As I continue to teach auctioneer continuing education (CE) throughout the United States, two terms frequently come up in regard to auctioneers handling their client’s auction proceeds.
Commingle
Convert
Both these terms regard actions that should not take place when holding client funds in a trust or escrow account. We wrote about such accounts here: http://mikebrandlyauctioneer.wordpress.com/2012/06/23/auctioneer-trust-accounts/Commingling is the placing of personal funds into an account designed strictly for client’s monies.Conversion is the placing of clients monies into an account designed strictly for personal funds.
To avoid both commingling and conversion, an auctioneer must simply keep client monies and personal funds completely separated — with at minimum two different accounts.
Why would an auctioneer commingle or convert?
Commingling occurs most often when there aren’t sufficient funds in the escrow/trust account to cover payouts to clients. Conversion occurs most often when there is a shortage in the auctioneer’s expense account, and client monies are used to cover that deficiency — essentially amounting to theft.
Penalties for commingling can include license suspension or revocation. Penalties for conversion can include license suspension or revocation, and even criminal charges.
These financially-related misdeeds have become more prevalent in recent years as bidder pools now include buyers from around the world and buyers have become more creative in trying to scam auctioneers and sellers (counterfeit money, credit card chargebacks, checks written on closed accounts, etc.)
Further, payment types now include wire transfers, different types of checks, credit card, debit cards, electronic payments and other instruments — all with different clearance terms and conditions.
Timing and clearance of such payments, in coordination with contractual obligations to pay the client, are much more complicated today than they were in 1939 when the above auctioneer was trying to sell a pitchfork in Tenstrike, Minnesota.
Nevertheless, auctioneers must endeavor to keep differently titled monies separated — and just as important — keep their client informed as to any client-money-related issues.
Mike Brandly, Auctioneer, CAI, AARE has been an auctioneer and certified appraiser for over 30 years. His company’s auctions are located at: Mike Brandly, Auctioneer, Keller Williams Auctions and Goodwill Columbus Car Auction. His Facebook page is: www.facebook.com/mbauctioneer. He serves as Adjunct Faculty at Columbus State Community College and is Executive Director of The Ohio Auction School.
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