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DATE News (chronologically)
05/26/10
automotive
Kruse Auto Auctions gets shut down by government  Dean Kruse joined his family’s auction business more than 50 years ago.

Tuesday, he watched the empire slip away, as the Indiana Auctioneer Commission stripped Kruse and Kruse International of their licenses to conduct auctions for years, condemning Kruse for bad business practices that left dozens of consignors waiting to be paid.

The revocation of Kruse International’s auction house license means Kruse International cannot conduct auctions and cannot apply for a new license for seven years. Dean Kruse’s personal license was suspended for two years, at which point he can apply for reinstatement – on indefinite probation.

The commission, part of the Indiana Professional Licensing Agency, rejected several initial settlements proposed by the Indiana Attorney General’s Office, saying they did not come down hard enough on Kruse and his auction house, which had more than 70 complaints filed against it with the state.

The commission’s decision leaves the auction company’s signature event, its Labor Day weekend classic car auction in Auburn, in limbo. Kruse International grew the annual event from a grass-roots effort in 1971 to a worldwide attraction that lasted nearly a week.

Another auction company could rent the Kruse Auction Park grounds and conduct an auction, but the Kruse name has suffered among classic car buyers and sellers.

Auburn Auctions LLC, a company created by Kruse employees, held an auction at the park this month, but inventory was down and crowds were smaller than past auctions.

Kruse, 68, said after the hearing Tuesday that he will weigh his options as to selling off his assets and hopes to make a decision within weeks. The loss of Kruse International’s auctioneer’s license makes the company worth “millions” less, he said.

During the nearly four-hour meeting Tuesday, board members did not hold back criticism of Kruse and the business practices that led to his downfall. Several times, board members asked Kruse’s attorney and the state’s attorney general to go back to the drawing board and add tougher penalties to proposed settlements, including a $35,000 fine added to Kruse International’s license revocation.

But the commission said that civil penalties should take a back seat to consignors whose unpaid claims with the attorney general’s office still total about $300,000, and they expressed concern Kruse will declare bankruptcy and the debts won’t be paid.

A subdued Kruse told the commission that his company was in the habit of releasing vehicles to trusted customers before receiving payment. It worked when those longtime customers paid him promptly, but when the economy tanked, many customers stiffed him – eventually to the tune of about $6.7 million, he said.

Kruse said he has taken out personal loans and sold personal property to keep Kruse International afloat. Dozens of lawsuits involving Dean Kruse and his companies, stemming from unpaid consignors and unpaid loans, are pending in DeKalb County courts and several states.

Kruse told the board he is doing all he can to avoid bankruptcy. “I want to get it cleaned up,” he said. “And I feel I can.”

Several commission members wondered aloud how the company allowed the practice of backdating checks and shuffling funds to continue since at least March 2008, when the first complaint was lodged with the state.

“It kept escalating,” said Chairman Jimmie Yagle, who said seeing Kruse’s unpaid consigners compensated was the only reason he was willing to consider not permanently revoking Kruse’s license. “It infuriates me. Infuriates me to no end.”

The state attorney general’s office and Kruse’s attorney urged the commission to temporarily suspend – not revoke – his personal auctioneer’s license, thus allowing him to act as a consultant to other auction companies and earn money to pay off his debts.

The commission balked, rejecting proposed suspensions of six and nine months before accepting the two-year suspension.

Indefinite probation will ensure the commission will retain control, Deputy Attorney General Amanda Bailor said.

Kruse must submit quarterly reports from a certified public accountant on the status of money owed consignors. The money must be paid within 18 months of the time he gets his license back, Bailor said.

The board also added a provision that bars Kruse from applying for an auction company or auction house license for five years.

Several board members expressed misgivings that even that agreement was too lenient. Board member Dianna Hancock was the only one to vote against it.

Kruse told the board the classic car collector industry is suffering with the struggling economy, and his family name has suffered from bad publicity. Those factors will likely continue to impede Kruse’s ability to pay off consignors, Hancock said.

“I think that well is dry, or it’s drying up,” she said. “And there comes a time you have to say, I’m a brilliant, intelligent businessman; I can do this again, with morals and ethics, in another industry.” Journal Gazette

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