Coming Soon to Your Town: Fake 'Madoff' Auctions?

Ads for "Bernie Madoff Auction" sales have been popping up across the country in recent weeks, getting the word out in such places as Columbus, Ohio, and Charleston, S.C., by placing big stickers on the front page of local newspapers. The ads begin, "Due to losses caused by Bernie Madoff," and then detail such treasures as original art by Peter Max, Salvador Dalí and Norman Rockwell — as well as Rolex watches and "other flashy items" — that are to be sold to "recover losses from Ponzi scheme." Trouble is, it's hard to tell whether any of the merchandise at these auctions was owned by Madoff or those he ruined or if the ads are just a dubious way to drum up traffic for run-of-the-mill estate sales. (See a Madoff family photo album.)

Most of these auctions are arranged by Southern Star Auctioneers, a Georgia company run by Dion Abadi, who has faced a number of official complaints and fines in recent years in multiple states. At one so-called Madoff auction held this fall in West Palm Beach, Fla. — a community hard hit by Madoff, who once owned houses and other property in nearby Palm Beach and who is now serving a 150-year prison sentence for his massive Ponzi scheme — many potential bidders exited fuming. "They all thought it was Madoff stuff, and it's not; it's from all over," an attendee told a local television station. A couple weeks later, in Naples, Fla., Abadi held another "Madoff" auction at which many bidders said they could not discern whether any merchandise was from Madoff or his victims. (See pictures of the demise of Bernard Madoff.)

Abadi did not return numerous phone messages, but his brother Gavin Abadi, an auctioneer also involved in the "Madoff" events, told TIME that Madoff victims do indeed provide merchandise for the auctions and that "we're getting inventory from them every single week." The problem, he said, is that most victims ask to remain anonymous. Southern Star put TIME in touch with one Madoff investor who said he lost millions in the Ponzi scheme and confirmed that he had given the Abadis some artwork to auction. But while that person said he was happy with the price the Abadis got him, he would not let TIME use his name and said he was troubled by Southern Star using "misleading ads" to "cash in on the Madoff tragedy."

Gavin Abadi acknowledged that the auction ads "may need tweaking." When told that bidders had complained that no Madoff estate items were on the block, as the ads seem to imply, and that bidders also didn't know whether any items were from Madoff victims, he said, "If that's a major concern, we should look into it and perhaps change some things," including disclosing to potential buyers which items are or aren't from Madoff victims. He said that he and his brother were "not looking to mislead or misrepresent. The victims we've been dealing with are so very happy with us and do feel we've truly helped them."

But Ilene Kent, a Madoff investor in New York City who now coordinates a victims' group called the Network for Investor Action and Protection, says Southern Star's advertising "seems deceptive at best" and makes her "feel like we're being used to lure people into auctions for this guy. If so, that really just adds insult to our injury." While Southern Star says it's using the ads as a way to get more bidders out to help Madoff victims, Kent fears Abadi is "just appealing to morbid public curiosity about how the mighty have fallen. But it wasn't just the mighty who got hit in this." (See 25 people to blame for the financial crisis.)

Recent ads have directed readers to madoffhelpline.com, a bare-bones site that consists of a few sentences and an e-mail address. "Have You Been a Victim of Bernie Madoff Ponzi Scheme?" asks the grammatically challenged site, which also misspells Madoff's name: "If you have been a victim of the Maddoff ponzi scheme and would Like to liquidate your fine art or jewelry at one of our future auctions contact us with a brief description of your inventory."

The auction ads used to reference a much more extensive site, Madoff-Help.com, a news and assistance site for Madoff victims, until its founder, Ron Stein, a certified financial planner in Huntington, N.Y., told Abadi to stop using it in his ads. "I guess he thought it gave them more credibility," says Stein. He says Abadi complied and apologized, but Stein nevertheless felt that "something just seemed unethical" about Southern Star's advertising.

It wouldn't be the first time Abadi has faced such questions. Last year the Florida Board of Auctioneers, which is part of the state's Department of Business and Professional Regulation, sanctioned Abadi twice for violating its rules regarding "false, deceptive, misleading or untruthful advertising." In 2007, Abadi's Illinois auction license was suspended indefinitely for failure to comply with the state's continuing-education requirements. He also had a run-in with Wisconsin regulators in 2002 for "failing to include required information in a published advertisement." Gavin Abadi would not discuss his brother's infractions but said that the two of them were "always willing to make any adjustment to an ad."

Critics say the auctions are another example of a "marketing to Madoff victims" campaign by industries ranging from life insurance to real estate. A common agenda item for Madoff-victim groups, say their leaders, is the relentless mailings for offers like life settlement or selling a life-insurance policy to a third party for a profit. (See TIME's Wall Street covers.)

(See TIME's Best Travel Gadgets of 2009.)

Still, as much as issues like questionably advertised auctions and life-settlement deals may vex Madoff victims, going after such bottom feeders is low on their list of priorities. The auction ads "are a sad commentary," says Ronnie Sue Ambrosino, a Madoff victims' group leader in Arizona. "But we have much bigger fish to fry."

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