(FORTUNE Magazine) – Who says crime doesn't pay? nearly three years ago venerable auction houses Sotheby's and Christie's pleaded guilty to colluding to fix commission fees during the 1990s. The two firms paid more than $600 million in fines and to settle civil lawsuit damages. After an ugly, high-profile trial, Sotheby's chairman, A. Alfred Taubman, cooled his heels in prison for ten months and CEO Diana "Dede" Brooks languished under house arrest in Manhattan.

Apparently the world's rich and famous have very short memories. Thanks in part to a couple of significant art auctions earlier this year, Sotheby's fortunes have soared. The 260-year-old firm posted a 55% surge in commission revenues in the first half of the year. Among its huge wins were the landmark private sale of the Forbes collection of Faberge eggs (the price was undisclosed but reported to be around $110 million) and the record-breaking auction of Pablo Picasso's 1905 painting "Garcon a la Pipe," which fetched $104.2 million. (Sotheby's take on the Picasso alone was reportedly $11 million.) Over the past year Sotheby's stock has climbed 89%, and its operating margins are quickly returning to early-1990s levels of 20%. (Christie's was taken private in 1998 by French tycoon Francois Pinault and does not report financial results.) "Sotheby's isn't just surviving in the wake of the price-fixing scandal; it's thriving," says Bob Goldsborough, an analyst at Ariel Capital Management in Chicago, which owns nearly 23% of Sotheby's class A shares, bought as the stock was tumbling during the scandal.

The man credited with turning Sotheby's around is CEO William Ruprecht, a 25-year Sotheby's insider. Ruprecht, who was relatively unknown in international art circles, landed the job in February 2000 when Brooks and Taubman were forced to step down as the government probe into the price-fixing scandal heated up. With the company drowning in debt, Ruprecht moved quickly to shore up the balance sheet and start shedding noncore businesses. Earlier this year Sotheby's sold its real estate brokerage group to Cendant Corp. for $100 million. (It will receive an ongoing license fee for use of its name.) Indeed, despite the fact that Sotheby's and Christie's soaked their customers for years, they've remained impervious to challenges both from other auction houses--like Phillips in the late 1990s--and from online auction sites. (Sotheby's ended its money-losing online partnership with eBay early last year.) Sotheby's and Christie's still control more than 80% of the $5 billion international art-auction market, a share that is roughly the same as before the scandals.

And the good times are likely to keep on rolling, say analysts. "A typical art cycle can last three to six years," says Rommel Dionisio, a senior equity analyst at Roth Capital Partners. "I think we're still relatively early in this rebound." That said, the fall art auctions will probably be more muted, since the only major sales are those of the estates of Johnny and June Carter Cash and, in October, French and Russian furniture and porcelain from the estate of Giovanni Agnelli, the late chairman of Fiat, and his wife, Marella.

Perhaps the largest remaining question about Sotheby's concerns its biggest shareholder, Taubman. Though he's no longer directly involved in day-to-day operations and has relinquished his seat on the board, he owns 80% of the class B shares of Sotheby's, which gives him majority voting control of the company. (His son, Robert Taubman, remains a director.) Two years ago, while he was in prison, Taubman and the board were interested in selling the firm but were unhappy with the offers that emerged. Now that the stock has rebounded, analysts wonder whether Taubman, 80, will sell some or all of his stake. Says Ariel's Goldsborough: "I think there is a stock price where Taubman would be a seller, and I don't think we're that far away from it." Maybe he'll invest the proceeds in Picassos. --Julie Creswell