted that it colluded with rival Christie’s International to fix sellers’ commissions. Sotheby’s agreed to pay $45 million in fines over a five-year period in the pact, which includes a clause stating the auction house will not be obligated to pay restitution to victims in the case. This clause was the sticking point for Kaplan. The judge is also presiding over the class action against the auction houses, which have reached an agreement in principle with plaintiffs’ lawyers to settle the case for $512 million. Kaplan said that his obligation to ensure that the proposed settlement is “fair and reasonable” to the class made him wary of accepting a plea agreement that prevents the government from seeking restitution. “I am, in a sense, being asked to pre-judge the adequacy of the settlement,” he said. His ruling came after Sotheby’s Senior Vice-President and General Counsel Donaldson Pillsbury admitted that in 1994 and 1995, senior officials at the auction house set up the price-fixing scheme with their counterparts at Christie’s. Later Thursday afternoon, former Sotheby’s chief executive Diana D. Brooks pleaded guilty to violating the Sherman Antitrust Act before Southern District Judge Richard M. Berman. Brooks told Berman in court, “I agreed to fix prices with respect to commissions charged sellers.” She will be sentenced on Jan. 5. Brooks’ plea leaves A. Alfred Taubman, Sotheby’s former chairman and to this day its largest shareholder, as a target of the government’s three-year criminal investigation into the scheme. The Sotheby’s plea agreement states that the Justice Department will not bring criminal charges against any current or former director, officer or employee of Sotheby’s, except for Brooks and Taubman. Christie’s was granted conditional amnesty by the government in return for its ongoing cooperation with the investigation. Pillsbury said after the hearing that talks with the government on a plea agreement go back to February. KEY ADMISSION Pillsbury admitted that the conversations between top officials at the auction houses resulted in a fixed, non-negotiable schedule of seller commissions. The result was that sellers were blocked from negotiating a more favorable deal for auctionable items with one or the other of two nominal competitors. If Kaplan had accepted the deal between the government and Sotheby’s, which he said was a “Type C” plea agreement, he would have had no discretion to alter its terms. It was only through his power to accept or reject the guilty plea that Kaplan retained any leverage over the sentence imposed on Sotheby’s. The judge said he felt “obliged to make a fully informed judgment” on the adequacy of the class settlement. He said he was therefore currently in “no position” to rule whether the class settlement or the plea agreement was appropriate, including whether the settlement would “make restitution inappropriate or superfluous.” The ruling came despite the desire of Sotheby’s lawyer, Steven Reiss of Weil, Gotshal & Manges, to settle the entire matter Thursday. Kaplan instructed Reiss and Assistant U.S. Attorney John J. Greene of the Justice Department’s Antitrust Division to submit papers stating “what the economic losses caused by the conspiracy really were.” “Without knowing that, I don’t know much about the adequacy of the civil settlement or this (agreement), notwithstanding it has a very large number next to it,” he said. He also instructed Sotheby’s to report to the probation department, which will produce a report that will have impact on his ability to accept or reject the plea. “I am looking for a serious submission here,” he said. “I don’t regard this as pro forma.” John Siffert, of New York’s Lankler Siffert & Wohl, represented Brooks.

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