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SOUTH Africa’s auction profession is riddled with corruption, according to Tirhani Mabunda, chairman of the South African Institute of Auctioneers.

In an analysis published on the institute’s website, Mabunda referred to the Auction Alliance scandal last year and compared members of the profession with speeding drivers passing a traffic accident. They slowed down for a few kilometres, but were “soon back to their speeding ways”.

“Regretfully, corruption and kickbacks continue to be as rife as they were before the Auction Alliance scandal,” he said.

Mabunda accused “corrupt and conniving” attorneys, liquidators and auctioneers of forming a triangle in which lucrative liquidation work was circulated among a handful of practitioners. Those on the outside were starved of work.

Mabunda also targeted the banks, saying they were intricately related to the profession.

“Who is the first to know when a company is in trouble? The accountants,” he wrote.

The accountants went to their “friends” the attorneys, who saw a way to make extra money. The attorney went to his friends at the bank and warned them about the imminent financial ruin of the company, Mabunda said.

Then the attorney or the banker would tell their friends, the liquidators, who would line up a friendly auctioneer.

Mabunda said the auctioneer then paid the liquidator and/or the attorney, who was also paid by the liquidator. And the attorney paid the accountant for getting the ball rolling.

By the time the creditor, the bank, was officially informed that the company was going to be liquidated, all the disposal operators were in position.

Mabunda said only then did the creditor go to the master of the court to get a provisional liquidation order. The master was meant to use his discretion in appointing a liquidator, but the bank told him with which liquidator it liked to work to get things done efficiently.

Everything is done in cash so

Who is the first to know when a company is in trouble? The accountants

that there is no paper trail, according to Mabunda.

He said buyers were not squeaky clean either. One way they manipulated the system was to collude between themselves. They bid up to an agreed price — say 50% of the item’s value — and then all but one member stopped bidding. With no counter offers, this member got the item.

After the legitimate auction, the buyers held their own private auction and bid the item up to its real value. The final 50% was then divvied up between the members.

Not all auction houses were corrupt, though, and not all liquidators, banks and attorneys were either, Mabunda said.

The MD of Park Village Auctions, Roy Lazarus, said margins in his business were so slim that “if I had to give kickbacks I would go insolvent”. He said Park Village got the work it did because it had the infrastructure to store stock.

Aucor director Bradley Stephens said outsiders “know about 5% of what goes on in the industry” — but that the Aucor Property Group was a “clean” operation. He said liquidations made up about 2% of the company’s turnover.