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. Last Updated: 07/27/2016

Sotheby's Investor Criticizes Board's Choice of Chairman

NEW YORK -- The largest outside shareholder in Sotheby's Holdings says electing the son of the company's former chairman to its board would represent an inappropriate conflict of interest in the face of the continuing criminal investigation into price-fixing at the auction house.

Sotheby's and its rival, Christie's, are the subjects of a Justice Department investigation into allegations that the auctioneers fixed commissions charged to buyers and sellers for several years. Christie's disclosed Jan. 28 that it had agreed to cooperate in exchange for leniency, and people involved in the case said prosecutors were in the late stages of evaluating possible criminal charges involving Sotheby's.

A. Alfred Taubman, the wealthy real estate developer who owns a controlling interest in Sotheby's, resigned as its chairman in February after Christie's disclosure. Taubman retains voting control of the company and its board through stock ownership.

His son, Robert, was scheduled to replace Taubman on the board in April, but the company's annual meeting was postponed at the last minute after objections by Ronald Baron, whose investment funds are the largest outside investors in Sotheby's.

"I believe Robert Taubman's appointment to be inappropriate at this time," Baron wrote to investors in his funds in a quarterly report obtained Tuesday. "We believe Robert Taubman will soon recognize the enormous conflicts of interest he will face.

Baron also said other board members were exceptionally close to Albert Taubman. Baron also complained that he had been assured several times in recent months that there was no substance to the federal price-fixing investigation.

Baron questioned the independence of Sotheby's board in a filing with the Securities and Exchange Commission in April, and he has been negotiating with the company over the makeup of the board. Baron's funds have invested nearly $500 million in Sotheby's stock, which has lost about half its value in recent months. But Baron sought to reassure his investors that Sotheby's long-term prospects would be strong after the conclusion of the federal investigation.

A spokesman for Sotheby's declined to comment on Baron's remarks and said that the annual meeting had not been rescheduled. A lawyer for Albert Taubman also declined to comment, and a spokeswoman for Robert Taubman, president of Taubman Co., said he would have no comment.