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May 22, 2015 - Global Modern-art wrangle hits NYC court
COURTHOUSE NEWS SERVICE - New Zealand-based collector Stephanie Overton has sued eight New York-based art companies in United States District Court for the Southern District of New York to recover modern art by Picasso, Chagall, Modigliani, Magritte and others worth more than $10.8 million. Overton alleges that these entities knew or should have known that her artworks were improperly offered for sale by Timothy Sammons, Inc., an Upper East Side-based art dealer, who has faced financial challenges for the past two years, and thus the entities were not good faith buyers in the ordinary course, who could have obtained clear legal title under the Uniform Commercial Code (UCC).
[ARIS Commentary: The allegations raised in the Overton lawsuit are reminiscent of the facts underlying the art fraud perpetrated by Lawrence Salander and the Salander O’Reilly Galleries, in which a formerly trusted dealer defrauded consignors and investors to cover his and his gallery’s mounting debt. See May 16, 2015, “What art collectors can learn from art thief Larry Salander”, Barron’s, http://online.barrons.com/articles/what-art-collectors-can-learn-from-art-thief-larry-salander-1431741126.
The Overton case represents another trend in the market, that is, the increasing burden of due diligence on art buyers. Overton has not sued the allegedly bad-acting dealer, who presumably has empty pockets, but the first down-stream buyers of her artworks for their failure to recognize “red-flags” in the disputed transactions (such as the below fair market price and lack of documentation) and conduct reasonable due diligence into the ownership of the artworks or the dealer’s authority to sell them.
To avoid Overton-like problems going forward, collectors should conduct independent research on prospective art dealers including UCC lien checks. In addition, savvy buyers should consider acquiring title insurance on artworks consigned for sale with dealers or galleries as the title insurer will ensure that the dealer or gallery follows the agreed-upon transactional process and consignment parameters and to show that they have followed highest due diligence standards for their own benefit and court-determination of their good faith, buyer in the ordinary course status under the UCC.]
May 14, 2015 - Dealer, family battle over $6M of pop artist’s work
NEW YORK POST - Michael Chutko has sued the estate of the Pop artist Marjorie Strider in New York state court to be declared the owner of certain Strider works (now valued up to $6 million) and to stop the estate from intervening with the sale of these works. The estate alleges that Chutko fraudulently came into possession of numerous Strider works. Chutko contends that from 2007 to 2010 he legally purchased directly from the artist specific pieces and spent additional funds in restoring, storing and marketing Strider’s work.
May 11, 2015 - German art dealer busted trying to sell fake Giacometti sculpture[ARIS Commentary: The Giacometti art forgery scheme, which some experts are comparing to the forgery scandal of Wolfgang Beltracchi, highlights the question of what if any paperwork addressing authenticity and ownership accompanied this alleged forgery and what, if any, documentation a buyer should normally expect to receive from the seller as part of pre-closing due diligence review in a multi-million dollar art transaction. To avoid purchasing fake or forged artworks, all provided documentation should be carefully reviewed by an independent expert, such as a title insurer, whose underwriting process will stress-test this and other information to assess passage of clear legal title with often an additive impact on questions of authenticity that buyers should increasingly address in tandem with review by art (history or forensic materials) scientists.]
ARTNET NEWS - Several individuals including one known as simply Wolf G. are being prosecuted in Germany for knowingly selling a forged Giacometti sculpture with falsified documentation. The forged work may have been created by the Dutch Giacometti-forger Robert Driessen. Many of Driessen’s forgeries are still in circulation even though in 2011 police found and melted over 1,000 of his bronze Giacometti forgeries. Several times, Wolf G. attempted to consign or to sell privately this particular work before being caught by an undercover agent.
April 28, 2015 - Film producer Vittorio Cecchi Gori accuses his actress ex-wife of stealing a $1 million Basquiat
ARTNET NEWS - An Italian film producer through his production company (G&G Productions) has sued his ex-wife in United States District Court for the Central District of California for conversion and to recover a Jean-Michel Basquiat painting that once hung in the couple’s home in Rome. The producer alleges that title to the painting was transferred from him personally to G&G Productions and that his wife unlawfully took the painting after their divorce.
[ARIS Commentary: The G&G Productions case illustrates a common art title risk related to matrimonial disputes, that is, questions of theft or lack of authority to transfer and co-ownership of artworks which may or may not be deemed marital property. Likewise, it is important for spouses and soon-to-be married parties to establish clear legal title to their art assets referenced in pre- and post-nuptial agreements and in the event of divorce property divisions. This clarification will protect the owner-spouse during the marriage or following the divorce as well as mitigate the actual or perceived risk for downstream buyers in the event of future sales.]
April 12, 2015 - Fine-art sales often come with strings attached
THE WALL STREET JOURNAL - Galleries are increasingly placing conditions and restrictions on the resale of art in sales agreements. Such restrictions typically prohibit the resale of art at auction or to individuals without prior permission by the gallery. Galleries claim that flipping artworks ultimately hurts the artist and collector; if for example, the work doesn’t sell at auction or sells below the low estimate. Opponents to resale restrictions argue that restrictions are used primarily to protect the gallery and its commission.
[ARIS Commentary: Gallery-imposed contractual restrictions and conditions on the future resale of art are fairly common in the art market and create a “right of first refusal” lien often overlooked by or unknown to the future buyer. Whether or not the clause is enforceable and attaches to the subject artwork or the contracting party (i.e. past buyer, who becomes the current seller), buyers should investigate whether the work was ever encumbered by any such restrictions to reduce the risk of being drawn into any potential future litigation.]
March 23, 2015 - Paul Walker’s estate wants his cars back
COURTHOUSE NEWS SERVICE - The estate of Paul Walker has sued in California state court the estate of Rodger Rodas to recover Walker’s full or partial title to at least 20 cars, an accounting of such cars allegedly illegally sold by Rodas’s estate and damages for conversion. Walker and Rodas died together in a car crash in 2013 and purportedly co-owned many valuable automobiles.
March 20, 2015 - Hunt for $40M pink diamond dazzles in NY
COURTHOUSE NEWS SERVICE - Heirs of Renato Angiolillo, an Italian General, have sued Christie’s in New York state court alleging that they are the true owners of a rare 34.65 carat pink diamond that Christie’s sold in 2013 at public auction. The heirs claim that their father or grandfather purchased the gem for his second wife, Maria Girani, who took custody of the jewel during her lifetime. After Angiolillo and then Girani died, the gem was to have been inherited by Angiollio’s heirs. At some unknown point, the diamond went missing. Girani’s son, Marco Oreste Bianchi Milella, said that it was not among his mother’s possessions at the time of her death. Others suggest that Milella may have illegally sold the diamond as he sold other gems previously in his mother’s custody. Christie’s reportedly knew about the heirs’ claim before the sale but told them that the consignor, who purchased the diamond for $20 million through a broker, acquired valid title under Swiss law.
[ARIS Commentary: The Angiolillo diamond litigation highlights the fact that common title risks including prior theft, family estate disputes and illegal sales may also apply to artworks catalogued and sold in public auctions.]
March 3, 2015 - Nonprofit wants Ty Cobb’s bat back
COURTHOUSE NEW SERVICE - The Jack Miner Migratory Bird Foundation, a Canadian nonprofit organization aimed at tracking waterfowl, has sued in Michigan state court Kirk Miner, a former employee, and the Detroit Tigers Major League Baseball team. The foundation alleges that Mr. Miner stole Ty Cobb (1905-1926 MLB centerfielder) memorabilia and then sold some of the objects including a bat, ball and letters to the Tigers.
February 26, 2015 - Swiss businessman arrested in art market probe
FINANCIAL TIMES - Yves Bouvier, a leading figure in the art world and co-owner of Natural Le Coultre with freeports in Luxembourg, Singapore and Geneva, was detained by Monaco authorities on allegations of manipulating prices in the sale of important artworks by Picasso, Modigliani, Gauguin and other Masters. Monaco authorities suspect Bouvier of defrauding a number of high-net worth individuals in Europe, the U.K, the U.S. and Asia by millions of euros including through providing collectors with false documentation.
See also “Monaco FC owner Rybolovlev among alleged victims of huge art scam”, The Telegraph, February 26, 2015; “Leading Swiss art broker arrested over alleged price-fixing scam”, The Guardian, February 26, 2015.
February 25, 2015 - Finding misplaced art can be a lost cause
OBSERVER - Artists, lawyers and collectors report that their or their clients’ art has increasingly gone missing while in storage facilities or in the custody of dealers, galleries and auction houses. There are many reasons why art disappears including because of poor-record keeping or theft.
[ARIS Commentary: Collectors and artists should maintain current records of the location of their artwork on consignment and in storage as well as periodically check that their art is where it is supposed to be located. Buyers should be aware that title claims can derive from others’ missing art.]
February 21, 2015 - Fight over real-life Schindler’s list rages in court
THE FORWARD - Title to a suitcase of documents belonging to the late Oskar Schindler, the German industrialist famous for saving Jewish workers by employing them at his factory, is at issue in Jerusalem District Court. The Holocaust museum Yad Vashem claims it acquired legal ownership of the papers in 1999 as donee of a gift from the sons of Oskar's mistress. But a friend and heir of Oskar's estranged widow also claims to have title through Mrs. Schindler's marital rights.
February 11, 2015 - Leonardo da Vinci painting had been lined up for sale to British equity fund
THE TELEGRAPH - Swiss police in coordination with Italian authorities seized from a Swiss bank vault a newly attributed “Leonardo da Vinci” painting, which could be worth as much as $150 million. Investigators have suggested that the picture was illegally removed from Italy without a required export license and the supposed owner, who claims she inherited the picture from her grandparents, is not the rightful owner. An unidentified U.K.-based fund was in the early stages of negotiations to purchase the picture from the purported owner now under investigation.
February 4, 2015 - Collector sues IRS for $40 million in taxes paid on work by Monet, Picasso, Gauguin and more
ARTNEWS - Barbara B. Allbritton, co-executor of her late husband Joe L. Allbritton’s estate, has sued the United States Internal Revenue Service (IRS) in United States District Court for the Southern District of Texas to recover $40 million in estate taxes paid “under protest” because the IRS erroneously treated art owned by a family-owned entity as the decedent’s property. The IRS believes that this entity transferred ownership to 33 artworks collectively worth $139 million over a four-year period to Mr. Allbritton. Mrs. Allbritton strongly disputes any such transfers and points out that there is no documentary evidence showing the alleged changes in ownership.
[ARIS Commentary: The Allbritton-IRS dispute highlights the importance of accurately documenting the purchase, sale or gift of artworks including maintaining invoices, bills of sale, deeds, canceled checks and wire payment confirmations especially when art is held like other investment assets by family trusts or related entities. Title insurance can become the best evidence of the ownership status of the transaction along with the retention of underlying documentation to manage IRS or state estate, gift or sales tax issues.]
February 4, 2015 - Galleries’ records are subpoenaed
THE NEW YORK TIMES - Several lawyers have confirmed that their New York-based art gallery and dealer clients have received subpoenas from the Manhattan District Attorney’s Office requesting copies of sales and shipping records. Although state tax authorities would not comment on any audit, the subpoenas suggest that the New York state government is investigating (as it did in 2002) whether galleries and collectors are properly paying sales tax for expensive art sold in New York.
February 1, 2015 - With 1031 exchanges, art investors avoid taxes
THE WALL STREET JOURNAL - Industry experts suggest that a federal capital-gains tax deferral, known as 1031 IRC like-kind exchanges, commonly used for real estate investment is increasingly used for art assets. To pass IRS scrutiny and obtain the tax benefit, taxpayers must meet certain requirements including hold their art as an investment, sell and purchase new “like kind” art of equal or greater value within 180 days and use a qualified exchanger to manage the swap.
[ARIS Commentary: To avoid unwinding 1031 like-kind exchanges for art, for instance due to lack of “investor” status, taxpayers should follow established due diligence standards which investors typically apply to other asset classes such as real estate including acquiring title insurance (see ARIS News, September 1, 2013, May 23, 2013, May 16, 2013, October 5, 2011). Taxpayers should be cognizant that the art ownership risk, which is prevalent because the art market is opaque, unregulated and involves movable property, can derail a 1031 exchange.]
January 22, 2015 - Davos 2015: Nouriel Roubini says art market needs regulation
FINANCIAL TIMES - One the world’s leading economists, Nouriel Roubini, who is credited with predicting the collapse of the U.S. subprime housing market, stated during the Davos World Economic Forum that the art market is vulnerable to money laundering, tax evasion, insider trading and other unfair manipulation. Roubini predicts that the international art market must either self-regulate or be regulated before it is undermined by these weaknesses.
[ARIS Commentary: The depth of money laundering as one of the more recently emerging risks in the global art industry is increasingly being recognized. (See also ARIS News, November 12, 2014, March 25, 2014, November 5, 2013, July 28, 2013 and May 12, 2013 and underlying authorities.) As a result, banks and other parties in the stream of commerce must construct more effective anti-money laundering compliance for art assets. Government agencies are expected to start improving and coordinating their detection efforts including their enforcement of compliance obligations at the intersection of art and finance.]
For other sources addressing the same AML developments in particular, see http://www.pwc.com/us/en/risk-assurance-services/publications/trade-finance-money-laundering.jhtml, http://blogs.wsj.com/riskandcompliance/2015/01/09/the-morning-risk-report-trade-based-money-laundering-proves-tricky/; and http://www.fatf-gafi.org/media/fatf/content/images/National_ML_TF_Risk_Assessment.pdf at page 48).
January 21, 2015 - Italy seizes more than 5,000 looted antiquities in record haul
BUSINESS INSIDER - A joint Italian and Swiss police operation seized more than 5,000 antiquities worth an estimated $52 million from Swiss warehouses. The investigation identified a smuggling ring that took artifacts from illegal excavations in Italy, sent them to Switzerland for restoration, and moved the objects across borders for sale with fake provenance and authenticity documentation to Germany, Britain, the United States, Japan and Australia.
[ARIS Commentary: This record-breaking seizure highlights the continuing and growing problem of asset risk in the global art industry – in this case stolen art and antiquities moving in the stream of commerce with fake provenance and fake authenticity documentation and in particular across borders and national customs import and export checkpoints without detection.]
December 30, 2014 - Son of former Beatles manager wins $1 million art lawsuit
ARTNET NEWS - The son of the late Allen Klein, who managed the Beatles and Rolling Stones, has secured an order from a Manhattan Surrogate Court judge to recover more than $1 million of art from his father’s girlfriend, Iris Keitel. Keitel, who lived with Klein for 30 years, claims that Klein gifted her the subject artworks. Klein’s will left the bulk of his estate to his estranged wife and three children.
[ARIS Commentary: The Klein-Keitel dispute illustrates the challenge of determining whether a decedent made undocumented gifts during their lifetime, which are outside of their estate. Without clear and comprehensive estate and gift documentation, it is difficult for actual or potential heirs and donees to resolve their ownership dispute without resorting to expensive and time-consuming litigation.]
December 24, 2014 - Audacity of ‘dishonesty exclusion’ draws fire
COURTHOUSE NEWS SERVICE - Renaissance Art Investors, LLC (RAI), the largest investor in the now defunct, bankrupt Salander O’Reilly Galleries, has sued its insurance broker, North Shore Risk Management LLC, in New York state court for allegedly misrepresenting the then existing art insurance market in that there were no offered all risk art policies without the “dishonesty exclusion.” This exclusion purportedly barred RAI’s recovery from its insurer AXA Art for its loss of $42 million in Old Master art investments with Salander O’Reilly Galleries.
[ARIS Commentary: The latest lawsuit filed by RAI is a cautionary tale for private and institutional collectors (including museums, universities, family offices and investors) to carefully review their “all risk” art policy to assess whether the dishonesty exclusion or other similar fraud or criminal acts exceptions may prevent cover for potential title-related losses. If so, these collectors should consider acquiring title insurance for their new purchases of art and for existing or consigned collections as comprehensive protection for the ownership risk.]
December 12, 2014 - Italian pensioner awarded ownership of Gauguin stolen from London flat
THE TELEGRAPH - A court in Rome has found that an Italian man, who unknowingly purchased paintings by Gauguin and Bonnard from a railway auction in 1975, has title to the pictures. The works were stolen in the early 1970s from the London home of Mathilda Marks, heiress to the Marks and Spencer empire (see ARIS News, April 22, 2014).
[ARIS Commentary: Although to date and in the Italian legal proceedings no claimant has come forward asserting a claim of ownership to the works, an individual heir or institutional beneficiary of the Marks estate may later assert title to the paintings vis-à-vis the downstream buyer. It is also unclear whether any subsequent buyer would obtain clear legal title to the works under U.S. law, which provides that a thief cannot pass clear legal title even to a good faith purchaser.]
December 4, 2014 - Siblings quarrel over “mishandled sale” of Ad Reinhardt painting worth millions
ARTNET NEWS - Cyrus Greenspon has sued his stepsister Amy Greenspon, co-owner of Algus Greenspon gallery, in Manhattan Surrogate's Court for mishandling the sale of their late father's Ad Reinhardt painting. Mr. Greenspon contends that his sister had a conflict of interest in selling the painting to a friend and at an artificially low price. The work was resold several months later at allegedly twenty times over the initial sales price. Ms. Greenspon, who is a co-executor of the father's estate along with her mother, denies any wrongdoing and reportedly did not receive a commission for the sales.
November 27, 2014 - A son seeks art looted by the East Germans
THE NEW YORK TIMES - The former art collector June Weldon filed (and her estate has continued) a lawsuit in the German courts in Munich to confirm title to a Dutch still life painting by Adriaen Coorte vis-a-vis the son of Dresden collector Helmuth Meissner, whose collection including allegedly the subject Coorte picture was seized by East German secret police (known as Stasi) in 1982. Mrs. Weldon and her husband purchased the painting in good faith from a Swiss art dealer, who acquired the work at a Christie's auction in the Netherlands in 1988, without knowledge of the prior seizure. The Weldon family contends that their title should be upheld as Stasi actions were lawful governmental acts. Experts estimate that the Stasi seized more than 200,000 art objects from private collections between 1973 and 1989 in "tax forfeiture proceeding" and then sold objects abroad to finance the government raising more than $40 million a year.
[ARIS Commentary: Although the seizure of art objects by the Stasi art squad in East Germany is an ownership risk that has received very little attention as compared to Nazi looting during World War Two, it raises similar complicated moral and legal issues for art collectors and the art industry as a whole.]
November 19, 2014 - In France, fears that rare book and manuscript fund is a €500m fraud
ART MARKET MONITOR - The founder of The Museum of Letters and Manuscripts and the investment fund Aristophil, which buys and sells rare books and manuscripts, is under investigation for fraud, money laundering and other financial crimes. French officials suspect that Aristophil was part of a €500 million Ponzi scheme.
[ARIS Commentary: ARIS routinely works with art and alternative asset funds, fund associations and fund auditors to confirm that all fund purchase and sale transactions are conflict-free, arms-length and produce accurate ROI. This in turn helps assure investors that their art fund investments are protected, see ARIS News Release, September 20, 2012.]
November 18, 2014 - Finders keepers in saga over hot diamond
COURTHOUSE NEWS SERVICE - On summary judgment, the United States District Court for the Southern District of New York has found that the Zaretskys, heirs of buyers (in the ordinary course), hold superior title to a seven carat diamond vis-à-vis the original owner. In February 2003, the William Goldberg Diamond Corporation (WGDC) consigned the disputed diamond along with other valuable jewelry to the celebrity stylist Derek Khan for his clients to wear. Soon after the consignment, Khan sold the diamond without approval by WGDC in breach of their agreement and relocated to Dubai. Several months later, the buyers acquired the diamond from a New York-based diamond merchant.
[ARIS Commentary: The result in the seven-carat diamond case reflects the court’s interpretation and unpredictability of the entrustment rules under New York’s Uniform Commercial Code (UCC), see ARIS News, June 9, 2011, May 23, 2011. Section 2-403(2) of the UCC provides that “entrusting of . . . goods to a merchant who deals in goods of that kind gives [the merchant] power to transfer all rights of the entruster to a buyer in the ordinary course of business.” Buyers do not obtain clear title to stolen objects under the UCC. The law is intended to protect commercial transactions and buyers by putting the financial risk of fraudulent transactions on owners because owners select merchants with whom to entrust their property. In this case, the court found that because Khan was a merchant, specifically, in the kind of goods transferred, the diamond was not stolen. Buyers’ UCC protections are not ironclad and buyers may need to defend or confirm title in litigation, which can be time-consuming and expensive. Buyers may not be deemed buyers in the ordinary course if they ignored red-flags or may be charged with a heightened duty to investigate title. A title insurer with art industry expertise can help buyers navigate the complicated landscape of the UCC in art transactions and ensure that buyers meet or exceed pre-acquisition due diligence requirements mandated by the UCC. Closing the art transaction with title insurance (which can be introduced by the buyer, seller or dealer) in escrow with a neutral, third-party insurer, protects all involved parties against the UCC risk and associated defense costs as well as the myriad of other art ownership risks.]
November 14, 2014 - A Philadelphia library sues Maurice Sendak's estate
HYPERALLERGIC - The Rosenbach Museum and Library has sued in Connecticut state court the estate of the late author and illustrator Maurice Sendak for title to a large collection of rare-edition books. The disputed books until recently had been on loan to the museum since 1969. The executors claim that these books were not gifted legacies to the museum under Sendak’s will because they are children’s books. The museum, however, contends that Sendak made no distinction in his will between books written for children and books for adults.
[ARIS Commentary: The Sendak estate litigation highlights the importance of drafting clear testamentary papers including last wills and testaments so that the intent of the testator is honored and specific legacies of personal property can be made without costly or time-consuming disputes between beneficiaries.]
November 12, 2014 - Spanish politicians busted for money laundering involving Goya paintings
ARTNET NEWS - Several former high-ranking Spanish politicians are under investigation for using government funds between 2006 and 2010 to purchase five paintings including two Francisco Goya works for €14 million at allegedly inflated prices through an intermediary, they created specifically for the purchases. Investigators are tracing the sales proceeds to determine where the money went and whether there was any mishandling in the sales including related to purchase price amounts.
[ARIS Commentary: Money laundering is an emerging ownership risk in the art market, which is gaining increased attention from governments and non-governmental organizations due in part to the high prices achieved by art sales, the global nature of the art industry and the inherent opaque and unregulated nature of this industry sector (see ARIS News, November 5, 2013, July 28, 2013, May 12, 2013, May 17, 2012, August 17, 2011, July 22, 2011, September 21, 2010).]
October 27, 2014 - Art of the deal: A rollicking market in contemporary art generates massive sales and spurs a new and growing service in art insurance
NONSTOP GULFSTREAM - A global consciousness around postwar and contemporary art and the worldwide growth of total and younger billionaires are driving today’s thriving art market. New and seasoned collectors should be aware of the valuation, title and authenticity risks associated with purchasing all kinds of art including 20th century-made artwork because of the lack of transactional documentation or documentation standards, unknowable information and anonymity in transactions.
October 21, 2014 - Trustee to probe whether Robert Truland paid a fair price for company artwork
WASHINGTON BUSINESS JOURNAL - A bankruptcy trustee is investigating whether Robert Truland, CEO of the largest Washington, D.C.-based electrical company, paid fair market value for dozens of artworks which he purchased from his company four months before his company filed for Chapter 7 liquidation in United States Bankruptcy Court in the Eastern District of Virginia. The company had owned the subject artworks for more than twenty years.
[ARIS Commentary: Allegations raised in the Truland case represent a common challenge of distinguishing between the ownership by executives verses the ownership of a corporation of tangible personal property including artworks, which have often hung on office walls for many years. These kinds of personal versus company title challenges can arise in the context of insolvency or allegations of malfeasance by management such as fraud or theft, see for instance, ARIS News, September 16, 2010 (Marc Dreier fraud and bankruptcy) and news about conviction of Dennis Kozlowski, former executive of Tyco International Ltd, and in mergers and acquisitions or executive management succession and later disputes over title to artworks that are seemingly a part of corporate collections. Within the bankruptcy context, these ownership challenges are further complicated by the fact that a court may deem prior pre-bankruptcy sales void if those transactions are found to be fraudulent or preferential conveyances.]
October 17, 2014 - Heirs sue bank over sale of Nazi-looted art
THE NEW YORK TIMES - Relatives of Ludwig and Margret Kainer, German Jews who lost their extensive art collection due to Nazi persecution, filed lawsuits in New York and Switzerland against a foundation (managed by a Swiss bank now a division of UBS), which has acted as the sole Kainer heir since 1971. The bank has collected proceeds from the restitution of recovered artworks including an Edgar Degas painting, which was sold subject to a restitution agreement at Christie’s for $11 million in 2009. The claimants contend that the foundation is a sham that has not fulfilled its charitable mission and that they are owed a share of the Kainer multi-million dollar inheritance.
[ARIS Commentary: The Kainer case represents the next wave of legal challenges associated with World War II art restitution cases and the legal trend of heirs seeking recourse not just from the possessor of the stolen art but also against more removed targets such as involved fiduciaries or third-party actors (see May 16, 2014 ARIS News discussing claims against the University of Oklahoma, the American Alliance of Museums (AAM) and the Association of Art Museum Directors (AAMD) and October 12, 2011 ARIS News discussing claims against a law firm for failing to include claimant “heir” in settlement). Restitution agreements do not always prevent future claims especially those raised by relatives of the original owner who were not a party to the settlement. Over the past sixty years, there have been evolving expectations and advances in genealogical research to identify and locate heirs, who may be spread across the globe without first-hand knowledge of their ancestors’ lost property. ARIS can confirm that it has written a number of title insurance policies for artworks sold subject to restitution agreements; policies which have provided comfort to settling parties as well as the market about the finality of the restitution.]
October 15, 2014 - A family battles over a disappearing trove of Chinese paintings
THE NEW YORK TIMES - Since 2003, the family of C.C. Wang, a renowned, early collector of classical Chinese paintings, has disputed in Surrogate's Court in Manhattan the validity of two competing wills and the ownership of hundreds of artworks worth an estimated $60 million. New litigation filed in New York state and federal court contends that tens to hundreds of artworks from the Wang collection and Wang estate are missing because of alleged theft, unauthorized transfers and illegal sham sales by family members.
[ARIS Commentary: The C.C. Wang dispute highlights the common title risk of unauthorized transfers in the context of estate or divorce disputes. In the opaque art market, it is challenging for buyers especially down-stream buyers to know whether the current or past seller had legal authority to transfer title to family-owned art and whether said sellers appropriately distributed sales proceeds to the estate in particular when there were multiple wills and undocumented inter vivos gifts.]
October 13, 2014 - How assumptions of ownership impact an appraisal under the 2014-15 edition of USPAP
APPRAISERS ASSOCIATION OF AMERICA - Under the new edition of the Uniform Standards of Professional Appraisal Practice (USPAP), which governs IRS-compliant art appraisals, appraisers should be mindful of the title risk, especially the more prevalent but often overlooked non-theft title risk, which might adversely impact the valuation of objects and in turn derail related tax, trust, estate plans and financial arrangements. Anchoring clear legal title to art and collectibles is important not only for asset integrity but also to prevent personal liability for appraisers because the appraiser must confront his or her lack of certainty in information about title as well as incomplete documentation, a common occurrence in the opaque art market, under the USPAP Scope of Work Rule and Competency Rule.
September 30, 2014 - Auction house sues Rosa Parks’ ex-lawyer over her $10M estate
NEW YORK POST - New York-based auction house Guernsey’s is suing Gregory Reed, the former attorney to the late civil rights activist Rosa Parks, in New York State court for contractually misrepresenting his ability to consign Ms. Parks’ property for auction. The heirs of Ms. Parks and a probate committee refused to consign Ms. Park’s property for auction. With court approval, the auction house eventually sold Ms. Parks’ property privately to a single buyer for an allegedly lower price.
[ARIS Commentary: The latest wrinkle in the litigation surrounding Ms. Parks’ estate (see ARIS News, July 26, 2011) highlights the potential liability of legal and other art industry advisors in consigning art and collectibles to dealers, galleries and auction houses on behalf of their clients.]
September 10, 2014 - The Detroit Institute of Art dueling valuations: fair warning for collectors
ART ANTIQUES DESIGN - The three appraisals of the Detroit Institute of Arts collection, performed in light of the bankruptcy of the City of Detroit, highlight the subjective nature of appraising fine art and inherent but often overlooked risks of authenticity and clear legal title, which directly impact valuation.
September 5, 2014 - The heir’s not apparent
THE NEW YORK TIMES - An Illinois state court has been asked to identify the closest living heir to the late street photographer Vivian Maier. After Ms. Maier died in 2009 without issue, her vast collection of negatives and oeuvre was discovered. David Deal (a former commercial photographer and lawyer who became interested in Maier) and John Maloof (who bought thousands of Maier negatives and promoted her work in galleries, museums, books and a documentary) have sought to name different once-removed cousins as Ms. Maier's closest living relative and sole heir. Until the estate litigation is resolved, which could take several years, it will be difficult for galleries to sell and museums to exhibit Maier's work.
[ARIS Commentary: It is not uncommon in today's art market for lawyers, experts and other interested parties to seek to identify potential relatives and unknown heirs of deceased artists through genealogy research to claim various forms of compensation related to copyright ownership of images and rights to tangible works trading in the art industry, creating uncertainty over the status of legal title to the works.]
September 5, 2014 - Marilyn Monroe’s lost letter
LOS ANGELES REGISTER - An undated letter from Marilyn Monroe to Lee Strasberg known as the "letter of despair" is the subject of a California state court ownership dispute. A Calabasas-based auction house sold the letter for $130,000 to an unidentified buyer. Anna Strasberg claims she is the rightful owner of the letter by inheritance and discovered it was missing when reading about the auction in a newspaper.
September 2, 2014 - Caveat collector
FINANCIAL ADVISOR - As the valuation of precious collectibles including art, wine and classic cars increasingly rises, so too has the risk of acquiring fake and forged items or objects with defective title. Experts suggest that prudent collectors should rely on at least two specialists to vet objects and consider purchasing title insurance, which insures over gaps in provenance to secure clear legal title, and provides an additional lens on authenticity through underwriting protocols.
August 18, 2014 - More hospitals use the healing powers of public art
THE WALL STREET JOURNAL - Hospitals are increasingly buying art and have multi-million dollar budgets (from philanthropy or built into construction budgets) to commission art in light of recent studies which suggest that certain art reduces stress, anxiety, pain and otherwise increases patient medical care. Some hospitals may also exhibit loaned art.
[ARIS Commentary: As the trend for hospitals to display art continues, hospital boards and management who are responsible for buying or commissioning art and accepting donations of art or art loans, should ensure that the hospital applies appropriate due diligence practices to its burgeoning art collection.]
July 25, 2014 - Fate of Elvis guitar in legal limbo
MEMPHIS BUSINESS JOURNAL - The National Music Museum in South Dakota filed a declaratory judgment action seeking to be declared the legal owner of an acoustic guitar that Elvis played and smashed in 1977. The museum filed suit in South Dakota state court but the defendants removed the action to federal court in United States District Court for the District of South Dakota Southern Division at Sioux Falls. The museum sued the collector Larry Moss, who allegedly donated the guitar to the museum in 2013, and the guitarist Robert Johnson, who allegedly had a right to purchase the guitar in 2008. The guitar had been on a long term loan at the museum. In related proceedings in Tennessee state court, Johnson sued Moss for libel and defamation.
[ARIS Commentary: The National Music Museum-Elvis guitar case illustrates the lack of transparency in the art and collectibles market and how downstream buyers and even institutional donees have limited visibility on past private transactions, prior owners and liens, encumbrances or other defects possibly infringing the clear legal title of offered objects. Given the opaque nature of this market, the ownership risk for purchasing art and collectibles can never be eliminated, only managed through transferring the risk to a third-party title insurer.]
July 22, 2014 - Supreme Court fraud case reveals corruption in art market
THE SYDNEY MORNING HERALD - A Sydney-based art collector is suing Christie’s, her art advisor and the consignor in Australian court for a 2000 purchase of an allegedly fake painting by the Australian artist Albert Tucker, who died in 1999. Years after the purchase, when the plaintiff attempted to consign the artwork, she was notified of its potentially false attribution. Discovery in the case suggests that there were as many as three different known provenances for the painting.
[ARIS Commentary: Because provenance is intimately related to authenticity, the investigation of provenance through the title insurer’s underwriting process of legal title is a cost-effective and efficient way to help manage the market’s authenticity risk. It is increasingly difficult, given the cited statistic that 20% to 30% of all secondary market art is fake or forged (referencing the Australian art market) and even with the guidance of art advisors and when buying only from top auction houses, to avoid purchasing inauthentic artworks especially by deceased artists.]
June 30, 2014 - Sotheby’s sues art sale glamour girl for £3 million after client fails to pay
THE TELEGRAPH - Sotheby's has sued Olyvia Kwok, a prominent London and Hong Kong-based art advisor and investor, in English court for non-payment of two paintings for which she bid on behalf of a client who ultimately lacked the financial means to pay for the artworks. Sotheby's acknowledged that Ms. Kwok is an innocent party to the transactions.
[ARIS Commentary: Art advisors typically act as agents for their clients in order to protect their clients’ identity in both private transactions and auction sales. When acting in this capacity, advisors may be held personally liable for the actions they undertake on behalf of their clients such as providing representations and warranties on title in standard consignment agreements and should also be mindful of the risks they take when stepping into the chain of title to flip or more slowly resell artworks.]
June 24, 2014 - Feds seize pre-Renaissance ‘Madonna’
COURTHOUSE NEWS SERVICE - A Byzantine style “Madonna and Child” painting, which allegedly disappeared in 1986 from a safety deposit box in Switzerland, was pulled from a Sotheby’s Old Master auction and is the subject of a federal forfeiture action in United States District Court for the Southern District of New York. The purported theft and likely unauthorized consignment of the painting stems from a dispute among the painting’s four co-owners which include heirs of one of the original owners.
[ARIS Commentary: Using traditional due diligence standards, it is difficult to discern the beneficial owner of the offered object, whether the object is owned by one or several parties and if all such co-owners authorize its sale.]
June 19, 2014 - Online trove of Haring and Warhol works fake, experts say
ARTNET NEWS - Several allegedly fake Pop artworks from the 1980s by Keith Haring and Andy Warhol have been pulled from an online auction at Paddle8. Because of the lack of transparency in the market, it is unclear whether the pulled works are part of a larger group of fakes with fictional provenance histories recently offered for sale to a London gallery and on eBay.
June 15, 2014 - Why auction rooms seem empty these days
THE WALL STREET JOURNAL - Auction house sales rooms are often sparsely attended by bidders as more and more bidders choose to buy art via the telephone or online. This trend may be due to the globalization of the art market, the convenience of not traveling to attend auctions or in general the long-standing desire of buyers to maintain their anonymity.
[ARIS Commentary: The advent and increasingly common practice of online and telephone bidding in traditional auction house sales protects not only the confidentiality of buyers but also maintains the historical opaque nature of the art market. Title insurance in the art transaction can help downstream-buyers address this perpetuating lack of transparency in the art world.]
June 12, 2014 - Time to take the risk out of consignments
ART & ADVOCACY - Private collectors are often unaware that when they consign art to dealers and galleries their consignment likely falls outside of the protections of Article 9 of the Uniform Commercial Code (“UCC”) in that they are not protected against future claims raised by creditors of the consignee-dealer or -gallery. Stephen Brodie, a partner at Herrick Feinstein and a leading practitioner in commercial art lending, suggests that there is strong precedent for the legislature, at least in New York, to revise the UCC to provide effective and practical legal protection for consignors of art as well as to enable commercial lenders to more easily provide credit to dealers against their inventory. As with title insurance, these proposed changes to the UCC will benefit a variety of art market stakeholders by instilling commercial world conventions into the unregulated, opaque art world.
May 16, 2014 - Looted art, provenance and D&O claims
THE D&O DIARY - The lawsuit filed by Léone Meyer in U.S. District Court for the Southern District of New York against the University of Oklahoma, its Board of Regents and the President of the University raises questions of director and officer liability for the university leaders’ role in accepting an allegedly Nazi-looted painting as a gift in 2000 without reasonable investigation of clear legal title as well as their continued possession of the painting (see ARIS News, January 19, 2014).
[ARIS Commentary: The University of Oklahoma and its leadership are facing challenging D&O issues related to collection management which are common and increasingly more prevalent for institutions which acquire art and collectibles by donation or purchase. While entities are facing greater scrutiny from the public and legislators about historical decisions pertaining to acquisitions (even acquisitions made in the past decade), institutions' D&O policies may provide no or limited coverage for institutional and individual art acquisition related claims.]
May 14, 2014 - Family and church feud over an Eakins
THE NEW YORK TIMES - The family of the late Catholic priest Msgr. Patrick J. Garvey is seeking to stop the Archdiocese of Philadelphia from selling privately at Christie’s an Eakins portrait of the monsignor. The family claims that the painting was on long-term loan to the church. The archdiocese asserts that the painting was gifted to the church in the 1950s by Msgr. Garvey’s nephew, who was a rector at the seminary.
[ARIS Commentary: As in the ecclesiastical Eakins dispute, there is often slim documentary or other evidence including the testimony of witnesses with contemporaneous knowledge to determine whether art was gifted or was loaned decades ago to parties in possession of the subject work (see ARIS News, July 10, 2013, June 26, 2013, April 11, 2013).]
May 12, 2014 - Van Gogh discovered by Spanish tax authorities
ARTNET - Tax authorities in Spain have seized a Van Gogh painting, which was last exhibited 40 years ago, in a raid of safe deposit boxes belonging to individuals who collectively, allegedly owe millions in back taxes. The taxpayer in whose name the safe deposit box is registered informed authorities that he was not the owner of the painting and that he was holding the painting for a foreign resident. In a similar safety deposit raid in 2012, the Spanish government confiscated Picasso and Miró works.
[ARIS Commentary: Buyers of art and collectibles should be wary of undisclosed country-specific federal and state use, capital gain, estate and other types of tax liens which may attach to artworks liquidated by sellers who are under financial distress and owe the government back taxes. There is no easy or efficient way for collectors to confirm the absence of lingering tax liens in asset purchase transactions.]
May 2, 2014 - Daughter of well-known art collector in battle over $3.5 million stamp collection
THE AGE VICTORIA - Marilyn Kino, the daughter of the late dealer and collector Justin Sterling, filed a claim in the Australian Courts over several missing rare, valuable Australian stamps which are allegedly missing from the Sterling collection and consigned for auction with Prestige Philately. The consignor, Mrs. Kino’s estranged brother-in-law, who previously assisted Mr. Sterling with his stamp collection, asserts that Mr. Sterling gifted him these stamps. Mrs. Kino, the sole beneficiary of Mr. Sterling’s estate, contends that her father never would have made such gifts without her knowledge.
May 2, 2014 - Selling a fake painting takes more than a good artist
THE NEW YORK TIMES - The civil and criminal cases unraveling the Knoedler & Company gallery’s purported art forgery highlight how a still-disputed $80 million art fraud persisted for fifteen years without detection in the art industry (see ARIS News, October 11, 2013, March 29, 2012, February 22, 2012, December 2, 2011). The alleged scheme was possible because a pattern of forgery is difficult to detect in an opaque industry where experts are unwilling to speak freely for fear of being sued; advisors can have multiple, undisclosed roles which have inherent conflicts of interest; and warning signs can be masked by standard secrecy conventions.
[ARIS Commentary: The Knoedler case study showcases how the ubiquitous lack of transparency in the art industry is fodder for fraud and manipulation. Transacting parties acting alone cannot navigate around the inherent secrecy of the art industry, only a market-neutral title insurance company can pierce through the layers of confidentiality to confirm passage of clear legal title, which is equal to and a lens on the related issue of authenticity.]
May 1, 2014 - Collector sues adviser over profits
THE ART NEWSPAPER - Art collector Eskandar Maleki has sued his former art adviser Amir Shariat in Commercial Court in London for allegedly misrepresenting the price of art bought and sold on Maleki’s behalf, profiting from undisclosed, unauthorized commissions in transactions and otherwise breaching his fiduciary duties. For instance, in an art transaction which Maleki rescinded, Maleki alleges that Shariat invoiced him $300k for a Glenn Ligon work in his collection and then resold the work for $375k to the Lindon Gallery, London. The adviser denies ever acting as Maleki’s agent and claims that he and his affiliated company always purchased and took title to the subject art before selling art to or reselling art bought from Malieki in arms-length transactions.
[ARIS Commentary: The Maleki case highlights the challenges in the opaque art market of identifying intermediary’s undisclosed practices not just for pricing consideration but for assessment of clear legal title passage, which is critical for represented clients as well as downstream buyers. ARIS has witnessed collectors increasingly trying to hold their art advisers accountable as fiduciaries with corresponding duties for their role in the art transaction.]
April 21, 2014 - Time Warner in fight for revered photographer Alfred Eisenstaedt’s prints
DNA INFO - Time Warner, owner of Life magazine, has challenged the Kaye family’s ownership of Eisenstaedt photographs which the late prolific photographer allegedly gifted to Ms. Kaye. The dispute began after Sotheby’s catalogued some of the Kaye’s Eisenstaedt photos to be sold at auction in April 2013. Time Warner alleges that it owns Kaye's Eisenstaedt photos per a contract signed by Eisenstaedt before his death, which gave the company rights to all Eisenstaedt images taken between 1929 and 1994. Kaye’s family alleges that their photos were gifted before the Time Warner contract was signed and Eisenstaedt’s death. Eisenstaedt is known during this lifetime to have given away many of his prints and photos to friends, families and subjects.
April 17, 2014 - U.S. government searching for WPA works
ARTFIX DAILY - The General Services Administration (GSA), a division of the U.S. government which manages federal buildings, is actively looking for missing government-owned paintings created by thousands of artists employed by the New Deal Works Progress Administration (WPA) during the 1930s and 1940s. A WPA painting by John Sloan depicting a New York City scene, which was recovered in 2003 by the GSA from the home of a late senator’s staff member, is on loan now to the Detroit Institute of Arts.
April 17, 2014 - France regains painting lost during the First World War
THE ART NEWSPAPER - France’s Musée de la Chartreuse Douai has recovered a painting by Alix Marie de La Pérelle-Poisson which was stolen from the museum in 1918. German provenance researchers identified a painting donated by a private collector to the Alte Nationalgalerie in 1959 as the lost Douai painting. Thefts from during World War One receive little media or scholarly attention especially when compared to today’s focus on art looted during World War Two.
April 16, 2014 - Van Gogh mystery: $100M Nazi art collection leaves Greek woman broke
GREEK REPORTER - In November 2003, the daughter of Meletis Peppas (a Greek Captain of the Resistance during WWII who looted a Nazi train) discovered several of her father’s boxes which had been hidden for sixty years and contained paintings possibly by Van Gogh and Cezanne as well as sketch books and other artifacts. For over a decade, Ms. Peppas has sought to authenticate the works and to identify possible prior dispossessed owners. Despite indications of authenticity, the inability to identify claimants and Greek law which purportedly grants Ms. Peppas legal ownership of the works, no dealers, galleries, museums or auctions houses will sell or purchase objects in Ms. Peppas’ cache.
[ARIS Commentary: Ms. Peppas’ collection appears unsalable because of gaps in the provenance history, which raise questions about potential looting during WWII and highlight the importance of title information in an opaque market. The substantial missing information about the chain of title for the Peppas works (irrespective of whether or not looting occurred) is likely unknowable; it has been seventy-years since the alleged train looting in 1944 and Ms. Peppas and various experts have spent a decade researching the prior ownership and locations of the objects without success. Without a more complete picture of the provenance of the objects, the Peppas works cannot be authenticated or sold even in a civil code jurisdiction for moral if not legal considerations.]
April 8, 2014 - Second claimant for Gurlitt’s Matisse halts restitution effort
ARTNET NEWS - A second unnamed party has claimed to be the rightful heir of a Matisse painting found in the possession of Cornelius Gurlitt, the son of the Nazi-commissioned art dealer Hildebrand Gurlitt who was found with hundreds of European artworks which his father acquired during WWII. Mr. Gurlitt was planning to return the painting to the heirs of the Paris art dealer Paul Rosenberg.
[ARIS Commentary: The competing claim for the Matisse picture, likely made by another relative of Paul Rosenberg or a different prior owner, highlights the challenges in confirming finality to WWII and other settlements; in particular ensuring that all proper parties are included in and consent to the terms of the agreement.]
April 8, 2014 - Risk and Uncertainty in the Art World
BOOK REVIEW - The newly published book Risk and Uncertainty in the Art World edited by Anna M. Dempster, Senior Lecturer (Associate Professor) of Sotheby’s Institute of Art, London provides a comprehensive review of the risks and uncertainties in the global art market as analyzed from the perspective of the sociologist, economist and art historian. Topics discussed by contributing academic and practitioner authors include the role, function and impact of – collectors, investors, artists, intermediaries, globalization, international trade, authenticity, collectibles versus fine art, legal and taxation frameworks, structural dynamics as well as regulation on the art industry.
April 2, 2014 - Stolen masterpieces worth $50M found in auto worker’s home
ABC NEWS - Italian police recovered two important paintings by Paul Gauguin and Pierre Bonnard, which were stolen in 1970 from the collection of Sir Mark Kennedy, who died without heirs. A Fiat employee bought the paintings in good faith for $25 at a railway auction, after the works had been left on a train from Paris to Turin. The pictures hung in the buyer’s home until after his death when his son attempted to sell them unaware of their attribution or prior theft.
March 31, 2014 - Protect your investment in fine art
ASCENT - Whether investing in fine art and collectibles for aesthetic or investment purposes, buyers should understand potential title risks of art ownership including legal liability, tax consequences and personal disappointment. Collectors should consider the risk management and value proposition of acquiring title insurance for their collection especially when artworks are used as loan collateral or in trust and estate strategies and donated to museums as charitable contributions.
March 25, 2014 - Confiscated baseball treasures used in money-laundering scheme going to auction
NORTH JERSEY - A New Jersey drug store owner was convicted of laundering money from the sale of stolen prescription drugs by buying baseball memorabilia. Prosecutors claim that the defendant converted his illicit profits into money orders that he used to buy hundreds of rare and vintage signed baseballs and trading cards. The county will sell four hundred laundered items for the prosecutor’s seized asset fund.
[ARIS Commentary: Buyers should be cognizant of the potential risk of unwittingly purchasing objects which may have been acquired by prior owners with laundered money. U.S. and foreign government authorities are increasingly aware that art and collectibles and the art industry as a whole are an effective tool to launder money (see ARIS News, November 5, 2013, July 28, 2013, May 12, 2013). The due diligence process that a title insurance company undertakes to guarantee legal title serves as a lens that can help clients avoid purchasing money-laundered objects.]
March 6, 2014 - State University of New York at Albany to serve as International Center of Innovation for Art and Collectibles Industry
WALL STREET JOURNAL - ARIS is pleased to announce that SUNY Albany will host the ARIS-sponsored “Center of Innovation on Standards and Solutions for Object-Identification Technologies in Global Art and Collectibles Industry.” The Center will bring together academic and private sector art market stakeholders from around the world to develop peer-reviewed, technology-based object identification and authenticity standards. The goal of this initiative is to create a new structural solution to protect the authenticity and identity of precious assets now and into the future.
February 28, 2014 - Couple who found $10m hoard of gold coins while walking dog could have broken law by not telling police
DAILY MAIL - A Northern California couple, who wish to remain anonymous and who discovered on their property over $10 million worth of U.S. gold coins dated from the mid to late 19th century, plan to sell most of the coins on Amazon. The couple may face a claim by the U.S. government because some speculate that these coins were hidden in the early 1900s by Walter Dimmick, who stole similar coins from the San Francisco Mint. Others speculate that the heirs of the prior owner of the real property on which the coins were found or of the coins themselves (but not the purported thief) may have and may bring ownership claims. These claims may tie to somewhat unique local laws which would have required, if the coins are considered “lost” and not “abandoned,” the couple to have reported their finding within a reasonable time to law enforcement authorities and local papers.
February 4, 2014 - Christie’s cancels sale of Joan Miro works owned by Portugal
THE NEW YORK TIMES - Christie’s cancelled the London auction of 85 Joan Miro artworks which were consigned by the government of Portugal. The collection became public property in 2008 when Portugal nationalized Banco Portugues de Negocios (BPN); BPN acquired the works from a private Japanese collection. Politicians and artists opposing the sale argued that the Miro collection was now part of Portugal’s cultural heritage but the Lisbon court rejected their motion for an injunction to stop the sale. The auction house stated that it stopped the sale because of “legal uncertainties” around the auction that could raise questions about buyers’ future ownership rights.
January 19, 2014 - Daughter of former owner of a painting stolen by Nazis is suing the University of Oklahoma in hopes of getting it back
DAILY MAIL - The sole heir of Raoul Meyer, a Jewish businessman who lost his art collection including a Camille Pissarro painting during WWII, has sued the University of Oklahoma (OU) in United States District Court for the Southern District of New York to recover the painting and damages. In 1953, Mr. Meyer was unsuccessful in a lawsuit against a Swiss art dealer to recover the painting because his claim was deemed untimely under Swiss law after the five-year statute of limitations had passed. The painting has been exhibited at OU’s museum since 2000 when it was donated as part of a larger donation of important French Impressionist paintings by Mr. and Mrs. Weitzenhoffer, good faith buyers who bought the painting from a New York gallery and were unaware of the prior Nazi theft.
[ARIS Commentary: The Meyer-OU dispute highlights common financial, moral and legal issues surrounding allegedly Nazi-looted artworks in public museum or university collections including in particular the conflict and outcome determinative differences between the ownership laws of the United States and civil code jurisdictions such as Switzerland. OU and its trustees face a difficult quandary of either paying for litigation defense costs and relying upon the 1953 Swiss judicial ruling with uncertain legal outcome or restituting the painting and losing a significant, valuable artwork in the collection, possibly in breach of the 2000 donation. The art market legal title risk and unique public trust, fiduciary predicament facing the U.S. nonprofit museum community, its leadership and trustees is discussed in greater depth in an ARIS technical paper (see ARIS News, April 23, 2013).]
December 19, 2013 - Moving beyond the “just right” Goldilocks approach to art market transactions
QUEST - In light of recent headlines about controversies in the art industry (from the discovery of the WWII art trove in Munich to the Knoedler Gallery authenticity disputes), art market participants are revaluating what is the appropriate level of due diligence in the art transaction and how to buy and sell precious assets without incurring losses or lingering liabilities. Forward-thinking parties are adopting best practices from the real estate and banking industries including the use of title insurance to avoid trading problematic artworks and to mitigate possible future challenges for the owners or sellers including claims of liability for professional advisors.
December 11, 2013 - Sotheby’s sued by Windex-maker S.C. Johnson over Frank Lloyd Wright desk and chair
ARTINFO - S.C. Johnson and Son, Inc., a multi-generational, family-owned consumer goods company based in Wisconsin, has sued Sotheby's and an unidentified consignor in United States District Court for the Southern District of New York to recover and to stop the sale of an iconic desk and chair designed by Frank Lloyd Wright in 1938 for its headquarters. The company alleges that the furniture was stolen because its policy is generally not to gift, sell or otherwise transfer Wright-commissioned furniture and it has documentation for all past gifts and loans of Wright furniture; but no such records for the offered items. The consignor claims it acquired the desk and chair directly or from heirs of the chemist Elerslie E. Luther circa 1950, who purportedly received the furniture as a gift from S.C. Johnson. The company asserts that the Luther “gift” is inconsistent with company records and Luther had no connection to the company.
December 5, 2013 - Courtroom brawl begins in Dallas over secrecy of a Rothko sale
THE WALL STREET JOURNAL - Marguerite Hoffman, the former owner of “Red Rothko” 1961, is suing in United States District Court for the Northern District of Texas the buyer and two dealers for allegedly breaching the confidentiality terms of a 2007 private sale. After Mr. Hoffman's death, Mrs. Hoffman decided to sell the work privately and keep the transaction confidential to avoid speculation about her finances. The work had been pledged as part of a larger donation to the Dallas Museum of Art, where it was on display in a show. The parties dispute the interpretation of any confidentiality term, which included prohibition against exhibiting the painting for 12 months. Three years after the Hoffman sale, the buyer sold the Rothko at Sotheby’s for $14.8 million in profit; the Sotheby’s sales catalogue did not include Hoffman in the provenance but listed the Dallas exhibition which referenced through photographs and other publicity the Hoffman’s ownership.
[ARIS Commentary: The Hoffman case highlights challenges surrounding known (to the extent it is difficult to comply with) and more significantly unknown, which is the case for downstream buyers given the opaque art market, confidentiality clauses in sales agreements for fine art and important collectibles. Confidentiality clauses, which are often added to the transactional mix to protect the privacy of wealthy buyers and sellers, may encumber precious objects with liens, restricting or even prohibiting their resale.]
December 3, 2013 - In the frame
STEP (Society of Trust and Estate Planners) JOURNAL - Lawrence M. Shindell, Chairman of U.S.-New York-headquartered ARIS Title Insurance Corporation, and Filippo Petteni, Managing Director of London-based Asterion Advisors, Art Industry Consultants, discuss the complications in executing trust and estate plans involving passion assets from valuation dilemmas to fiduciary push-backs increasingly faced by professional advisors. STEP is the worldwide professional association for practitioners managing family inheritance and succession planning with 18,500 members across 80 jurisdictions from a broad range of professional backgrounds including lawyers, accountants and trust specialists.
For the STEP Journal article, see http://www.step.org/frame
For a more detailed version of this article
November 27, 2013 - Michael Ovitz sues gallery, alleging fraud over artwork sales
LOS ANGELES TIMES - Michael Ovitz, co-founder of Creative Artists Agency, has sued Perry Rubenstein Gallery in California state court for failing to return two consigned Richard Prince works or to pay the minimum $1 million agreed-upon sales proceeds.
November 15, 2013 - Painting set for auction has mysterious past
HAMPTON ROADS - A regional Virginia-based auctioneer, Phoebus Auction Gallery, has decided to sell an 18th century English portrait despite allegations raised by Baronet Slade that this painting may have been stolen from his family while in storage. The work was consigned by the estate of Robert Kittleson, whose ledgers indicate that he purchased the painting in 1979 from an unknown source. The Baronet has presented no evidence of the theft and the work was never the subject of an insurance claim or registered as stolen with the police or a stolen art database.
[ARIS Commentary: Although this matter involves a relatively unimportant painting with a low valuation, it highlights marketability challenges surrounding artwork for which claimants have asserted ownership yet lack documentary proof to support their claim of superior title.]
November 8, 2013 - Bidders cry foul over auction of Banksy painting
THE NEW YORK TIMES - The winning bidder of a painting donated by the street artist Banksy to Housing Works (a nonprofit organization which helps the homeless and people with H.I.V. and AIDs) and sold online per Banksy’s donations terms, renounced its $614,800 bid. Housing Works contacted the under-bidders and the artwork was eventually sold reportedly for more than $450,000 to an anonymous collector. Other bidders have since complained that the online auction and post-sale was poorly handled and the seller anonymously bid up the price, created a false sense of urgency and leveraged bidders’ post-sale offers.
[ARIS Commentary: The Banksy-Housing Works sale, intended as a good deed for a worthy, charitable cause, highlights the current kinks in online auction sales – such as lack of transparency in the sales process and lack of financial vetting of bidders – an unregulated and untested channel of the global art industry.]
November 7, 2013 - 2 founders of Dia sue to stop art auction
THE NEW YORK TIMES - Heiner and Fariha Friedrich, founders of the Dia Art Foundation, have sued the foundation in New York state court to stop it from selling to private individuals certain artworks for as much as $20 million at a Sotheby’s auction. The plaintiffs admit that although the terms in which the works were transferred to Dia in the 1970s and 1980s are unclear because they cannot locate title transfer documentation, the works were donated or loaned to Dia to preserve contemporary art for public access and viewing.
[ARIS Commentary: The Friedrichs’ situation in which documentation confirming title transfer or loans of art and collectibles to a nonprofit institution is lost or never existed is unfortunately a common scenario in the museum and non-profit community. It is in the best interests of both donors and institutions to memorialize in writing the terms of all art donations and long-term loans and keep these documents in a safe place to ensure that the parties’ full intentions are followed and litigation disputes are avoided in the future.]
November 5, 2013 - Idle hands and the art market: The devil’s playground
ARTASIAPACIFIC - Art transactions, especially private dealer or gallery sales, carry an inherent risk of entanglement in illicit money laundering activities involving for instance tax evasion or fraudulent conveyances to frustrate creditors. The art market is ripe for money laundering enterprises because of its lack of transparency, in which concealed principals and prices, limited paper trails and subjectivity of pricing are the norm. To avoid not only financial loss but the threat of criminal prosecution, the author advises collectors and their advisors to take certain preventative measures including purchasing title insurance.
[ARIS Commentary: The market continues to transform best practices on risk management around art and collectibles transactions and the risk of trading objects plagued by everything from illicitly begot funds to fake or forgery challenges (ARIS News, October 11 and 16, 2013). Industry stakeholders (from advisors, sellers, and buyers to dealers), who are genuinely concerned about the state of the art market, are taking it upon themselves to exercise a greater level of care in the transaction and to apply these new heightened standards consistently in all art and collectible transactions, not just the seemingly more problematic transactions.]
October 29, 2013 - Sotheby’s to face court battle over family’s ‘lost £100,000 painting’
EVENING STANDARD - A descendant of a British colonial administrator has filed a lawsuit in English Court to recover a Winslow Homer painting, which was scheduled for auction at Sotheby’s New York in 2009. The heir asserts that the artist gave her ancestor, who served as Governor of Bahamas, the painting in 1885 during his occupancy there and that the picture was stolen from her family home probably in the 1980s.
October 25, 2013 - ‘Superman’ artist stunned to find ‘donated’ work on sale
NEW YORK POST - A comic book artist has contested the ownership of one of his original drawings which was published by DC Comics in late 1963 and scheduled for an upcoming auction sale by Heritage Auctions. The artist contends that his employer promised fifty years ago to donate the iconic drawing of Superman and President Kennedy to the John F. Kennedy Memorial Library at Harvard University. The consignor allegedly purchased the drawing at a Sotheby’s auction in 1993 for $5,000.
[ARIS Commentary: This dispute highlights the challenges surrounding hidden encumbrances and specifically the title risk that a party lacks authority to sell a work including as a result of an undocumented or incomplete gift. It is nearly impossible for the trade and collectors to identify these liens through market-traditional due diligence. This case also raises a reoccurring theme with artworks that are published in magazines or comic books, that is, whether the publisher or artist owns the original work as opposed to either party having the right to publish and reproduce the image.]
October 16, 2013 - The case for title insurance
ART & ADVOCACY - A transactional real estate and art attorney opines that given the indisputable proliferation of art market title risks (from theft to other title problems such as gifts or loans, hidden encumbrances and family disputes), which can have a long tail and are challenging to identify even by experts, as well as high valuations for art, title insurance should be a standard convention in all art sales above a certain price point.
October 11, 2013 - AbEx fakes scandal silences the experts
THE ART NEWSPAPER - The criminal and civil authenticity-related Knoedler Gallery, LLC, litigation is having a chilling effect on scholars, who are increasingly reluctant to give their opinions about artworks for fear of being dragged into expensive, reputation-damaging litigation. Collectors and their advisors are now seeking to take more responsibility in verifying art purchases of Modern and even contemporary art.
[ARIS Commentary: The long-term fallout from the Knoedler litigation (which highlights the increasing frequency of authenticity-related claims, corollary decreasing willingness of experts to give public opinions and as a result increasing inability of the market to confirm authenticity) is likely to transform the art trade, which has no other financially viable option but to disclaim expressly all warranties of authenticity and to replace these contractual and implied warranties with a negligence-based duty under which dealers can maintain that they exercised reasonable care in investigating authenticity. ARIS predicts that dealers and galleries will seek in effect to create shared liability with buyers and to remove any suggestion that non-merchant buyers have no duty to inquire independently about their art purchases. This shifting of the duty to investigate to both the sell-side and the buy-side puts the art market in a still greater quandary and counterbalances the first Knoedler decision (De Sole et al. v. Knoedler Gallery, LLC et al. and Howard v. Freedman et al., motion to dismiss ruling by Judge Paul Gardephe, September 30, 2013). Because authenticity has a provenance component and provenance constitutes a subset of legal title, buyers and sellers who incorporate title insurance into their transaction — which addresses the core title risk and puts an additional lens on authenticity — can readily demonstrate to downstream-buyer litigants and the courts that they exercised a greater level of care in the transaction than might otherwise have been acceptable under past legacy standards.]
September 18, 2013 - These saints are ours, Getty says
THE ART NEWSPAPER - The J. Paul Getty Trust and Museum filed a lawsuit in United States District Court for the Central District of California to quiet title to a 14th century diptych valued at $2.7 million, which the Getty purchased in 1986 from the Wildenstein gallery in New York, who in turn acquired it from the French aristocratic Sabran-Pontevés family. Géraud Marie de Sabran-Pontevés, one of the four children of the late Duke of Sabran-Pontevés, recently claimed title to the painting alleging that his brother sold the work without the other siblings’ consent after his father’s death in 1981. On this same basis, he successfully secured a judgment against his brother in French court.
[ARIS Commentary: The Sabran-Pontevés-Getty case illustrates the inherent opaqueness and uncertainty in the international art market because ownership disputes often arise decades after sales transactions, irrespective of substantial assurances of clear legal title offered by the seller or the buyer’s considerable due diligence, and downstream, good faith buyers are frequently the target of title disputes when investors or family members disagree years later over the distribution of jointly held property.]
September 1, 2013 - Art and collectibles: the perils of 1031 exchanges
QUEST - Experts suggest that 1031 exchanges for art and collectibles is a rapidly growing area of the tax code because of current high valuations for art and precious objects and the 2013 increase in the capital gains tax. However, to take advantage of this benefit, taxpayers must follow the strict requirements and tread carefully. Given the opaque and unregulated nature of both the QI (Qualified Intermediary) and the art industry, it is also easy to see how an exchange process can get off track. To benefit from like-kind exchanges, art investors should follow the structural and due diligence standards which investors exhibit when transacting other assets such as real estate to ensure that title passes properly, creates finality to the transaction, and does not jeopardize the tax strategy.
August 28, 2013 - Swiss lawyer Edgar Paltzer uses $500,000 artwork by Charles-Francois Daubigny to post bail
ARTDAILY - A Swiss attorney, who pleaded guilty to advising American taxpayers on how to evade taxes through the use of Swiss banks, has offered a Barbizon oil painting for partial payment of his $2 million in bail.
[ARIS Commentary: Using art to post bail exemplifies how fine art and important collectibles, a subset of tangible personal property, is an accepted alternative asset class recognized as having intrinsic value. In this case it is unclear whether the government has accepted the collateral, however parties which accept art as collateral and potentially in this case as a pseudo-financial instrument must effectively manage the unique title and valuation risks of precious objects to secure the benefits of this asset class.]
August 28, 2013 - Ex-Sony CEO claims his mother got ripped off by art consultant to the tune of $1M
NEW YORK POST - Michael Schulhof, acting as the executor of his mother’s estate, filed a lawsuit in New York state court against his mother’s longstanding art curator and advisor, Lisa Jacobs, for allegedly misrepresenting the final sales price of a Basquiat artwork by $1 million and retaining that additional million on top of her $50,000 commission. Based on Ms. Jacobs’ trusted position as an agent, Mr. Schulhof argues that Ms. Jacobs breached the fiduciary duties of utmost honesty, good faith, undivided loyalty and due care when acting on behalf of Mrs. Schulhof. In addition to compensatory damages, Mr. Schulhof is seeking $2 million in punitive damages.
August 26, 2013 - Auction to end fight over Ferrari
CINCINNATI - Subject to an Ohio state court-ordered settlement, a rare 1954 Ferrari “375 Plus Spider” is estimated to sell at a Bonham's London auction for $25 to $30 million, over ten times the original estimate of the value in 2010 (when the lawsuit was filed). The car was the subject of a lengthy ownership dispute between the individuals and now heirs of the prolific car collector, Karl Kleve, who purchased the car in 1955 and removed some of the original parts (ironically to prevent theft), and the Belgian racer and Ferrari dealer, Jacques Swaters, who purchased the car in good faith in Europe in 1990, several years after the car was allegedly stolen.
[ARIS Commentary: The expected high price for this rare Ferrari is heightened due to the fact that the court settlement ensures that the car is sold with all of the original parts and manufacturer documentation; in other words, in this case a judicial ruling establishes the authenticity and clear legal title to the Ferrari. The art and collectible ownership risk extends to the rare, classic and antique automobiles market, which likewise lacks a foolproof system to ensure that traded automobiles are not stolen and are free of liens and encumbrances. Although Kleve reported the theft of his Ferrari to local law enforcement circa 1989, who reported the theft to Interpol, the car was released with clear legal title by Belgian police in 1990 because the imported Ferrari purportedly had a different chassis number from Kleve’s Ferrari. Only a title insurer that conducts "process underwriting" in which the company takes a holistic view of assessing submitted property including vetting the ownership history of the work, and provides a financial guarantee of clear legal title to the property can fully manage the risk exposure in the collectible automobile market.]
August 22, 2013 - Art dealer Ronald Coles guilty of multi-million-dollar fraud
THE SYDNEY MORNING HERALD - Former top Australian art dealer and director of the Ronald Coles Investment Gallery, Ronald Coles, pled guilty to operating a ten-year fraud, deception and larceny scheme (see ARIS News January 22, 2009); selling paintings without owners’ permission and the same work multiple times without investors’ knowledge. Victims of Cole’s crimes allegedly include superannuation funds and individuals, who spent their pension savings on art at Cole’s gallery.
August 16, 2013 - Jasper Johns’ assistant accused of swiping $6.5 million worth of art
COURTHOUSE NEWS SERVICE - James Meyer, a longtime, studio assistant for Jasper Johns, has been indicted in United States District Court for the Southern District of New York for stealing 22 unfinished artworks from the artist’s studio and selling them for millions without the artist’s knowledge or permission through a Manhattan-based gallery. Allegedly, Meyer misrepresented to the gallery and others including prospective buyers in notarized statements that he received the works as gifts directly from Johns, and that he had the right to sell them. Meyer purportedly created fictitious inventory numbers and conditioned the sale of the works upon the buyer not loaning, exhibiting or re-selling the works within eight years.
August 14, 2013 - Lucky bidders claim abandoned artwork
COURTHOUSE NEWS SERVICE - Independence Collection, LLC has sued the Iranian artist, Tala Madani, in United States District Court of Oregon in a declaratory judgment action to quiet title and confirm its ownership of 114 Madani paintings. Independence acquired the paintings when it purchased the contents of an allegedly abandoned storage locker in Oregon, which the storage company sold pursuant to a warehouseman’s lien. Madani threatened to sue The Phillips Gallery in Manhattan, the consignee of one of Independence’s Madani works, questioning the consignor’s legal title and denying the authenticity of the work.
August 12, 2013 - NY fraud victim gets 18 artworks, worth $33M
CRAIN’S NEW YORK BUSINESS - Pursuant to a U.S. district court order, U.S. marshals delivered eighteen artworks by Rothko, Warhol, Hirst and others worth an estimated $33 million to a hedge fund, which was the largest victim in the $400 million Dreier fraud scheme. These works were once reportedly owned and pledged by Marc Dreier (the bankrupt, criminally convicted attorney fraudster (see ARIS News, June 28, 2012, September 16, 2010, January 2, 2009, and December 10, 2008)) as collateral to finance a deal.
[ARIS Commentary: Although the court order may cleanse the subject Dreier modern and contemporary artworks from claims related to Dreier’s offenses, akin to a blanket or individual 11 U.S.C. §363 sales order approved by the bankruptcy court, the order does not cover unrelated financial liens, encumbrances or other title defects. Only title insurance tailored to art and other collectibles provides a financial guarantee on the full spectrum of art market title risks; latent, market-typical title risks are likely overlooked in court proceedings, if any due diligence is undertaken. In addition, title insurance enhances the marketability and hence valuation of personal property by dispelling any lingering doubts about clouds on title connected to notorious prior owners and court-ordered ownership transfers.]
August 5, 2013 - Japanese man claims $1.6M Renoir painting sold at Sotheby’s was stolen
BLOUIN ARTINFO - A Japanese collector claims that a Renoir painting, which sold at a Sotheby's London auction in February 2013, was stolen from his Tokyo home in August 2000 along with several other works. The collector contacted the local police but did not register the missing works with any of the industry stolen art databases. The consignor in the recent sale allegedly purchased the painting in the ordinary course and in good faith.
[ARIS Commentary: This story, in which a purportedly, privately owned artwork is stolen in Japan and then resurfaces for sale in London, demonstrates the inherent title risks in the opaque and global art market. Practically speaking, when measured against traditional industry references, neither the sell-side nor the buy-side of the market can discover past thefts of artworks when works are not registered in government or private stolen art databases (a common occurrence); and, even if stolen works are registered, traditional databases have inherent imperfections, for instance, a work can be missed in a search if a stolen work has been attributed differently in the past in the database from the present, known searchable terms.]
July 29, 2013 - The salacious tale of those Saint Laurent sketches
BLOUIN ARTINFO - Pierre Bergé, Yves Saint Laurent’s business partner, and Fabrice Thomas, Yves Saint Laurent’s former employee and secret lover, dispute the ownership of a multi-million dollar cache of sketches by the late designer. Thomas asserts that the designer gifted him the portfolio, which he in turn later gifted to German businessman, Lothar Gallinat. However, Bergé asserts that the sketches were stolen.
[ARIS Commentary: It is important for donors to document their transfer of tangible personal property gifts even when the gifts are made to close acquaintances and irrespective of the perceived low, present value (as values for art and collectibles often increase) to avoid future, unanticipated ownership disputes.]
July 28, 2013 - U.S. could pursue art collection of SAC founder
ARTFIX DAILY - SAC Capital Advisors LP, a $14 billion hedge fund, is being charged with insider trading. Although its founder, Steven Cohen, who is one of the world’s biggest art collectors, was not indicted, the U.S. government may seek to recover hundreds of millions of dollars from Cohen personally including his artworks in the criminal and civil forfeiture lawsuit. U.S. prosecutors claim that SAC engaged in money laundering and Cohen acquired artworks through co-mingled, illegally-made profits.
[ARIS Commentary: It is critical for buyers to ascertain the identity of sellers in art transactions and to follow effective risk mitigation practices to avoid purchasing objects with potential undisclosed government liens.]
July 17, 2013 - Marilyn Monroe negatives to be auctioned with copyright
THE ART NEWSPAPER - A large photographic archive of negatives and transparencies along with copyrights of the celebrity photographer, Milton Greene, is being sold at a Los Angeles-based auction house. Greene leveraged the archive as loan collateral in the 1970s; sometime later, Greene defaulted on the loan and a Polish governmental entity took title to the archive in or around 2000. A U.S. collector, who is the current consignor, purchased the archive in 2005 from the Polish entity.
[ARIS Commentary: The provenance of the Greene archive shows that even as early as the 1970s fine art was used as loan collateral, and art lenders have routinely taken and continue to take ownership of pledged art collateral as a result of borrower default.]
July 11, 2013 - Trust, but verify, as they say
THE ART NEWSPAPER - At least two recent scholarly, art industry conferences have focused on the relationship – substitute or complimentary – between trust and transparency in the global art market (see ARIS News, April 9, 2013). The author suggests that the possible disconnect between trust and transparency in the art world can be reconciled by stakeholders’ ability to verify transactional details through new communications technology as well as reliance on art market specialists.
[ARIS Commentary: While access to information through advanced technology certainly fosters greater trust and transparency in the art market and is beneficial for all involved parties, these advances and more data even in the hands of knowledgeable art industry experts cannot eradicate the baseline, incremental exposure in nearly all art transactions. Surrounding most art objects, there are some unknowable factors, for instance, gaps in the provenance history, about which neither trusted advisors acting in good faith nor greater transparency in the transaction can resolve and which should be accounted for through risk management.]
July 10, 2013 - Alexander Graham Bell auction halted; Smithsonian disputes ‘gift’
LOS ANGELES TIMES - A California auctioneer has pulled from its auction Alexander Graham Bell historical documents, which describe the inventor’s design for a kite-like human aircraft. Bell’s great-grandson, the Smithsonian Institute and the National Geographic Society questioned whether Paul Edward Garber, the former head curator of the National Air Museum (precursor to the National Air and Space Museum), was gifted the papers in the 1950s rather than took possession on a temporary loan basis in his official capacity. The Bell family has sought to preserve Bell’s legacy for public research and donated the bulk of Alexander Graham Bell’s archive to the Library of Congress.
June 26, 2013 - A legal defeat for Anne Frank House
THE NEW YORK TIMES - A district court in the Netherlands has ordered the Anne Frank House, an Amsterdam museum on the Prinsengracht where the Frank family hid during WWII, to return thousands of archival documents to the Anne Frank Fonds, the universal heir of Mr. Frank, Anne’s late father, which was created to manage Anne’s legacy and the copyright to her diary. The House expected the Frank archives to be a permanent loan and unsuccessfully contested the Fonds’ ownership to several items.
[ARIS Commentary: The lengthy, bitter litigation between the Anne Frank House and the Anne Frank Fonds highlights a common art market title challenge of distinguishing loans from gifts as well as the importance of documenting loans to avoid disputes years later, which often occur between parties not involved in the initial transaction who lack direct knowledge about the original parties’ intent.]
June 10, 2013 - Stolen Civil War sword will return to Brown
COURTHOUSE NEWS SERVICE - The District Court for the Eastern District of Virginia has ordered the return of an 1863 ceremonial Tiffany & Co. sword to Brown University from the collector Donald Tharpe, an allegedly bona fida purchaser. The university received the sword as a gift in 1948 and lost possession between 1975 and 1977 likely due to theft. The university discovered its possible location as early as 1992 but did not file a claim for recovery until 2011. The court found that the university’s claim was not barred by laches because the university did not unreasonably delay filing suit and any such delay did not prejudice Tharpe, who knew about the claim as early as 1994 and did not investigate.
[ARIS Commentary: The Brown University v. Tharpe case highlights the difficulty in predicting the outcome of litigation based on the factual and equitable doctrine of laches as well as the heavy investigatory burden on buyers to avoid acquiring stolen art and collectibles. Even when an original owner takes more than thirty years to pursue a claim, if the object is considered stolen through circumstantial evidence, a buyer does not take clear legal title despite the buyer-in-the-ordinary-course provisions of the Uniform Commercial Code.]
June 5, 2013 - Art dealer sues Andy Warhol Foundation
COURTHOUSE NEWS SERVICE - Frans Wynans Fine Art (“Wynans”) has sued The Andy Warhol Foundation for the Visual Arts (“Warhol Foundation”) in British Columbia for allegedly selling without legal authority and its consent in breach of contract four Polaroid photographs of the famed hockey player, Wayne Gretzky, which Warhol took in 1983 for a Wynans-commissioned painting. Wynans claims that through separate contractual agreements with Gretzky and Warhol, respectively, it acquired and still holds the exclusive license and right to sell or otherwise exploit the commissioned Warhol-Gretzky paintings and preparatory photographs. In November 2012 surrounding Christie’s marketing of its online Warhol Foundation sale, Wynans discovered that the photographs existed. Despite protests raised by Wynans’ attorney, the photographs were sold in March 2013 for $9,000 with the proceeds held in trust pending resolution of this dispute.
[ARIS Commentary: The Warhol-Gretzky dispute is an example of a title issue affecting a primary market or artist’s estate work that is related to a private contractual agreement, which is difficult if not impossible for buyers to discover through due diligence and to protect themselves against other than through title insurance.]
May 23, 2013 - $585,000 Bubble gum art deal blows up
COURTHOUSE NEWS SERVICE - The renowned art collector Jane Holzer has sued Stephan Stoyanov and his gallery in New York state court for derailing an IRC 1031 “like-kind exchange” of four artworks. Holzer alleges that because Stoyanov bounced a check and failed to pay the third-party intermediary (Gagosian Gallery) for her two relinquished artworks within the statutory mandated time period, Stoyanov failed to take title to the exchanged artworks in time for Holzer to defer capital gains taxes on her relinquished artworks.
[ARIS Commentary: The Holzer v. Stoyanov case shows the importance of properly executing like-kind exchanges of fine art (ARIS news May 16, 2013) including the use of a qualified, independent “Qualified Intermediary” to manage the IRC-mandated functions (such as properly handle and account for escrowed funds) and a title insurer to certify the underlying clear legal title to the relinquished and the replacement property. Confirmed clear legal title to relinquished and replacement works is the final prerequisite to a valid, completed forward or reverse IRC 1031 like-kind art exchange.]
May 22, 2013 - Suspected theft prompts cancellation of Bergman auction
AUCTION CENTRAL NEWS - Bukowskis auction house in Sweden has canceled the sale of items owned by the filmmaker Ingmar Bergman in light of claims made by Bergman’s son that the objects were stolen from his mother. According to local police, Bergman’s daughter took these items from her mother without her authority, pawned them, and then sold the pawn shop receipt to a dealer, who consigned the objects for sale with the auction house.
May 20, 2013 - Court fight over signed first-edition Wilde
COURTHOUSE NEWS SERVICE - Elia Zois, a London collector, has sued Sotheby’s and Henry Harrod (an heir of a friend of Oscar Wilde to whom the author gifted a signed, first-edition of “The Importance of Being Earnest” in 1899) in New York state court for slander of title, tortuous interference of contract and to be declared the true owner of this book. On the eve of the auction, Harrod claimed that the book, which Zois purchased from a reputable dealer in 1985, was stolen from his family in the early 1980s. The parties agreed to split the proceeds of the auction sale but the book was bought in. Zois claims that Harrod’s title claim derailed the sale.
[ARIS Commentary: Past title claims even claims resolved by binding settlements may adversely affect the marketability of fine art or important collectibles and the prices achieved at public auction or in private treaty sales. Title insurance is a cost-effective, proactive way for parties to communicate to the market that all prior, potential title disputes have been resolved by private agreement and that the buyer will take clear legal title to the offered work.]
May 16, 2013 - Like-kind exchanges
TRUST & ESTATES - Like-kind IRC 1031 exchanges allow art investors to defer tax gain recognition on the sale of artworks, which is especially attractive now because art prices continue to climb and taxes on art sales can have a combined federal rate up to 31.8 percent. To secure 1031 tax benefits, taxpayers must satisfy several strict requirements including proving that the replacement and relinquished property are like-kind and among other factors used in the same place, that is, inside or outside of the United States (see also ARIS news October 5, 2011).
[ARIS Commentary: Taxpayers, qualified intermediaries and financial or legal advisors involved in like-kind exchanges of fine art and important collectibles should be cognizant of the significant consequences and risks of unwinding 1031 exchanges. Because of the opaque and global nature of the art market, in which undisclosed principals with different nationalities transact multi-million dollar deals, exchanges can unwind due not only to investors lacking clear legal title but also to the replacement or relinquished property being “used” in different locations. Title insurance can help to establish that artworks are like-kind through title insurer-certification of location of subject property for purpose of “predominant use” inside or outside of the United States without impacting the transacting parties’ desires to preserve their confidentiality.]
May 16, 2013 - Interpol targets Qaddafi family treasures
THE ART NEWSPAPER - An international task force including the World Bank and UK government has been established to identify Qaddafi’s illicit fortune and repatriate assets including art to the successor Libyan government. Qaddafi and his sons allegedly purchased large amounts of artworks, in particular Islamic art, which was destined for a new museum in Tripoli, through organizations unaffiliated with the regime or through offshore investment groups.
May 12, 2013 - Valuable as art, but priceless as a tool to launder money
THE NEW YORK TIMES - Domestic U.S. and foreign law enforcement claim that thousands of valuable artworks are used to launder illicit profits. Officials contend that the art industry is ripe for criminality since multi-million dollar art transactions are commonly conducted between private unnamed sellers and buyers, art is easily moved between countries, and dealers are not obligated to report suspicious financial transactions as in other industries such as real estate or banking. However, galleries, dealers, and art trade associations dismiss the suggestion that there is an industry-wide problem with money laundering.
[ARIS Commentary: Due to the inherent nature of the art market (lack of regulation and transparency in art transactions) and prosecutors’ renewed focus on civil forfeiture of art that may be linked to criminal activities even when there is no criminal conviction, stakeholders should pay particular attention to red-flags indicating suspicious and possibly criminal activities. A title insurance company can help pierce through the veil of secrecy to research the validity of prior owners and export or import records.]
May 2, 2013 - Collector says Sotheby’s sold him Nazi-owned art - now it's unsellable
THE ART NEWSPAPER - Steven Brooks, a collector who bought an Old Master painting by Louis-Michel van Loo at Sotheby’s in 2004, has sued the auction house in California state court claiming that Sotheby’s failed to disclose material facts about the picture, that is, that the Nazi Gestapo commander Hermann Goering bought it in 1939, and otherwise did not deliver a painting with value or clear legal title. Sotheby’s has allegedly refused to refund Brooks’ purchase price, and both Sotheby’s and Christie’s will not sell the work now because of the uncertainty of legal ownership between 1906 and 1939.
[ARIS Commentary: The van Loo matter highlights for the first time through litigation the thorny issues of marketability, title and valuation of works for which there is uncertainty as to Nazi looting or dispossession and no identifiable claimant or claim; an increasingly common dilemma. Similar issues have plagued orphaned antiquities, which lack documentation proving legal export and ownership outside of source countries before 1970 (or earlier under specific country’s cultural property laws). The good faith sell-side of the art market has struggled with how to manage the trade of “orphaned works” to satisfy the good faith demand-side of the market.]
April 26, 2013 - Bank of America sues for Warhol painting sale profits, plus artworks to cover loan defaults
ABC NEWS - Bank of America is suing in the United States District Court for the Northern District of Georgia two real estate executives, Harold Barry and Christian Schoen, for failing to deliver scheduled artworks used as loan collateral and the proceeds promised from a completed sale of a Warhol painting. Barry and Schoen defaulted on a loan in 2007 which they guaranteed in part through pledging their artwork as collateral.
[ARIS Commentary: As banks are increasingly accepting art as collateral for loans, so too is the expected default rate on art loans, an occurrence which brings into focus U.S. and international banking regulatory requirements to de-risk non-traditional collateral such as fine art and important collectibles. Banks face exposure on recovery and sale of art collateral; in particular, upon guaranteeing clear legal title for sale they are open to claims from title risks existing before the loan due to the inherent opaque, unregulated nature of the art market in addition to lingering default-related title challenges between the bank and the borrower, which can depress marketability and values at sale.]
April 18, 2013 - Co-investing in art: What every art fund manager needs to know
THE ART FUND ASSOCIATION - Art investment funds routinely share ownership of art inventory with its immediate fund investors or with third-party co-investors, however, many fund managers are not fully aware of the accompanying, significant risks of co-ownership, which stem from future foreseeable or unforeseeable events such as involuntary transfers due to death, divorce or bankruptcy of co-owners. Well-advised art fund managers should create co-ownership arrangements only through written co-ownership agreements or the formation of special purpose vehicles (SPV) (see ARIS Alert, January 25, 2013), which address the management, possession, leverage, disposition, storage and insurance including title insurance of subject co-owned art.
[Commentary: The market continues to witness the growth of the art and other alternative asset investment fund market sector. Given potential issues surrounding co-ownership of art outlined in this article -- issues grounded in conflicts between co-owners, which may create clouds on title for the subject work -- and given the increasing frequency of fund co-ownership, it is important for art funds not only to create comprehensive co-ownership SPV agreements but to sell co-owned artworks with title insurance in order to alleviate buyer concerns about joint-ownership complications, enhance sales prices and affirm for investors fund manager compliance with its fiduciary duties and with controlling fund documentation.]
April 11, 2013 - Dispute over spitball-covered Signac settled
ARTINFO - A Paris court has held that the community of Montreuil and not the heirs of the Post-Impressionist artist Paul Signac are the legal owners of a Signac painting, which has hung in the Montreuil city hall since 1938. The heirs claim that this picture was loaned but not gifted to the City. Neither party has contemporaneous loan or gift documentation to support their position.
April 7, 2013 - BU caught in middle as filmmaker, professor feud
THE BOSTON GLOBE - Mark Rappaport, an Indie filmmaker, and Ray Carney, a Boston University film professor, have publicly disagreed in litigation and online whether Rappaport gifted Carney a sizable portfolio of film reels, scripts and other items or asked him to store these materials. The once- friends failed to memorialize in writing their understanding in which Carney took possession of this portfolio.
April 3, 2013 - Who is on your side?
QUEST - In light of recent and continuing litigation in the art industry, for instance the dual role of dealers representing both the seller and dealer in the same transaction without disclosure, more and more forward-thinking art market participants are recognizing the need for change in the industry. Rather than focusing on the standard notion of transparency, primarily around fair market pricing; the driver of this change should be on improving practical transactional standards as a whole, which address the opaqueness of the art market transaction and ensure the consistent integrity of art industry transactions.
April 1, 2013 - Art as an alternative investment
INTERNATIONAL ALTERNATIVE INVESTMENT REVIEW - Fine art and other treasured tangible objects are alternative asset investments, which are becoming a major percentage of mid-tier and UHNW clients’ wealth and require specialized expertise to manage strategically. Many large single family offices, whose founders are often well-known art collectors and art patrons, have little to no expertise or experience planning around artwork. Financial wealth advisors should understand how to access experts in the relevant, specific art markets and areas of tax, legal title, recognition, liquidity and premiums. For instance, as with any investment, clear legal title to passion assets is critical and can be secured with art title insurance.
March 7, 2013 - Arthur Pinajian art worth $30 million found in garage
HUFFPOST - In 2007, Thomas Schultz and Lawrence Joseph purchased a cottage in Long Island, which was the former home of the late and largely unknown Armenian-American artist, Arthur Pinajian, for approximately $300,000 as well as three thousand of Pinajian’s paintings and drawings stored in the attic and garage for $2,500. Today, this collection has an appraised value of $30 million. Pinajian’s cousins and heirs reportedly sold the art because they believed that they already had plenty of Pinajian’s paintings and that the buyers were better suited to obtain art world recognition for Pinajian.
See also The New York Times, “Closing on a house, and a life’s story, told in art” March 14, 2007
[ARIS Commentary: Upon his death, the artist Pinajian wanted all of his artworks to be dumped into a landfill, a request that the heirs ignored when they sold Pinajian’s entire life work for a modest sum. This sale presents several interesting questions about the liability of the artist’s estate, executors and buyers (both initial and downstream). Matthew F. Erskine (an attorney based in Boston with Unique Strategies for Unique Assets) raised some of the following issues (i) can the IRS audit the estate and assess an estate tax on the collection; (ii) if so, what is the valuation of the collection (i.e., the $2,500 sales-purchase price or the $300,000 appraisal value); (iii) can the decedent’s and/or estate’s legal or financial advisors be held liable for not advising their client or clients to appraise the collection; and (iv) if so, would the damages include owed IRS taxes on the stepped-up value of the collection. In addition, given the millions of dollars possibly at stake, the Pinajian heirs may seek to cancel or rescind the sale to Schultz and Joseph on the grounds of a mutual mistake and/or seek redress from downstream buyers of Pinajian works.]
March 4, 2013 - You bought it, but do you own it? Understanding art title risks
ARTASIAPACIFIC - Buyers of fine art and important collectibles should be cognizant of the title risks that may adversely impact whether or not they take good and valid title to purchased object. Title risks include theft, creditor claims, fraud by agents, lack of co-owner consent, prior bequests of artwork, art dealer claims and fraudulent conveyances. There are commercially reasonable means to protect against art market title risks; title insurance helps collectors discover potential problems in the chain of legal title before their purchase and later if title is challenged reimburses the buyer for the purchase price and the legal costs of defending title.
March 4, 2013 - Tacoma museum auctions donated Chinese artifacts
SEATTLE PI - The heirs of donors, who gifted a collection of over 100 Chinese artifacts to the Tacoma Art Museum in Washington in the 1970s, have sued the museum in Washington state court to stop the sale of their parents’ gifted objects including robes and jewelry. The donors and their heirs believed that the museum would keep the works in its permanent collection. The museum initially told the heirs that it had changed its collecting focus to Northwestern art and the gifted collection was not museum-quality and only worth $30,000 in total. After the museum sold a third of the collection at auction in San Francisco for $230,000, the heirs sought legal intervention to prevent the sale of the remainder of works.
March 1, 2013 - NY judge halts auction of The Band member’s stuff
SALON - A New York state court has granted "Rock and Roll Hall of Fame" musician Garth Hudson a temporary restraining order to stop his New York landlord from a planned online sale of Hudson’s personal possessions including an alto sax and other band memorabilia. The landlord claims that Hudson owes him six-years of outstanding storage fees totaling $60,000; Hudson claims that the landlord illegally took his property and has overstated the amount due.
February 28, 2013 - Battle over disputed folk art museum gifts may end soon, but asset war rages on
ARTINFO - The U.S. Bankruptcy Court for the Southern District of New York may soon approve a settlement between the estate of Ralph Esmerian (the convicted high-end jeweler (ARIS News, November 22, 2010, May 21, 1009 and May 1, 2008)) and the American Folk Art Museum (AFAM) transferring title to a portion of Esmerian’s folk art collection which Esmerian promised to gift to the AFAM. Despite the other creditors’ $140 million claim against the estate (creditors include Christie’s and Sotheby’s) and possible objections to the settlement, the Virginia Museum of Fine Art (VMFA) reportedly has purchased a gouache on paper from the estate. It is not known how the parties intend to address the on-going litigation and the Esmerian provenance of the work.
February 11, 2013 - As police investigation of Bill Lowe Gallery continues, artists air claims of cheating, fraud
ARTS ATL - Atlanta-based dealer and gallery owner Bill Lowe is under police investigation for his alleged corrupt business practices including not paying artists their full remuneration for sold works, “losing” artists’ works and forcing artists to settle for less than they were owed under the 50/50 representation split. For the past two decades, market insiders have reportedly been aware of a market reputation that Mr. Lowe failed to pay fully or regularly his artists.
[ARIS Commentary: The Lowe story follows albeit on a smaller, regional scale the publicly-reported art dealer fraud schemes of Michele Cohen and Lawrence Salander, highlighting the fact that the art market remains an opaque, unregulated industry and that title risks permeate primary market transactions too. Collectors of all genres including contemporary art should consider and insist on purchasing artworks from dealers and galleries in escrow to ensure that all parties including consigning artists and sellers are properly paid.]
January 25, 2013 - French masterpiece by 17th century artist Charles Le Brun discovered in the Hotel Ritz
ARTDAILY - While renovating the legendary Ritz Hotel in Paris, an important painting by Charles Le Brun, royal painter of Louis XIV, was discovered. It hung in the suites of the hotel occupied by Coco Chanel for over thirty years, but little else is known or documented about the origins of the painting including the prior owners. Christie’s plans to sell the picture at a Paris auction in April.
January 25, 2013 - Kravis claims collector Bryant reneged on joint MoMA gift
BLOOMBERG - Henry Kravis, founder of KKR & Co., and his wife, Marie-Josée Kravis, president of the board of trustees of the Museum of Modern Art (“MoMA”), have sued fellow art collector and former MoMA trustee, Donald Bryant Jr., in New York state court for breach of their ownership agreement for three Jasper Johns paintings, known as the “Tantric” series. In 2008, the Kravises and Mr. Bryant jointly purchased the Johns works, which collectively are valued at $15 million to $25 million, and agreed to annually alternate possession of the works and eventually gift them to the MoMA. In their complaint, the Kravises claim that Mr. Bryant has refused to transfer possession of the works per the agreed-upon schedule unless and until they agree to repudiate the promised gift.
[ARIS Commentary: Collectors (whether acting as buyer or seller) should be cognizant of challenges in the co-ownership of art and collectibles including the challenges which arise when multiple co-owners lack consensus and dispute the disposition of fine art including the enforcement of promised gifts to charitable institutions. Without clarity of joint ownership (in a “Special Purchase Vehicle”-type of agreement or through litigation), co-owners may not have clear legal title to their art, and the work may lack full marketability.]
January 11, 2013 - Judge settles dispute over rare gem collection
THE NEW YORK TIMES - A New York state surrogate’s court judge has confirmed that Alan Bronstein has full legal title to approximately $14 million worth of rare, colored diamonds and fairly bought his late business partner Harry Rodman’s ownership interest in the collection. In the 1980s and 1990s, Bronstein and Rodman assembled the diamond collection, which has since been exhibited at leading museums around the world. Rodman’s heirs alleged that the transaction in which Rodman transferred his share in the collection for $10,000 to Bronstein should be set aside as fraudulent.
January 7, 2013 - Brooklyn Museum may have to pay hundreds of thousands to store fake art
DNAinfo.com - The Brooklyn Museum has filed a lawsuit in Manhattan Surrogate Court seeking approval to sell 292 gifted works, which are known to be fake, replicas or in poor condition (ranging from so-called Renaissance paintings to Qing Dynasty pottery), and which were bequeathed to the museum by Michael Friedsam in 1932. Colonel Friedsam’s gift required one of his executors (none of whom is living today) to approve the deaccessioning of any items. It costs the museum nearly half a million dollars a year to store and care for the Friedsam collection.
[ARIS Commentary: Museums, especially mid-size and smaller museums, and their trustees should be aware of the risks of accepting bequeathed or gifted artworks having extensive donor restrictions that create liens or encumbrances on the legal title of the items and impair the ability of the museum to sell or transfer the items in the future. Donor restrictions may cause museums to incur legal fees and other costs associated with these issues as well as costs associated with more commonly considered issues such as conservation or storage, and can impact goodwill with donors and their heirs.]
January 3, 2013 - Legendary stolen tapestry ‘Virgin and Saint Vincent,’ worth $1.3 million, may have been found
HUFFINGTON POST - U.S. customs authorities are investigating whether a tapestry owned by a Houston-based nonprofit organization is the same tapestry that was stolen from a Spanish cathedral in 1979. The nonprofit Music Doing Good Inc. purchased the tapestry in 2010 from a Brussels art dealer, allegedly in good faith and without knowledge of the prior theft.
[ARIS Commentary: Trustees of nonprofit institutions owe a fiduciary duty to the entity and must act with the highest standard of care; acting in good faith may not be enough to meet this threshold especially when acquiring multi-million dollar works because there are means to reduce and eliminate the art market title risk and ensure that the entity takes clear legal title.]
January 2, 2013 - Ownership of Colonial-era torah finial bells disputed
AUCTION CENTRAL NEWS - The Newport-based Touro Synagogue and the New York-based Shearith Israel Synagogue, two of the oldest Jewish congregations in the United States, have sued each other in United States District Court for the District of Rhode Island over ownership of finial torah bells valued at $7.4 million. Touro seeks to sell the bells to finance its endowment fund and has negotiated a private sale of the bells to the Boston Museum of Fine Art. Shearith claims that it acquired ownership of Touro – its building, cemetery, torahs and ceremonial objects including the bells – in the early 1800s when Touro fell into disrepair and it became trustee of the congregation.
December 10, 2012 - Zurich misplaces more than 5,000 works of art
AUCTION CENTRAL NEWS - While conducting an audit of its inventory, the City of Zurich discovered that it has lost over 5,000 artworks in its collection including over a thousand original works and a painting by Le Corbusier. The city’s artworks are displayed in hundreds of public facilities, and are estimated to be worth $130 million in total.
December 9, 2012 - Surrealistic art at stake in storage dispute
THE PRESS DEMOCRAT - Jason Stiegelmeyer, the son of the late Surrealist artist Norman Stiegelmeyer, has sued Brian Heim in California state court to recover sixty-one artworks by his father worth approximately $300,000 that are implicated in a storage dispute. Mr. Heim asserts that he has the right to keep the collection per an oral agreement in which Mr. Heim agreed to move, store and pay outstanding fees on Mr. Stiegelmeyer's art collection, and in return Mr. Stiegelmeyer agreed to transfer title to one work a month to Mr. Heim for at least twelve months. Mr. Heim has already sold at least two works at auction in Los Angeles for a total of $18,400. The court issued a preliminary injunction to block Mr. Heim's future transfer, sale or assignment of any more Stiegelmeyer artworks pending resolution of the litigation.
December 9, 2012 - Row erupts over British empire museum’s ‘lost’ artefacts
THE GUARDIAN - Almost 150 collectible objects and paintings lent by collectors to the British Empire and Commonwealth Museum in Bristol, England were lost or sold at auction by the museum without the authority of lenders. As a result, there are ongoing disputes between the defunct museum, which closed after the financial crisis in 2008, and lenders, who seek to recover their precious objects, as well as between former museum trustees and the former museum director.
December 1, 2012 - Coast Guard sues to get back lighthouse lens
MAINE ANTIQUE DIGEST - The United States (on behalf of the United States Coast Guard) has sued the Huron City Museum in United States District Court for the Eastern District of Michigan seeking a declaratory judgment that it is the owner of a 140-year old glass Fresnel lighthouse lens (“Lens”), which the Coast Guard donated to the City of Harbor Beach in 1970. The gift was made subject to recall if the Lens was not publicly displayed for historical preservation or protected in a safe and secure environment. While conducting an audit of its Fresnel lenses in 2009, the Coast Guard determined that the Lens, which the city had by then loaned to the Huron museum, was not adequately exhibited or protected.
[ARIS Commentary: The Coast Guard Lens case highlights the challenges that donees, usually museums or nonprofit institutions, face in accepting gifts of fine art or collectibles with restrictions especially restrictions which are subjective or perpetual. When a donee breaches or appears to have breached a gifting restriction, the donee’s title to the gifted object may become encumbered by a latent defect or the subject of a title claim by the donor.]
November 28, 2012 - MoMA gains treasure that Met also coveted
THE NEW YORK TIMES - The heirs of the late art dealer Ileana Sonnabend are donating the Robert Rauschenberg assemblage entitled “Canyon” to The Museum of Modern Art as part of a $41 million settlement with the Internal Revenue Service. The I.R.S. has agreed to drop its tax assessment of the work and the owners cannot claim a tax deduction for the donation of the work. (See ARIS News, July 22, 2012, March 4, 2012 and February 23, 2012, describing valuation of the work as $0 or $65 million because of the protected bald eagle.)
[ARIS Commentary: In the “Canyon” settlement, the I.R.S. and the Sonnabend heirs effectively agreed that this combine, which is a landmark work of the 20th century, has defective title because it is illegal to sell, trade, gift or even possess stuffed bald eagles, and as a result the combine has $0 value for estate tax and charitable tax deduction purposes. This agreement confirms the relationship of title to value in the art and alternative asset markets, that is, without confirmed clear legal title, fine art and collectibles have reduced to zero commercial value.]
November 24, 2012 - Collectors, artists and lawyers: Fear of litigation is hobbling the art market
THE ECONOMIST - The record $13.5 million sale of a Diebenkorn work with a certificate of authenticity from The Richard Diebenkorn Foundation shows that documented authentic works achieve higher prices. Experts predict that actual litigation and the fear of litigation over authentication will continue to grow and increasingly hurt the sale of artworks that do not have certificates of authenticity or that are excluded from catalogue raisonnés. To reduce liability, artist foundations such as The Isamu Noguchi Foundation are starting to create online catalogue raisonnés, which can be quickly revised, and have vowed to keep quiet if and when they see a fake work for sale.
[ARIS Commentary: Preventative efforts of artist foundations and art scholars to insulate their exposure for authenticity-related decisions do not address the concerns of collectors, who want to avoid buying fake artworks, or the concerns of the market as a whole. As previously noted in ARIS Alerts, November 5, 2012, fake artworks repeatedly resurface on the market. As a result, dealers, galleries and collectors are increasingly purchasing art title insurance and relying on the underwriting protocols undertaken by a title insurer on the ownership history of the subject work as a means to help parties avoid buying fake and forged works.]
November 20, 2012 - Police: Morgantown woman took all of her mother’s estate
TRIB LIVE - Marlene Wesolowsky, the executor of her mother’s estate, is facing civil claims brought by her brother in West Virginia state court for failing to produce his baseball card collection, which is valued at $147,000 and was stored at their mother's home until her death. Ms. Wesolowsky asserts that she never took possession of the missing baseball cards.
November 20, 2012 - Hopper expert questions how minister got an art trove
THE NEW YORK TIMES - Gail Levin, a leading Edward Hopper scholar, has suggested that the late Reverend Sanborn, a local minister, who in the 1960s took care of the Hopper home, illegally obtained possession of hundreds of Hopper paintings, drawings and artifacts. The Reverend sold many Hopper works in his lifetime, and told dealers and curators that he purchased his works from the Hopper estate or was gifted works from Mrs. Hopper. However, Mrs. Hopper, who was known not to gift art to friends, left her entire Hopper art collection to the Whitney Museum of American Art. The Sanborn family trust still contains an unspecified number of Hopper works.
November 20, 2012 - Former Marcos aide charged with secretly keeping Monet painting
REUTERS - The former secretary to Imelda Marcos was indicted in New York state court for conspiring to sell artworks including a $32 million Monet painting which Ms. Marcos acquired when her husband was the President of the Philippines. The Philippine government has claimed title to these paintings as part of the multi-billion-dollar restitution owed by the Marcos for their illegal taking of national property.
November 19, 2012 - Herald Tribune postpones photo auction after images’ ownership is challenged in court
ARTINFO - The International Herald Tribune’s sale at Drouot of 300 archival photographs has been stopped in light of legal claims filed in Paris court by several agencies claiming ownership of the works. The plaintiffs claim that the publisher knew or deliberately ignored the fact that it did not own these photographic images.
November 18, 2012 - Billions in bearer bonds could be lost due to Hurricane Sandy: sources
NEW YORK POST - Hurricane Sandy caused flooding in an underground vault near Wall Street that reportedly housed around $70 billion in paper bearer bonds and stock certificates. Many of these notes may have been destroyed by water damage, and it will be difficult if not impossible for owners to redeem them.
[ARIS Commentary: As the post-Sandy economic consequences continue to be assessed in New York and New Jersey, unfortunately many galleries, dealers and collectors are faced with the loss of fine art and collectibles as well as the destruction of their paper or electronic inventories, bills of sale or sales agreements. This wide scale loss of title-related documentation will likely create title risks, and make it more difficult for sellers to prove and buyers to confirm the ownership history of works.]
November 16, 2012 - Weschler’s can’t pass the blame for auction gaffe
COURTHOUSE NEWS SERVICE - The District Court for the District of Columbia has allowed Anne Cronin to sue the auction house, Adam A. Weschler & Son, for fraud and conversion in allegedly selling her personal property without legal authority. Ms. Cronin stored furnishing and other personal items at Prosperi Company’s storage facility. Due to an outstanding storage fee balance, Prosperi consigned Ms. Cronin’s property to Weschler’s for sale. A day before the sale, Ms. Cronin and Prosperi resolved the storage-fee dispute, and notified Weschler’s of their mutual desire to stop the sale. However, Weschler’s still sold 37-lots of Ms. Cronin’s property.
November 14, 2012 - What’s up with Watteau?
THE ECONOMIST - Litigation has emerged surrounding questions about whether the Hohenzollern family (the former Prussian royal family) sold an important Jean-Antoine Watteau painting twice to the German public. In 1983, the Land of Berlin paid $9.5 million for the painting, which is currently exhibited at the Charlottenburg Palace. In 2007, researchers discovered documents, which indicated that the Hohenzollern family may have already received $5.8m for the painting from the former German Democratic Republic after the abdication of the Kaiser in 1926 or 1927. Documents from the 1950s, however, suggest that the painting was still owned by the Hohenzollerns after WWII.
[ARIS Commentary: The Watteau-Hohenzollern story demonstrates the challenges in tracking the ownership of older artworks, which have been part of family collections for several generations and across different jurisdictions. In retrospect, archival documents may seem vague, and provide an incomplete or conflicting history of the ownership of the subject artwork or collection. This often presents challenges for heirs and the family’s financial and legal advisors, who must confirm clear legal title to the family’s art for sale, gift or tax benefits and otherwise allocate the art as an asset in a larger trust or estate plan.]
November 5, 2012 - UK art world slams council for sculpture sale plan
REUTERS - A London-based government council is considering selling a sculpture by Henry Moore, which the sculptor sold to the city for a price below market value in the 1960s. The council faces significant budget cuts, and the proceeds from the sale of the Moore work (estimated to be worth USD $32 million) could alleviate some of this financial strain. However, leading artists and Moore’s daughter have urged the council not to sell the work because the sale would conflict with the artist’s intent in originally selling the work; and the display of the work is enjoyed by Londoners especially those in one of the poorest boroughs.
[ARIS Commentary: The UK Moore matter continues the trend in the non-commercial sectors of the art market – museums, foundations and governmental entities – of monetizing art assets as a means to address economic pressures and in ways considered unthinkable in the past. See ARIS Alert from March 30, 2011 on the sale of four Clyfford Still works by the City of Denver. The resulting future friction points around whether these prior sales were with lawful authority are significant. As this envelope continues to be pushed, the market can expect to face challenges when auditors are asked to render unqualified audit reports on art investment funds acquiring these assets (see ARIS News from September 20, 2012 “An open invitation to the art and passion alternative asset investment fund market”); when financial institutions are asked to lend against these assets as collateral; or when fiduciaries for foundations or charitable trusts are asked to provide guarantees of clear legal title for sales or exhibitions.]
November 5, 2012 - Fake art may keep popping up for sale
THE NEW YORK TIMES - The persistent problem of the resale of fakes and forgeries in the global art market is receiving ever-growing attention, a problem which plagues artist foundations and estates, collectors, dealers and law enforcement agencies alike. There is no consistent or clear rule on how to handle fake or suspected fake artworks. Some works are stamped with notations about the work’s questionable authenticity, while others are seized or destroyed as part of criminal investigations. Still, most such works remain privately owned without any designation and the works eventually resurface to be traded in the market.
November 5, 2012 - 'Looted' Chinese antiques pulled from Bonhams auction to “avoid any possible offence”
ARTDAILY - Bonhams withdrew two Qing Dynasty vases from its London Fine Chinese Art sale in light of criticism raised by Chinese authorities over the sale of these antiques, which were according to the auction catalogue “retrieved” in 1860 from the Summer Palace. The auction house apologized to Chinese officials, who largely view items removed from the Summer Palace in 1860 as unlawfully looted or stolen by the British and French armies even though some such antiques were also likely taken by local Chinese persons and later sold by Chinese art dealers.
November 5, 2012 - PricewaterhouseCoopers added as defendant in MF Global customer lawsuit
THE WALL STREET JOURNAL - Investors of MF Global Holdings Ltd., Jon Corzine's defunct brokerage firm, have sued PricewaterhouseCoopers in United States District Court for the Southern District of New York alleging that the global accountancy firm was negligent in auditing the company's books, breached its fiduciary duty to the company and to the company's clients and knew or should have known that the company's internal controls did not adequately safeguard customer assets.
[ARIS Commentary: The PricewaterCoopers case follows a larger art market litigation trend: professionals who advise high-net worth individual and institutional clients are increasingly being sued and held professionally liable including under theories of breach of fiduciary duty when adverse outcomes surround clients' investment assets. In particular, appraisers face a challenge in rendering an IRS-mandated, USPAP- (Uniform Standards of Professional Appraisal Practice) compliant appraisal because USPAP requires the appraiser explicitly to state assumed hypothetical conditions behind the appraised value including that legal title to the object is clear, but then the appraisal has limited utility because of the open-ended assumption and condition. Accountants auditing commercial enterprises such as art or other alternative asset investment funds similarly face the difficult task of rendering qualified audit reports of the enterprise including the integrity of its balance sheet given the inherent degree of uncertainty about whether the fund has clear legal title to the assets against pressure from the market and their clients for an unqualified audit report.]
October 19, 2012 - How Dietmar Machold allegedly became ‘the Bernie Madoff of violins’
BUSINESS INSIDER - The renown German violin dealer, Dietmar Machold, who once supplied the world’s top orchestras with rare stringed instruments from the 17th and 18th centuries, is facing fraud, embezzlement and other charges amounting to €5 million in damages in Austrian court. Mr. Machold allegedly sold violins without legal authority to do so and without paying consignors, used the same violin or non-existent violins as loan collateral with different banks, and grossly inflated the valuation of violins in sales and appraisals used for charitable tax deductions among other purposes.
[ARIS Commentary: As a form of collectibles, the global violin market lacks transparency and regulation in similar ways to the fine art market. Mr. Machold’s alleged bad acts went undetected for decades because a small group of dealers handle the global sales of the most sought-after violins; it is common practice for dealers not to disclose the provenance of violins, the price without commission or whether one or more dealer is involved in the transaction; and owners, who frequently purchase violins solely as investments, rarely take possession of their violins and instead often store them in the dealer’s climate-controlled vault or lend them to acclaimed musicians for professional use.]
October 12, 2012 - Beltracchi fake pulled from Millon and Associates Auction in Dubai
ARTINFO - A Paris auction house pulled a painting allegedly by the Polish artist Moïse Kisling, which was created by the master forger Wolfgang Beltracchi who is in prison for operating a 35-year art forgery scheme involving Impressionist and Modern artworks. The provenance for the picture included Collection Jägers, Cologne and Collection Beltracchi, Palma; both of which refer to the forger and the forger's publicized fictitious collector.
October 11, 2012 - Developments and tools for art collectors
TRUSTS & ESTATES - Private wealth managers can help art collectors to navigate the unique nuances of owning valuable, precious fine art and collectibles from transferring capital gain taxes, minimizing risks associated with selling and buying through auction houses and dealers to insuring clear legal title and monetization of works through art title insurance.
October 11, 2012 - Why do I owe tax on art I don’t own?
QUEST - Taxpayers spend a lot of time and money creating and executing tax-efficient strategies around their real property and other investments but often ignore the tax implications of their precious objects, which can lead to significant losses. The Sonnabend and Swift cases demonstrate how uncertainty surrounding clear legal title and ownership defects may dramatically impact the estate’s tax liability.
October 10, 2012 - Clue arises regarding lost photo of Mahler
THE NEW YORK TIMES - A signed photograph of Gustav Mahler owned by Arnold Schoenberg, which the family realized was missing in the late 1980s, has reemerged. A Los Angeles man, who asserted that his grandfather received the photograph as a gift, has offered to sell the work to the Schoenberg family for $350,000. The Schoenberg family suggests that this man’s title to the work is tainted since Schoenberg would have never gifted a Mahler memento and has threatened legal action. Scholars believe that the work may have been stolen, borrowed by a researcher and not returned or lost during cataloging.
October 6, 2012 - Judge: Castle Rock woman owns $12,000 violin but daughter gets custody
DENVER POST - A Colorado state court has ruled that although Carol Rist owns the $12,000 violin at issue, her daughter may retain possession of the instrument as long as she plays and uses it. Since 1999 when she purchased the instrument, Ms. Rist has permitted her daughter, who is now a professional musician, to have custody of the violin. Ms Rist asserts that the violin was on loan to her daughter before a family dispute and that she has full ownership rights to the instrument. Her daughter claims to have acquired not only possession but also clear legal title to the violin from her mother as an inter vivos gift.
[ARIS Commentary: The Rist family violin dispute demonstrates albeit on a small scale the challenges in dividing among parties the bundle of ownership rights (such as possession, title, co-ownership and copyright) associated with tangible personal property and more specifically fine art and important collectibles.]
October 4, 2012 - Former US Supreme Court justice’s heirs win legal fight
AUCTION CENTRAL NEWS - The North Carolina Court of Appeals has ruled that the heirs of one of the first U.S. Supreme Court Justices, James Iredell (1751–1799), hold clear legal title to their ancestor’s historic papers, which could be worth more than $3 million. In 1910, one of the justice’s descendants loaned the papers to the North Carolina Historical Commission, which has maintained possession of the papers for over 100 years, and the State contended that the family relinquished ownership of the works.
October 4, 2012 - Gallery is sued on sales
THE WALL STREET JOURNAL - A Connecticut-based private art foundation founded by Richard McKenzie has sued Forum Gallery and the gallery’s owner Mr. Fishko in United States District Court for the Southern District of New York for more than $14 million including punitive damages for breach of fiduciary duty and other claims. Mr. McKenzie alleges that for the past decade Mr. Fishko sold him and his foundation 110 artworks totaling $11.8 million, and that many of these artworks had inflated prices and were sold on consignment without the authority of and repayment to consignors. In January 2012, the gallery sued the foundation in Connecticut state court asserting that the foundation unlawfully kept a painting for which Mr. Fishko had paid $250,000 to the foundation.
October 4, 2012 - $5M tax-free gifts? Going, going, gone
FORBES - The $5 million gift and estate tax exemption for individuals (and $10 million exemption for couples), which expires at the end of 2012, has spurred urgency among many UHNW families to gift valuable assets to their heirs through trusts and other vehicles. Some advisors suggest that appreciating property such as fine art and important collectibles is the best property to use for lifetime gifts so that additional appreciation post-gift is also excluded from the donor’s estate.
[ARIS Commentary: Many UHNW benefactors and their financial advisers are focused on avoiding donor remorse in making “forced” gifts; however, careful planning including dynasty transfer and third-party restrictions can address these concerns. Likewise, careful planning including art title insurance can eradicate an equally important yet often overlooked challenge surrounding the $5 million tax exemption, that is, the risk that the donor lacks clear legal title to gifted objects. Without clear legal title, the donor cannot legally gift the assets and take the exemption. As a result, many years after the exemption is taken and the family recipient resells or re-gifts the work and the title defect comes to light, the taxpayer, heirs or estate may be liable for the very taxes that the initial taxpayer tried to avoid (at some unknowable future rate) plus penalties and interest.]
October 2, 2012 - How to invest in fine art
FT ADVISER - The U.K.’s Financial Services Authority (FSA) published a consultation paper outlining restrictions on the distribution and marketing of art and collectible investment funds, which are categorized as Unregulated Collective Investment Schemes (UCIS). The FSA found that the majority of UCIS passion asset funds failed to meet FSA requirements and posed a significant risk for ordinary investors.
[ARIS Commentary: As art and other alternative asset investment funds continue to gain prevalence so too are the regulatory, legal and related risk management issues. For parties ranging from sophisticated UHNW individuals to institutional investors, financial and other risks exist when investing in fine art and other collectible investment funds and in managing such funds. Emerging regulations are now ushering in new standards for transparency in fund transactions, fund administration and fund audits. (See ARIS News, September 20, 2012.). The standard use of title insurance by alternative asset investment funds furthers the purposes of the proposed U.K. regulation of UCIS for fine art, wine, car, instrument and other collectible funds.]
September 27, 2012 - Flea-market Renoir allegedly stolen from Baltimore museum; auction canceled
THE WASHINGTON POST - A small Pierre-Auguste Renoir painting, which was acquired at a flea market for $7 two years ago and was consigned to be sold at a Virginia-based auction house for an estimated $75,000 to $100,000, was stolen from the Baltimore Museum of Art in 1951 while it was on loan by the donor Saidie May, who bequeathed her entire collection to the museum. There is no known police report surrounding the theft, and the work is not listed on any stolen art registry. A journalist fortuitously discovered the painting’s history by reviewing museum archival papers. Experts predict that the museum, the insurance company (who paid a $2,500 claim for the stolen work in 1951) and the flea-market buyer will all assert ownership of the Renoir picture in a complicated legal proceeding.
September 5, 2012 - Warhol Foundation will donate or sell its whole collection
THE NEW YORK TIMES - Over twenty-five years after Warhol’s death, the Andy Warhol Foundation for the Visual Arts will liquidate its entire collection of more than 20,000 paintings, prints, photographs and drawings. Works will be sold at live and online auctions by Christie’s over several years. Combined sales are expected to total more than $100 million.
[ARIS Commentary: Because the Warhol Foundation no longer authenticates artworks for the commercial market (see ARIS News, January 17, 2012), buyers should consider purchasing Warhol works sold directly from the Warhol Foundation with title insurance to shore up the authenticity via locking the legal chain of title at the initial primary market sale, when there is limited risk or exposure and hence lowest insurance premium cost. An art title insurance policy at inception maximizes the value to the Warhol artwork over the years and when the insured or the insured's heirs are ready to gift or sell the object.]
September 4, 2012 - Unearthed gold coins belong to Uncle Sam
COURTHOUSE NEWS SERVICE - The United States District Court for the Eastern District of Pennsylvania has awarded the U.S. Government title to ten uncirculated “double eagle” gold coins produced by the Philadelphia Mint in 1933 and worth today approximately $80 million in total. (See ARIS News, July 7, 2011). The court presumed prior criminal intent because the heirs lacked documentation which showed a legitimate release of the coins from the Mint during a twenty-day window of opportunity in 1933.
[ARIS Commentary: The double eagle coin litigation is an extreme example of the critical importance, in this case it made an $80 million difference, of maintaining proper records and documentation for tangible personal property especially when ownership crosses generations, and when primary actors or prior owners with first-hand knowledge may be deceased. Collectors should maintain title transference records for all works in their collection; this best practice will maximize underlying support for trust and estate plans and facilitate the sale of works and overall underwriting of title insurance.]
September 3, 2012 - A Picasso online for just $450? Yes, it is a steal
THE NEW YORK TIMES - As online art marketplaces and internet art sales continue to proliferate (see ARIS News and Commentary, June 21, 2011), so too has the staggering number of fake and fraudulent items labeled and sold as “original” or “authentic” works by recognized artists including Alexander Calder, Pablo Picasso and Alberto Giacometti. These works are often sold with false documents and false information attesting to their authenticity and provenance.
[ARIS Commentary: Buyers should be aware of the high probability of encountering authenticity and title risks when purchasing artworks online. Top-rated internet sellers do not vet and guarantee that all works sold on their sites by third-parties are authentic and free and clear of encumbrances and liens. At best, these sellers can address complaints after the posting goes live or after the sale. Plus, it is expensive and nearly impossible for artists’ estates and foundations to track and prevent fakes from entering the fluid and evolving online market, a task which they have also failed to achieve for the bricks and mortar art market. Savvy buyers should seek out online art sellers and auction sites that properly manage the art market title risk by transferring the risk to a third-party insurer and offering buyers title insurance as part of the online sales transaction.]
August 28, 2012 - More brokers let clients borrow against their Bruegels
REUTERS - Mainstream U.S. brokerages are now increasingly offering high-net-worth clients non-recourse loans up to approximately $150 million collateralized by fine art and important collectibles as a response to investors’ desire to create liquidity without paying capital gains taxes or commissions from the sale of their art possessions. Historically, art-backed loans were offered only from a handful of specialty banks and private banking units.
[ARIS Commentary: Most brokers have until recently steered clear of art lending because of the fact that they lack expertise required to assess properly the complex issue of confirming borrowers’ legal ownership of the offered art or collectible as well as the volatility and macro market conditions of the global art market. Lenders’ standard use of art title insurance as a risk management best practices tool has given banks comfort and confidence to offer new financial products in the alternative art asset sector.]
August 16, 2012 - Britain stops export of key Picasso painting
REUTERS - The U.K. Committee on the Export of Works of Art and Objects of Cultural Interest has placed a temporary ban on the exportation of a Picasso painting dated 1901 entitled “Child with a Dove”, which was on loan to the National Gallery in London from 1974 until 2010. The owner is prohibited from removing the work from Britain until December 2012 or June 2013 if a public or private party based in the U.K interested in purchasing the work comes forward.
[ARIS Commentary: This Picasso-UK export case demonstrates how difficult it is for art collectors to anticipate countries’ cultural patrimony laws and to manage the risk of illiquidity and liens stemming from export or import violations. It would have been difficult to predict the art council’s decision that a painting by a Spanish artist, which was once on a long-term loan to a national museum, would be a sufficient nexus to the host country and basis to justify deferral of exportation of the work for sale.]
August 8, 2012 - Grand jury hits art dealer with fraud indictment
COURANT - A Connecticut art dealer and owner of an art gallery has been indicted by a federal grand jury in Connecticut for knowingly selling clients fake artworks by Picasso and Chagall for which he created false provenance histories and fake certificates of authenticity.
August 5, 2012 - The lost da Vinci: Is this painting found hanging on the wall of a Scottish farmhouse one of the master’s works worth £100m?
DAILY MAIL - A picture housed in a London home and a Scottish farmhouse for over forty years has been touted as a possible Leonardo da Vinci work worth over £100 million. The late Dr. McLaren acquired the work in the 1960s as a gift from one of his patients, and until recently the family had no idea about the possible attribution or value of the picture. Nothing is reportedly known about the 500-year provenance history of the work before 1960.
August 1, 2012 - Lichtenstein painting, missing for 42 years, surfaces in warehouse
THE NEW YORK TIMES - A Lichtenstein painting entitled “Electric Cord” estimated to be worth $4 million, which went missing in 1970 from the late dealer Leo Castelli’s collection, was discovered at Hayes Storage in Manhattan after James Goodman, a gallery owner, asked the Lichtenstein Foundation to authenticate the work. Mr. Goodman asserts that he did not know that the work was stolen and that the purported owner said that he had an invoice from Mr. Castelli. Ms. Castelli has filed a lawsuit in New York state court against the warehouse and the unidentified possessor to recover the picture and prevent it from leaving the storage site.
July 31, 2012 - There’s a huge black market for art and collectibles stolen from the rich
BUSINESS INSIDER - As art prices for great works continue to soar and the art market as a whole continues to grow, so too does the global opportunity for and criminal enterprise of theft of valuable art, wine and collectibles. Law enforcement experts on art crime including Bonnie Magness Gardnier, who runs the FBI National Stolen Art File, believe that stolen art moves quickly from the black market to the commercial art market in part because as Agent Gardnier explained, “We don’t require here in the United States that the sale of a work of art have a title document to go with it.”
[ARIS Commentary: In the wake of art and collectibles having matured into an alternative investment asset class, the art market and its array of professional advisors – from legal, financial and wealth advisors to auditors of art investment concerns and banks lending against art and collectibles as collateral – remains at the crossroads of adopting the same kinds of risk management tools for art assets as long-recognized in parallel markets. Although stolen art remains 25 percent of all title exposures in the art and collectible markets (the other 75 percent of the risk derives from liens and encumbrances such as creditor liens or unpaid taxes and issues surrounding legal authority to transact), the risk is on the rise and many fenced works quietly make their way back to the marketplace. More and more thought-leaders in the market including top tier advisors are mandating the use of art title insurance as the only means to manage effectively the market title risks and to maximize liquidity and asset values in the transaction.]
July 25, 2012 - The 10-million-dollar mercedes
FORBES - One of the world’s rarest cars, a 1936 Mercedes-Benz 540K Special Roadster made-to-order for the late Baroness Gisela von Krieger’s brother, was the subject of an ownership dispute resolved in 1998 after years of litigation and is estimated to sell for up to $10 million at California’s Pebble Beach Classic Car Week. The Baroness left the car in a garage in Connecticut in 1959 when she traveled to Switzerland and died in 1989 without returning to the U.S. to reclaim the car. In 1992, the car was found “abandoned” in a garage in Connecticut.
[ARIS Commentary: The von Krieger Mercedes case shows that the art market ownership risk extends to the rare, classic and antique automobile market. Collector cars are often parked in storage garages for many years and may be deemed to have been abandoned, which can often lead to lengthy, expensive litigation over the rightful ownership of the car among the finder, garage owner, original owner and their heirs or estate.]
July 22, 2012 - Art’s sale value? Zero. The tax bill? $29 million
THE NEW YORK TIMES - The Sonnabend heirs and the IRS have diametrically opposed views, $0 versus $65 million, respectively, of the value of the “Canyon” Rauschenberg assemblage, which is illegal to sell because it contains a protected stuffed bald eagle. (See ARIS News and Commentary, March 4, 2012 and February 23, 2012). A member of the IRS Art Advisory Panel has said that the panel appraised the work and its fair market value solely on the stunning aesthetic value of the work without reference to any relevant restrictions.
[ARIS Commentary: The dispute over the valuation of “Canyon” shows how appraisers often incorrectly follow or apply the Uniform Standards of Professional Appraisal Practice (USPAP), which must be followed to be IRS-compliant; especially USPAP Standard 7-2, which provides that the appraisal report must identify all economic attributes with a material effect on value which includes “any known restrictions, encumbrances, leases, covenants, contracts, declarations, special assessments, ordinances or other items . . .” Similarly, the IRS guidelines note that in determining an item’s fair market value, taxpayers should consider “any restrictions, understandings or covenants limiting the use or disposition of the property.” ]
July 21, 2012 - An artifact, or a payday
THE NEW YORK TIMES - Don Larsen, a Yankees pitcher from the 1950s, has sought to recover his uniform, which he wore while pitching the only perfect World Series game, from the San Diego Hall of Champions. The hall has had possession of the uniform since 1964. The hall lacked accession paperwork to show that the uniform, which experts believe could sell for $250,000 to $1.5 million at auction, was a gift rather than a loan from Mr. Larsen.
[ARIS Commentary: The Larsen case highlights a growing challenge for museums and collectors focused on sports and other memorabilia where, as in this case, an item was accepted for loan or donation on only a handshake. Many museums have been entrusted with artifacts decades ago and, similarly, collectors have purchased items which at the time had modest prices but are now very valuable and for which they have no conclusive documentary proof of ownership. As a result, past donors or lenders and their families are increasingly seeking to recover items previously entrusted to museums to monetize their property in the hot auction market and buying collectors are increasingly being drawn into the same ambiguity over clear legal title of these objects.]
July 18, 2012 - Chinese art funds on a risky road to maturity
THE ART NEWSPAPER - There has been a boom in the creation of Chinese art funds, investment trusts, art exchanges and other art-investment vehicles in the past few years, which have mirrored the suggested strength of the Chinese art market and which consumers have embraced as a means to diversify their asset portfolio with alternative art assets.
[ARIS Commentary: Buyers, in particular those focused on contemporary Chinese art, should be cognizant that art investment products have short maturity (typically two to three year holding) periods and that many Chinese art funds will soon be liquidating anonymously through auction sales a massive amount of art assets. ARIS predicts that sales by Chinese art investment-vehicles, which operate outside of government regulations and focus on realizing returns for investors, will likely create systemic art market title risks because, for instance, these art investment-vehicles may actually be undisclosed trusts issuing art loans and most such Chinese art investment-vehicles in this hyper-fueled sector of the art market appear to conduct little to no due diligence on the title risk before making purchases.]
July 17, 2012 - Sotheby’s sues Chinese man over $3.5M non-payment
AUCTION CENTRAL NEWS - Sotheby’s has filed a lawsuit in Hong Kong High Court against a Chinese man who allegedly failed to pay the total purchase price for twenty paintings and scrolls which he bid for and won at auction sales in April 2012. This is the thirteenth legal case Sotheby’s has brought in Hong Kong, the third largest global art auction hub after New York and London, against bidders for non-payment since 2006. See similar non-payment cases, ARIS News, June 15 and 23, 2012.
July 12, 2012 - The curse of the outcast artifact
THE NEW YORK TIMES - Collectors are having a more difficult time donating or selling cultural objects with undocumented provenances dating back at least to 1970 because museums and auction houses are applying tighter policies for donations and consignments. As a result, many collectors are stuck with "orphaned" cultural artifacts, which they purchased in good faith decades ago from reputable dealers. Critics of this heightened scrutiny suggest that the prohibition of important gifts may adversely affect museum patrons' financial contributions and curtail scholarship efforts.
[ARIS Commentary: The bifurcation in the antiquities and cultural artifacts market between works with provenance documentation dating at least to 1970 versus works without provenance documentation or information dating to 1970 is expected to continue to create schisms in that market and the museum community as well as to migrate in similar ways to other sectors of the art market. For instance, works that have legal title information and documentation below a certain qualitative and quantitative threshold will become less marketable absent title insurance and at the extreme uninsurable from a title insurance company’s standpoint. Even in the antiquities and cultural artifacts market, the existence or absence of pre-1970 provenance information does not eliminate all provenance-related risks nor does it address the preponderance of non-provenance title related risks concerning liens, encumbrances and authority to sell issues common to the art market. Title insurance for all forms of fine art and collectible objects enables collectors to achieve full marketability in the works that they buy, sell or donate.]
July 9, 2012 - Special Report Museum Insurance. Sticking point. The varied nature of insurance for museums
ICOM NEWS - Museums across different international jurisdictions address the same multi-faceted issues associated with protecting rare and valuable artworks and artifacts from damage or loss through risk management. Insurance products such as art title insurance allow museums to acquire through purchase, gift, loan or bequest objects with complete confidence and a financial guarantee in the face of defective title claims.
June 28, 2012 - The government is auctioning off the art collections of millionaire fraudsters
BUSINESS INSIDER - The U.S. Marshals Service is auctioning hundreds of artworks by important artists including Picasso, Rembrandt and Chagall, which were seized from convicted criminals who were also art collectors such as Marc Dreier and Shawn Merriman. See ARIS News, September 16, 2010, April 9, 2009 and December 10, 2008.
June 23, 2012 - As the truth about China’s economy comes out, so does the truth about China’s art market
FORBES - Economists contend that the Chinese art market, which buoyed to the number one spot in global auction sales ahead of the U.S. in 2011, is not as robust as once believed; in particular, the contemporary Chinese art market has shrunk or is smaller than previously believed and is primarily domestic to China. In addition, many “buyers” reportedly never pay for lots won in Hong Kong and Beijing auctions.
[ARIS Commentary: The art market in China magnifies the challenges of lack of regulation and transparency in the global art market. When successful bidders routinely refuse to pay for lots due to cultural or financial reasons, they are not only undermining the legitimacy of the auction process but also creating uncertainty over the title to supposedly sold artworks. (See ARIS News, June 15, 2012, which discusses the ownership dispute of a partially paid-for $1 million Ming vase). ]
June 18, 2012 - Court orders return of late copper heiress’s art, other gifts to staff
AUCTION CENTRAL NEWS - The Public Administrator for the City of New York appointed to administer the estate of the heiress Huguette Clark (see ARIS News, March 15, 2012, November 28, 2011) has ordered recipients of $37 million worth of gifts including a Stradivarius violin to give them back to the estate. The administrator has also ordered the investigation of other gifts including a Manet painting that Ms. Clark gifted to a hospital.
[ARIS Commentary: The sheer size of the $400 million Clark estate magnifies the ownership challenges of distribution and gifts of art and other assets through trusts and estates. At issue is whether Ms. Clark made valid gifts in her will, intestate and inter vivos over a period of twenty years. It is difficult if not impossible for the court to reconstruct Ms. Clark’s intentions and mental capacity and to determine which gifts are valid, legally binding and give the recipients full ownership rights to the subject property. ]
June 15, 2012 - Ming vase dispute won’t crack under pressure
COURTHOUSE NEWS SERVICE - A dispute over the sale and ownership of a $1,385,500 antique Chinese Ming vase is the focus of litigation in the United States District Court for the Eastern District of Pennsylvania between the sellers, Samuel T. Freeman & Co. auction house, and the buyers, who are residents of China. Because the buyers failed timely to pay the total purchase price, making only incremental payments of slightly more than half of the purchase price over a ten month period, the auction house canceled the sale. The buyers object to the cancellation. The sellers filed an action in Massachusetts federal court seeking declaratory and injunctive relief from the auction house for ownership and possession of the vase and to recover the partially paid auction proceeds. The auction house filed an interpleader action in Pennsylvania federal court on the same issues but against the sellers and buyers. The District Court in Pennsylvania permitted its proceedings to continue as an extraordinary circumstance exception of the first-filed rule because all relevant parties consented to suit in Pennsylvania, which was the forum specified in the conditions of sale.
June 14, 2012 - Art market boom leads to calls for regulation
XINHUANET - China’s art auction market, which overtook the U.S. in 2011 as the largest auction market in the world, has burgeoned and continues to grow and include non-HNW individuals. Legal protections, including regulations and enforcement, however, have not kept pace with the Chinese auction market’s rapid growth. Consumers are not protected against fraud by the auctioneer, a common basis for disputes, and there are varying degrees of rules regulating the identification and authentication of works. The Ministry of Culture is currently considering legislation to regulate businesses operating in the art market, to define tradable works and generally to protect owners, consumers and traders.
June 13, 2012 - Money-laundering rules mean more work for dealers
THE ART NEWSPAPER - The European Commission has issued several recommendations to prevent money-laundering in the art market including lowering the threshold amount of cash that dealers or galleries can accept per sales transaction and instituting clearer guidelines for background checks on buyers and other transacting companies. Critics contend that these efforts will unduly burden smaller dealers and galleries and are particularly onerous for traders in the art market who routinely sell to foreign buyers, trusts and other entities.
[ARIS Commentary: Governments around the world are slowly starting to make inroads in regulating the art market by addressing art industry vendors’ business practices which are not in line with other market sectors including the art market practice of not verifying the identity and legal status of the ostensible buyers. Title insurance on the traded fine art or important collectible as part of the transaction will ensure transparency and compliance with the spirit of these proposed laws regulating the art industry with new forms of due diligence standards.]
June 12, 2012 - Fakes, forgeries and ownership
QUEST - Today, more than ever before because of high valuations in the art market and experts and foundations bowing out of authentication to avoid the threat of litigation, collectors struggle to avoid purchasing fake or forged artworks. Confirming legal title and provenance, the latter of which is a component of legal ownership, is an effective means to help address authenticity. The process that a title insurance company undertakes to guarantee legal title serves as a lens that can help clients to avoid buying fake and forged works. Title insurance has become an integral part and consideration in all art market transactions to address both ownership and authenticity challenges, which are more common than many presume in the opaque art industry.
June 12, 2012 - Wife, girlfriend take dispute over painter Thomas Kinkade’s estate, handwritten will to court
THE WASHINGTON POST - The late artist Thomas Kinkade's widow and girlfriend have disputed in California state court the distribution of Mr. Kinkade's estate, which includes over $65 million in art-related assets. When Mr. Kinkade died, he was living with his girlfriend and had been separated from his wife for two years. The girlfriend argues that two handwritten notes of Mr. Kinkade from 2011 allegedly bequeathing her the mansion and $10 million to establish a Kinkade museum supersede any earlier will or probate presumptions.
June 11, 2012 - Husband, wife face $18 million bond each for allegedly stealing money from his employer
ABC - A married couple, who allegedly stole $9 million in various fraudulent schemes, has purportedly spent $2 million of their stolen funds on paintings, sculptures, comic books, sports memorabilia and other collectibles acquired at an unidentified auction house. Federal investigators have seized many of these objects from the couple’s home.
June 1, 2012 - Nazi victim’s family told to return artifact
THE NEW YORK TIMES - The Supreme Court of the State of New York Appellate Division has reversed a trial court decision and ordered the heirs of Riven Flamenbaum, a Holocaust survivor, to return an ancient, small Assyrian gold tablet to a museum in Berlin. The trial court held in favor of the family because the museum failed to report the tablet as stolen and there was no way to determine how Mr. Flamenbaum acquired it. The Flamenbaum family does not know how or when the late Mr. Flamenbaum obtained possession of the tablet after his liberation from Auschwitz in 1945. The object was apparently looted from the Vorderasiatisches Museum after the object was put in storage in 1939.
[ARIS Commentary: The Flamenbaum matter reverses the typical WWII fact-pattern and has the museum argue against laches and in favor of restitution. It is unclear whether this decision will be considered an anomaly or will impact New York jurisprudence on WWII and other types of stolen art given the court’s treatment of the laches defense. Specifically, the appellate court placed greater emphasis on the fact that the estate was not prejudiced by the museum’s failure to exercise reasonable due diligence to locate the tablet than on the failure itself, that is, the museum’s failure to report the tablet as missing and stolen to law enforcement authorities and to stolen art registries.]
June 1, 2012 - Got a Picasso? Get a small business loan
CNN MONEY - Pawnshop-like personal asset companies are offering individuals and small businesses short-term loans for under $1 million in exchange for collateral such as fine art, jewelry and other valuable objects. This new business model blurs the line between high-end private bank loans and low-end pawn brokers. The typical loan to value (LTV) ratio in these transactions is 50% to 70% of the resale value and depends on the specific collateral.
May 24, 2012 - Art prof accused of canoodling a Grant Wood
COURTHOUSE NEWS SERVICE - A collector has sued a tenured University of Wisconsin professor in Wisconsin state court to recover a Grant Wood picture which she gave to the professor in 1995 to be stored at the university’s museum and which the professor consigned for sale at the Iowa auction house Jackson Auctioneers & Appraisers. The collector contends that she never transferred ownership to the professor when she gave him physical possession and custody of the picture but rather intended to bequeath the painting to her children. The complaint alleges that the professor wrongly represented to the auction house that he received title to the painting by gift.
May 23, 2012 - What If Your Prized Art Turns Out To Be Nazi Loot? The Niche Market For Art Title Insurance
ARTINFO - "Can insurance be sexy? Maybe in the art world."
[ARIS Commentary: As the British economist John Maynard Keynes -- considered the most influential economist of the 20th century -- once said, “The difficulty lies not so much in developing new ideas as in escaping from old ones.” Article after article in the global news highlights the prevalence of title disputes in the art market despite the best due diligence efforts of sophisticated transacting parties. The old guard continues to perpetuate misinformation and lack of transactional transparency. In addition to the accurately presented portions of today’s ARTINFO article, one of the quoted parties immediately reached out to ARIS in writing advising that the party was significantly misconstrued and the comments so skewed in the article to the point of effectively creating a misquote. As part of a multi-billion dollar international insurance company, we applaud our many market partners and others who objectively recognize the value and importance of title insurance in the global art market and its many affiliated market sectors.]
May 17, 2012 - Credit card investigation shows art market open to international fraud
THE ART NEWSPAPER - Over 30 auction houses in the U.K. including Christie’s and Bonhams have sold art and other objects to individuals perpetrating theft by using stolen credit cards. These individuals have secured an unknown quantity and value of lots by bidding over the phone or on the internet and picking up the items before the credit card companies and banks have cleared payment of the transaction or been alerted of the credit card fraud. Brick and mortar auction houses as well as online auction sites have been victims to this scheme in part because auctioneers typically have limited credit card security procedures, and anti-money laundering procedures in the U.K. only apply to cash transactions.
[ARIS Commentary: This new style of art theft (which manipulates weaknesses in auction houses’ credit card procedures) is exacerbated by the fact that auction houses, even regional ones, conduct business online, anonymously and with increasingly international bidders. This can have a significant impact on the global private and public art market, putting purchasers at risk of unknowingly buying stolen art down-stream and sellers at risk of being defrauded and not paid their sales proceeds as it is unclear who (auction house, bank or credit card company) is liable.]
May 8, 2012 - Pepsi's recipe heads to court
WALL STREET JOURNAL - The heirs of Richard John Ritchie, the man credited with developing the current formula for Pepsi-Cola in 1931, have sued PepsiCo in U.S. District Court for the Southern District of New York seeking a declaratory judgment that they have the right to sell their father’s original papers, which describe the soda formula, without violation of trade secret or other laws. PepsiCo has asserted ownership of the papers and has threatened to interfere with the heirs’ ability to market and sell these materials, which have a pristine and highly-valued provenance. The papers were discovered in 2008 in boxes removed from Mr. Ritchie’s home and over twenty-years after Mr. Ritchie’s death.
May 3, 2012 - Protecting your art from title claims
MARTINDALE - Title claims are increasingly common in the global art market. Disputes about the ownership of art will continue to occur and increase in frequency as the value of art increases and access to information increases enabling claimants to pursue claims. Pierre Valentin, a partner with the global law firm Withers, advises clients to take various measures to safeguard against the art market title risk including obtaining art title insurance. The ARIS ATPI® policy, which covers art provenance risks including theft and illegal export or import and classic risks such as security interests and creditor liens, is the most comprehensive way to protect your art objects.
May 2, 2012 - The costs of litigating in England and Wales
WITHERS WORLDWIDE - The global law firm Withers has witnessed an increase in the number of art-related cases coming before the English courts. Although individuals and entities involved in these art disputes will attempt to resolve their differences out of court and through settlement, they often end up in litigation, which carries financial costs. It is important to understand not only how much litigation costs but also the ways in which litigation costs can be funded and in the U.K. (and other jurisdictions where the losing party pays for the costs of the successful party) recovered from the other side.
[ARIS Commentary: Collectors, dealers, galleries and museums should be aware of art title insurance, which provides full indemnity for the value of the work and full defense costs outside of the indemnity limits as a customized solution to address the often substantial costs associated with title disputes in the art world. The ARIS ATPI® title insurance policy also provides highly specialized defense coverage and carries no deductible, no exclusion for what that insured should have or could have known about the title defect, no exclusion for market source from which the work was purchased and optional public relations expense cover.]
April 29, 2012 - Sotheby’s Australia Chairman Geoffrey Smith battles ex-partner over joint assets
ARTINFO - Since 2006, Geoffrey Smith, chairman of Sotheby’s Australia, and his former partner Robert Gould, a Melbourne art dealer, have disputed the division and distribution of assets which the couple accumulated during their relationship including a significant art collection estimated to be worth around $7 million.
[ARIS Commentary: The Smith-Gould case illustrates the importance of the caveat emptor or buyer beware warning in that if you do not know who is selling the artwork, you may unintentionally buy a work caught in a joint ownership and relationship dispute. For instance, if while Mr. Smith continued to dispute the allocation of shared property, Mr. Gould sold a Warhol picture that was jointly purchased by Mr. Gould and Mr. Smith without disclosure of this fact to the buyer, the unsuspecting buyer may be subject to a claw-back title claim by Mr. Smith.]
April 27, 2012 - Paintings, stolen during a violent home invasion in 1976, to be auctioned at Sotheby’s in New York City
ARTDAILY - Five years ago, Mr. Conley, a Rhode Island lawyer and developer, asked an unidentified Rhode Island art dealer to appraise two Impressionist paintings and discovered that the works were stolen in a home burglary in the 1970s. Mr. Conley claimed that he was unaware of the past theft and that he had received the works from his brother, an antiques dealer. A Rhode Island federal district court awarded title to the pictures to the heir of the victim’s estate, who consigned the works for sale at auction at Sotheby’s.
April 16, 2012 - Turning art into opportunity
ALCHEMY - Over the last eighteen-months, demand has risen and is expected to continue for the next three years for art-backed loans as a means to free art assets for liquidity, investment and to pay unrelated financial liabilities such as taxes. Collectors considering a loan using their art as collateral should be aware that administrative fees include appraisals and title insurance (premium can be paid out of loan proceeds). With the right advisors and title insurance, major banks have gained comfort in accepting art as unconventional collateral and borrowers are able to leverage their existing banking relationships to obtain lower interest rates and higher loan to value ratios.
April 12, 2012 - Break the silence over fakes
THE ART NEWSPAPER - There have been many recent news reports about faked and forged artworks flooding the market, some of which have fooled sophisticated collectors, respected dealers and galleries, as well as even at times artists’ foundations. See ARIS News, March 29, 2012, February 22, 2012 and August 9, 2011. Compounding the problem, which may inadvertently encourage the production and circulation of fakes and forgeries, is the fact that the majority of art experts are reluctant to make decisions or voice opinions about authenticity for fear of retribution through litigation.
[ARIS Commentary: A systemic solution to thwart the proliferation of faked and forged artworks in the art market is for buyers, sellers and their advisors to pay closer attention to the provenance, which is a subset pattern of facts related to the clear legal title, of artworks. A faked or forged artwork always has a faked or forged provenance history and title insurance is the only way to secure financially and to guarantee clear legal title to fine art and important collectibles.]
April 9, 2012 - The UHNW market: “Soft-side” services now a “must-have”
FAMILY WEALTH REPORT - Wealth management firms servicing UHNW clients have been increasingly incorporating “soft-side” or non-financial services, which include capital preservation, risk management, succession planning, philanthropy and educational offerings, to meet client demand. Some firms view these non-financial aspects of wealth management as part of a holistic strategy rather than tactics for investment.
[ARIS Commentary: ARIS has partnered with many leading wealth management firms internationally as part of this growing trend. The wealth management sector is increasingly seeking to ensure the integrity of their UHNW clientele’s acquisition, tax, trust and estate and charitable gifting strategies and to mitigate their client’s liability exposure to the art market title risk through title insurance coverage for the client’s fine art and important collectibles across the client’s range of transactions.]
April 5, 2012 - Navigating the art loan biz, a surging industry attracting both big banks and “loan-to-own” sharks
BLOUIN ARTINFO - The $7 billion art lending industry is growing as art-rich and cash-poor individuals increasingly use their works as collateral for loans. The art lending process can be difficult and expensive; many banks require significant back-up capital and charge high interest rates because of the difficulty in confirming provenance and authentication for the collateralized artwork. Death, divorce and debt are often the impetus for art loans. New York has become the international hub for art lending partly because banks rely on New York's UCC financing statement filing rules, which give banks a security interest in the work and which can give banks sufficient comfort to permit borrowers to retain possession of their collateralized objects.
[ARIS Commentary: Lenders who are accepting fine art and important collectibles as security for loans should be attuned to the challenges in the lender determining that the subject artworks have clear legal title and a "rock-solid provenance." Banks can suffer major losses if the borrower defaults and the work has an unanticipated defect in title, and they can unwittingly assume legal liability when the bank sells the work in satisfaction of the debt and warrants clear legal title as the new owner of the work. The genesis behind art lending (often death, divorce and debt) and related liens and encumbrances from estate, marital and liquidity or financial challenges put the art-backed loan in a higher than average title risk category. UCC financing statements do not provide ironclad protection but only give the bank a priority position as a secured creditor in the work vis-à-vis other secured or unsecured creditors and provides little value if the borrower disposes of the work or the work has defective title. Art title insurance instituted in art lending transactions protects the lender so that in the event of default, the bank will recoup its loss up to the amount of the loan. The title policy in the loan transaction also benefits the borrower because the title insurance carrier's guarantee of legal title to the collateralized work can encourage the bank to offer a lower interest rate, a higher loan-to-value ratio, or both, and to complete the loan transaction as a threshold matter.]
March 29, 2012 - Chairman of Tom Ford fashion firm sues Knoedler Gallery over Rothko painting
GALLERIST NY - Mr. and Mrs. De Sole have sued the Knoedler Gallery, which was the oldest and among the most respected galleries in the country until its closure in late 2011, and Ms. Freedman, former director of the gallery, in U.S. District Court for the Southern District of New York for the sale of a $8.3 million fake Rothko painting. Since the gallery's closing, this is the second major lawsuit brought by buyers who purchased multi-million dollar postwar masterpieces from the gallery which the gallery acquired from Glafira Rosales and without documented provenance histories. The De Soles allege that the gallery and Ms. Freeman intentionally deceived or recklessly disregarded the truth about the provenance and authenticity of the work.
[ARIS Commentary: The art market has long-recognized that issues of legal tile and authenticity are first-cousins of each other, and the De Soles-Knoedler claim illustrates how legal title, of which provenance is a subset pattern of facts, can relate to authenticity. A title insurance company’s underwriting to guarantee clear legal title becomes an additional lens on authenticity as well as valuation. See ARIS News and Commentary, February 22, 2012.)]
March 27, 2012 - Storage firm sold her 4 Warhols, woman says
COURTHOUSE NEWS SERVICE - AnneMerie Donoghue, a private art collector, has sued Extra Space Management, Inc., a company renting self-storage space throughout the U.S., in New York state court for wrongfully selling four of her Warhol prints for $250,000 purportedly to satisfy outstanding rental fees. Ms. Donoghue stored her art collection in one of the Company’s locations in California. She alleges that because she pre-paid two months of rent ($312 per month) and pre-authorized future rental payments on her credit card, the company had no right to remove and liquidate her possessions including the Warhols.
[ARIS Commentary: Art collectors (acting as buyers and owners storing their artworks in commercial storage facilities) should be aware of potential title challenges associated with warehouseman liens. Under the U.S. UCC and similar U.S. state laws, upon following statutory notice and other procedural requirements, art storage companies may obtain “warehouseman liens” and seize property including precious artworks of renters who owe outstanding storage fees. There is some uncertainty whether a good faith purchaser of property that a warehouseman sells at auction or privately under a warehouseman’s lien takes title to the work free and clear of the renter-owner’s ownership claim when the warehouseman fails to comply with all requisite statutory requirements.]
March 15, 2012 - The $10 million Degas ballerina, heiress Huguette Clark and the tax man
OPEN CHANNEL - Henry Bloch, co-founder of the tax company H&R Block, purchased in good faith from the Peter Findlay Gallery in New York a Degas painting, which was stolen from Huguette Clark's Fifth Avenue mansion in the 1990s. (See ARIS News, November 28, 2011 for background on Ms. Clark's $400 million estate dispute involving in part her art collection.) Ms. Clark did not pursue recovery with the police or register it as missing in stolen art databases in order to avoid unwanted publicity, but nonetheless the FBI later became aware of the theft. In 2005, simultaneously Mr. Bloch discovered that the picture had been stolen from Ms. Clark in the 1990s and Ms. Clark discovered that Mr. Block possessed the painting. Several years later, these parties reached a confidential settlement in which Ms. Clark agreed to donate the painting to the Nelson-Atkins Museum of Art, where the Blochs are benefactors; Ms. Clark received a $10 million charitable tax deduction; and Mr. Bloch agreed to transfer immediate legal ownership of the painting to the museum and to cede physical possession of it after his death. The FBI case is still open, but the New York Public Administrator, which is handling Ms. Clark's estate, has not challenged the gift of the Degas painting. Until recently, the settlement was kept highly confidential (only three of the museum's twenty-one trustees knew about the secret arrangement) and museum records did not show the accession.
[ARIS Commentary: The latest wrinkle in the Huguette Clark estate dispute highlights two major challenges in the art market and museum community. First, although Ms. Clark was unique in her extreme aversion to publicity, many art collectors are likewise keen to maintain their privacy and will not contact the police or stolen art databases about their missing artworks. This lack of disclosure of art theft in general makes it difficult for buyers to confirm clear legal title to purchased artworks on this one particular issue aside from the non-theft related art market title risks. Second, Ms. Clark's gift of the Degas painting to the Nelson-Atkins Museum of Art reflects the sometimes loosened accession standards for favored patrons and important works and a corollary lack of transparency to the public trust and to institution management. In this case, the museum's full executive committee of trustees did not know of and therefore did not review and agree to the gift, which should have been carefully vetted in light of the prior alleged theft of the painting and potential questions regarding Ms. Clark's state of mental competency.]
March 14, 2012 - What happened to $1.8 billion in rubies?
COURTHOUSE NEWS SERVICE - In Washington state court, businessman Lawrence Lester and his company have sued Wells Fargo Bank and others for failing to return five Thai rubies together worth approximately $1.8 billion. The rubies are culturally protected stones owned by the Thai Buddhist Abbot. The Abbot entrusted and transferred title to the rubies to Mr. Lester solely to enable him to secure a loan in the United States using the stones as collateral. Mr. Lester alleges that the Gemological Institute of America (GIA), which was physically examining and appraising the rubies for the loan, wrongly released the rubies to the bank. The bank has allegedly refused to return the rubies. It is unclear who has possession of them. Mr. Lester claims that the rubies were not sold and could not have been sold for any price due to Thai regulations.
[ARIS Commentary: The Thai rubies case presents an extreme example of how the moveable nature of fine art and important collectibles can present title risks. The rubies are easily portable and similar to all tangible personal property (i.e., paintings, memorabilia or estate jewelry) in that it is easy for these kinds of precious objects to be misplaced, lost or stolen and then reenter the market with title defects unbeknownst to downstream buyers.]
March 4, 2012 - If the IRS wasn’t a government agency, might this count as conspiracy?
THE TRUST ADVISOR - – The valuation of a famous Rauschenberg assemblage containing a federally protected bald eagle carcass, which is owned by the Sonnabend estate, presents a double jeopardy conundrum (see ARIS News, February 23, 2010). The IRS has valued the work at $65 million even though legally the estate cannot sell the work or transfer the work to a museum for a charitable gift tax deduction. The estate valued the work at $0 because of the title defect.
[ARIS Commentary: Although the Sonnabend-Rauschenberg case is an extraordinary matter bringing to light an oddity in U.S. IRS tax practice, the underlying valuation principle has general application to all collectors and estates owning and holding fine art and collectibles. When valuing tangible personal property for estate tax or charitable gift tax purposes, appraisals (which must be USPAP compliant for IRS tax purposes) must specify that the appraiser has assumed clear legal title of the asset or has otherwise identified known, potential ownership issues that affect the appraised value. For instance, if the owner has defective legal title to an object, the object has zero value. If the owner's title is clouded by a lien or encumbrance, the object has less than full fair market value.]
March 4, 2012 - Tapping experts is key when clients invest in art
INVESTMENT NEWS - Experienced, sophisticated art collectors tend to rely on the advice of a group of advisors, who are experts in the art industry including appraisers, curators, dealers and insurance brokers and carriers. These art industry specialists help collectors navigate pitfalls in the unregulated, high-risk art market. For instance, “[t]he art market has long recognized that there is no way to know for sure if there is a break in the chain of title.”
March 2, 2012 - Collector wins rights to ‘Cry’ sculpture
COURTHOUSE NEWS SERVICE - The New York State Court of Appeals, the highest state court in New York, has ruled that Biond Fury (the boyfriend of the late Yulla Lipchitz, the artist Jacques Lipchitz’s widow) acquired title to a large 1920 Lipchitz bronze sculpture in 1997 through an inter vivos gift and sold the work in 2005 to David Mirvish. Hanno Mott (Mrs. Lipchitz’s son from her first marriage and a beneficiary of her estate) has contested ownership of the piece since 2003. Mrs. Lipchitz gifted this sculpture and many other works to Mr. Fury by writing a note on the back of an image of the intended gift. Around the same time as Mrs. Lipchitz’s gift, Mr. Mott loaned the work to France and then sold it in 2004 through Marlborough International Fine Art along with three other works for $1 million.
February 29, 2012 - We don’t own that Modigliani
THE ART NEWSPAPER - In a declaration filed in litigation pending in United States District Court for the Southern District of New York, the Nahmad family and the Helly Nahmad Gallery has asserted that it does not own the claimed Nazi-looted Modigliani painting. The Nahmads assert that the entity International Art Center (IAC) owns the work. The claimant asserts that IAC is a wholly-owned Nahmad company, which owns $3 billion to $4 billion worth of the gallery's and family's art stored in a storage facility in the free port of Geneva.
February 27, 2012 - Who owns an artist’s legacy? The tangled tale of Theodoros Stamos
ARTINFO - For the past three years, the estate of the late Abstract Expressionist artist, Theodoros Stamos, has been involved in litigation in the Greek courts, which has expanded into litigation in U.S. federal court, over ownership of several Stamos works and the authority to manage the copyright and determine the authenticity of Stamos’ works. The artist died with two contradictory probate documents: a 1997 will granting authority over his estate to his sister, Georgianna Savas, and a 1995 letter giving the artist’s friend, Zacharias Portalakis, the right to all his copyrights.
[ARIS Commentary: Mr. Stamos’ lack of estate planning has created uncertainty in the probate of his estate across the international borders of Greece and the United States, as well as confusion over the authenticity and legacy of the artist’s works. For instance, despite Ms. Savas’ objection, Mr. Portalakis obtained a seizure order from a Greek court to stop the sale of two allegedly fake Stamos works from a Greek auction house. Even if the Stamos estate could agree upon the authenticity of Stamos works, it may choose to follow the lead of several artist-endowed foundations and estates and not issue certificates of authenticity or give opinions as to authenticity (as a result of multi-million dollar legal defense fees in authenticity disputes and high premium costs for directors’ and officers’ liability insurance) (see ARIS News, December 2 and 8, 2011). In the United States, unlike in Europe, there is no clear “droit moral” to oversee an artist’s legacy including protecting against the sale of fakes and forgeries. In the future, an artist’s market is likely to be bifurcated between works with supporting documentation directly supporting or helping to support authenticity (such as previously issued certificates of authenticity or art title insurance policies) and works without any such documentation. Although title insurance does not cover authenticity, the title insurer’s underwriting process for an art title insurance policy vets moral hazards surrounding submitted artworks and financially guarantees clear legal title to artworks, which provides comfort on authenticity to buyers, lenders and the market as a whole.]
See also “A matter of opinion, Concerns about liability have led several artist’s foundations to stop authenticating their work,” ARTnews, February 28, 2012.
February 24, 2012 - Paintings from Hitler’s collection found in Czech Republic
AUCTION CENTRAL NEWS - Seven paintings from Adolf Hitler’s collection worth reportedly €2.7 million were found hidden in a monastery near Prague. These works are part of a larger collection of Czechoslovakian “war booty” with questionable ownership histories during WWII. In the past two years, at least two objects with similar provenance histories have been offered for sale at European auction houses.
February 23, 2012 - Even rich heirs deserve a fair shake from the IRS
FORBES - The Sonnabend estate has filed a lawsuit in U.S. Tax Court challenging the IRS’s valuation of an important work in the Sonnabend collection, a collage-painting by Robert Rauschenberg containing a stuffed bald eagle. In light of a 1940 U.S. law, which protects and restricts ownership of the bald eagle, the estate’s appraisers valued the work at $0. The IRS, however, claims that the work is worth $69 million and that the estate owes $29 million in taxes plus a $11.7 million penalty for its gross valuation misstatement.
[ARIS Commentary: The Sonnabend case highlights a conflict in federal tax law and practice. The government maintains the position that contraband including stolen art or protected antiquities has an “illicit market value” for estate tax purposes. However, as art lawyers and estate lawyers have asserted, without clear legal title, fine art and collectibles have no commercial value since objects with defective title cannot be sold legally or donated to museums.]
February 22, 2012 - Suitable for suing
THE NEW YORK TIMES - As the Knoedler gallery lawsuit and FBI investigation into the gallery’s sale of fake multi-million artworks continue, more information about the initial seller, Glafira Rosales, who was a minor art dealer, and her business practices has come to light (see ARIS News, December 2, 2011, November 30, 2011). Over nearly two decades, Ms. Rosales sold twenty paintings to the gallery that were purportedly new to the market, derived from an anonymous collector with homes in Zurich and Mexico (who inherited the collection), and lacked any records tracking ownership history.
[ARIS Commentary: An art title insurance carrier acts as an institutional, independent lens on authenticity, which may ferret out anomalies related to insureds' covered artworks. There are several red-flags to the Abstract Expressionist works sold by Ms. Rosales to the Knoedler gallery. The sellers and buyers ignored the conspicuous absence of title records for these major works by important artists, relying instead only on the assessment of the quality of the works to determine authenticity (which is now disputed based on signature, style and forensics, for instance, works contain paint pigments that had not been invented at the time the works were created). Court documents name prior owners (John Gerzso and his father) and advisors in the sale of the collection (artist Alfonso Ossorio). Heirs of the now-deceased parties or the living parties or their representatives, however, have denied any specific connection to these works or to the sale of similar artworks. Standard art title insurance underwriting protocols involve confirming the transference of legal title and other legal bases on which a current seller possesses a subject work. The underwriting process thus creates transparency for the title insurer on the identity of the actual verses putative owner or seller, helping the title insurer to secure the legal title and indirectly the market to affirm authenticity. The market challenges are especially acute when transaction principals unwittingly face multiple layers of undisclosed consignors and, as in the Knoedler-Rosales case, the reportedly quick resale of a work from a minor dealer to an established dealer to an important collector.]
February 14, 2012 - Lee Harvey Oswald gravestone wanted back from Roscoe museum
ROCKFORD REGISTER STAR - “A tombstone doesn’t typically come with a title or a deed of ownership.” Several parties have asserted title to the gravestone of the assassin of JFK, Lee Harvey Oswald. David Card (the son of the late buyer-owner of Mrs. Oswald’s house, where the gravestone was stored) alleges that Holly Ragan lacked authority to sell the gravestone in 2009 to Wayne Lensing (the owner of Historic Auto Attractions, whose private museum contains the world's largest collection of JFK memorabilia including the gravestone). Ms. Ragan acquired possession of the gravestone when it was stored by Mr. Card’s mother at Ms. Ragan’s mother-in-law’s home. The gravestone is reportedly worth up to $100,000.
February 6, 2012 - Collector says gallery took $950k for forgeries
COURTHOUSE NEWS SERVICE - Joseph Goldsmith, an art collector, has sued New York-based art gallery, Charlton Rose Fine Art, and its principals for selling nearly a million dollars in forged artworks falsely attributed to Keith Haring, Jean-Michel Basquiat and Andy Warhol from 2005 to 2007. Mr. Goldsmith alleges that the gallery induced him to purchase the art, which representatives of the Haring and Basquiat estates later declared to be fakes, by providing fabricated certificates of authenticity.
[ARIS Commentary: Although neither art title insurance nor any other insurance product covers or insures the authenticity, authorship or attribution of art; the art title insurer’s underwriting process, which is conducted by a third-party without a financial stake in the transaction, can help to prevent collectors from buying fake or otherwise problematic artworks. It is part of title insurance carriers’ routine due diligence and internal protocols to assess moral hazards surrounding submitted artworks (including the contents and veracity of certificates of authenticity) to support the company’s financial decision to guarantee clear legal title to the work.]
February 4, 2012 - Greenwich artist hopes for return of seized paintings
STAMFORD ADVOCATE - Serbian customs officials seized fifteen artworks by the Connecticut artist Marian “Bing” Bingham worth several thousand dollars while the works were on their way to an exhibition at a gallery in Bucharest, Romania. The authorities alleged that because the importing party (the dealer which represents the artist in the United States) lacked the necessary transit form, the artworks had presumptively entered the country illegally and were subject to seizure on suspicion of being smuggled works.
[ARIS Commentary: Transporting art - even contemporary, relatively inexpensive art - across national or international borders requires compliance and understanding of country-specific forms, rules and regulations which can be confusing to collectors (both foreigners and nationals) and violation of which can result in seizure, fines and criminal penalties, and which impinge upon the clear legal title to the work. Documentation by an insurance company that accompanies the work, such as a policy of title insurance, can function as a quasi-passport that can facilitate the cross-border movement of the work.]
January 24, 2012 - Thanks a lot, Uncle Sam
COURTHOUSE NEWS SERVICE - Margaret Bowland, a Brooklyn-based artist, has sued the United States, the Smithsonian Institute and the National Portrait Gallery in United States District Court of the Eastern District of New York for shipping her painting, which was exhibited at the National Portrait Gallery for over a year, to a third-party buyer without her authorization and without receiving the $100,000 sales price. The painting, which won the “People’s Choice Award” in the museum’s portrait competition, was previously exhibited at the Klaudia Marr Gallery in New Mexico. The museum sent the picture in accordance with the gallery’s instructions even though the museum purportedly knew that the artist held title to the work. The artist has not been paid by the buyer (who allegedly paid the gallery) or the gallery; but, neither party is named as a defendant in the case.
January 19, 2012 - $14M suit hits Gagosian
NEW YORK POST - Jan Cowles has sued Larry Gagosian, the Gagosian Gallery and John Doe (the unidentified buyer of her Lichtenstein picture) in New York state court to recover a Lichtenstein picture worth allegedly $5 million. Another case filed by Mrs. Cowles against the gallery with similar facts involving the unauthorized sale of a Tansey picture has settled. (See ARIS News, May 11, 2011, March 11, 2011). Mrs. Cowles alleges that the gallery knew that the Lichtenstein work belonged to her and not her son Charles Cowles but made no effort to contact her or her attorney to obtain authority to take the picture from her apartment or to offer it for sale.
January 19, 2012 - Colleen Weinstein disputes Hotel Chelsea’s handling of late husband’s art; demands return
NY DAILY NEWS - Colleen Weinstein, the wife of the late Arthur Weinstein, owner of Hotel Chelsea and other New York City night clubs, has threatened to sue Chelsea Dynasty LLC, the new owner of the hotel, to get her husband’s artworks back. The Weinstein art collection hung until recently prominently in the halls of the hotel. Mrs. Weinstein claims that the new owner unlawfully removed the entire collection of 25 artworks from the premises and will not let her take a mobile that hangs on the 10th floor. The hotel’s representative asserts that it acquired full legal title to all of the Weinstein’s art when it purchased the building.
January 17, 2012 - Basquiat’s Authentication Committee to disband in September 2012
GALLERIST NY - The Authentication Committee of the estate of Jean-Michel Basquiat announced that it will stop accepting applications to review artworks. This decision follows the disbanding of the Lichtenstein and Warhol committees in light of the potentially serious financial and legal consequences surrounding making negative decisions about the authenticity of applicants’ submitted artworks. Most art experts would agree that real paintings tend to have the right provenance and a literary reference in the artist’s catalogue raisonné.
January 12, 2012 - Remember who owns the Alamo jacket
COURTHOUSE NEWS SERVICE - Dallas-based Heritage Auctions sold in December 2011 a tan suede jacket worn by John Wayne in the 1960 “The Alamo” movie for $119k subject to a pre-sale agreement between Ellsworth Marshall Jones (a stuntman, who received the jacket while working on the film,) and Derek Jones (Marshall’s nephew, who alleges that his uncle gifted the jacket to him in 1990,) to keep the sales proceeds in escrow. After the sale, Ellsworth reneged on the agreement and restated his claim to recover possession of the jacket. The auction house filed a declaratory judgment action in United States District Court for the Northern District of Texas seeking an order confirming that Derek is the rightful owner of the jacket and that pursuant to the pre-sale agreement the auction house can deliver the jacket to the winning bidder.
January 6, 2012 - NASA questions Apollo 13 commander’s sale of list
ASSOCIATED PRESS - Dallas-based Heritage Auctions has suspended the $388k sale of a 70-page module checklist used on the Apollo 13 mission in light of ownership claims raised by NASA. Commander James Lovell consigned the item, which bears his handwritten mission notes, to the auction house and gave standard written representations about his clear title to the historical document. NASA has also asserted title to three other space memorabilia items in the same November 2011 Heritage sale and has settled another similar astronaut memorabilia claim. According to NASA officials, there is a potential risk of government seizure of all aerospace-astronaut items unless and until the title issue has been resolved.
December 15, 2011 - Humana sends smuggled Italian statues home
AUCTION CENTRAL NEWS - Humana Inc., a Kentucky-based health insurance company, returned a pair of 2nd century Roman marble statues to Italy after the company discovered that the statues had been illegally smuggled out of Italy. The company purchased the statues, which were displayed in the lobby of Humana’s headquarters, from an unnamed art gallery in New York in 1984.
December 8, 2011 - The law vs scholarship
THE ART NEWSPAPER - Individual art experts following the lead of institutional artists’ foundations are increasingly reluctant to give opinions about the authenticity of art for fear of being sued for their conclusions. The threat of litigation trails the rise in 20th century art prices and may stall academic discussions about artists’ oeuvres. Academics lose even when they win baseless lawsuits because in the U.S. courts the “American rule” is that legal fees are borne by each party and are not generally recoverable from the losing party. If experts continue to avoid giving authenticity opinions, fakes may more readily enter the art market and deceive innocent buyers.
[ARIS Commentary: As more and more individual academics and institutional boards, foundations and estates decide to exit from the business of providing certificates and opinions on the authenticity of artwork offered in the stream of commerce, there will be greater uncertainty about authentication protocols for buyers. Even if an artist’s foundation continues to work on a catalogue raisonné, the foundation may not disclose to the owner whether or not their submitted artwork will be included in the catalogue, creating uncertainty around the work until the catalogue is published and inclusion (or exclusion) of the work is known. An alternative, cost-effective approach to address authenticity for transacting parties with additional benefits is to obtain title insurance financially securing the party’s legal title to the artwork, which places an additional lens on provenance and in turn authenticity , see ARIS commentary December 2, 2011.]
December 2, 2011 - Possible forging of modern art is investigated
THE NEW YORK TIMES - Federal and New York law enforcement authorities are investigating a possible two-decade long, multi-million dollar expert art forgery: In particular, whether approximately twenty works by postwar masters such as Motherwell, Pollock and Rothko sold by prestigious dealers and galleries including Knoedler & Company are fakes. Glafira Rosales, an art dealer from Long Island, who claimed to have access to an anonymous, international collector with a cache of undiscovered art, brought the artworks to market. The involved dealers and galleries, the bulk of which are not being targeted by FBI and other investigators, have asserted that they did not intentionally or knowingly sell forged artwork yet none can positively identify the selling collector represented by Ms. Rosales or point to any documented provenance for the sold artworks.
[ARIS Commentary: Although art title insurance does not cover or insure authenticity or attribution (which can be a matter of divergent opinion), the title insurer’s underwriting process for an art title insurance policy serves as an additional lens by an independent, third-party on matters which brings to the surface moral hazards surrounding the artwork such as fake provenance histories with fictitious prior owners or over- or understated valuations that can signal authenticity and other issues. Collectors routinely gain comfort on authenticity by the fact that a title insurance company has vetted and financially guaranteed clear legal title to the artworks.]
November 30, 2011 - Nazi loot claim fails to hinder planned Cologne auction of Kandinsky work
BLOOMBERG - Lempertz auction house based in Cologne, Germany plans to sell a Kandinsky watercolor with a low estimate of $1.2 million without disclosing in the catalogue that there is an unresolved WWII restitution claim for the picture. Heirs of Lissitzky-Kueppers contend that in 1926 the work was loaned to the Hanover museum and later seized by the Nazis as “degenerate art.” Lempertz argues that in the 1920s Ms. Lissitzky-Kueppers gifted the watercolor to Lotte Beck, whose family allegedly had possession of the work until 1989. The auction house has not notified potential German or international buyers of the Lissitzky-Kueppers heirs’ pending restitution claim for the work in the catalogue or elsewhere stating that there was no reason “to tarnish the painting.”
November 30, 2011 - A gallery that helped create the American art world closes shop after 165 years
THE NEW YORK TIMES - Knoedler & Company – one of the oldest, most esteemed art galleries in the United States that helped define American artistic taste for generations and provided art to many great collections and institutions – has abruptly closed. The gallery did not specify the reasons for its closure apart from stating it was due to business considerations. Former Knoedler clients will have little recourse if and when they discover that they purchased art with problematic title or authenticity from the gallery.
November 28, 2011 - Dispute over $400 million Huguette Clark estate jeopardizes future museum
ARTFIX DAILY - Distant relatives of the late Huguette Clark, heiress to a copper mining fortune, have contested the disposition of Ms. Clark’s $400 million estate in New York Surrogate’s Court. Ms. Clark executed two diametrically different wills six weeks apart: The first will gave her fortune to family members and the second will established a foundation to create an art museum and gave money to charity, her nurse, lawyer and accountant but nothing to relatives. At issue in the likely expensive and protracted estate dispute is the ownership of Ms. Clark’s large art collection, which includes valuable works by Renoir, Sargent, and Monet.
November 17, 2011 - Wedgwood museum faces threat of forced sale
THE GUARDIAN - The Wedgwood Museum in Stoke-on-Trent, England might be forced to close and liquidate its multi-million pound collection of china because of the museum’s historic ties to Waterford Wedgwood Potteries, the company founded by the Wedgwood family which went into bankruptcy administration two years ago. Under English law, any company linked to a pension scheme can be held responsible for pension shortfalls. Because five out of 7,000 former Wedgwood company employees became museum employees, the museum may be held liable for the company’s outstanding £134 million pension payments. The museum has been legally and financially independent from the Wedgwood company for fifty years.
November 8, 2011 - 200 years later, France claims a missing artwork
THE NEW YORK TIMES - The French Ministry of Culture has alleged that a painting brought to France to be authenticated as a work by the artist Tournier and for sale was stolen in 1818 from the Augustins Museum in Toulouse. Mark Weiss, owner and director of Weiss Gallery in London, purchased the picture at an auction in 2010 in Maastricht, the Netherlands. French authorities contend that the painting belongs to the French state and cannot leave the country. Ironically, Mr. Weiss imported the picture in the hopes of selling it to the Toulouse museum, the same museum from which it was allegedly stolen 200 years ago. Mr. Weiss was shocked by the theft allegation because French officials have been aware of the painting’s existence for several years and the Art Loss Register had no record of the theft.
See also “British gallery rejects France’s claim to painting,” AFP, November 8, 2011.
November 4, 2011 - The Getty Museum is in a legal fight over Armenian bible pages
LOS ANGELES TIMES - A state court in California has denied the J. Paul Getty Trust’s motion to dismiss a lawsuit brought by the Armenian Orthodox Church to recover several pages of an ancient biblical manuscript allegedly stolen from the church either around the end of WWI or in the late 1940s. (See ARIS News, April 6, 2011). The Getty bought the manuscript pages in 1994 for $950,000 and asserts that it has clear legal title to them. An attorney for the church noted that the church has identified and may pursue restitution claims for at least 60 similar Armenian manuscripts, which were allegedly stolen during the Armenian Genocide and are now in the collections of American museums.
See also “Getty fails to derail Armenian church lawsuit over manuscripts,” The Bellingham Herald, November 3, 2011.
November 1, 2011 - Man demands Nazi-looted Modigliani
COURTHOUSE NEWS SERVICE - Philippe Maestracci, the sole heir to the Jewish art dealer Oscar Stettiner who ran a gallery in Paris before WWII, has filed a declaratory judgment action in U.S. District Court for the Southern District of New York to be declared the owner of and recover a Modigliani painting currently in the possession of the New York-based Helly Nahmad Gallery. The heir alleges that Stettiner was forced to flee Paris in 1939 leaving his art collection including the Modigliani behind, which was later sold without Stettiner’s consent.
November 1, 2011 - Artists file lawsuits, seeking royalties
THE NEW YORK TIMES - Several artists including Chuck Close have filed a class-action lawsuit against Sotheby’s, Christie’s and eBay for allegedly violating the 1976 California Resale Royalty Act. The lawsuits seek to force the auctioneers to reveal the identity and location of sellers, information that is kept secret, but necessary to enforce the royalty payments. Acclaimed Los Angeles-based artist Mark Grotjahm has also sued prominent California collector Dean Valentine in California state court to recover a 5% royalty owed for three artworks that Mr. Valentine has resold. California is the only U.S. state that has such legislation, although the royalty rights of artists (also known as droit de suite) is recognized by many European countries. The California law generally provides that artists whose work is resold are entitled to 5% of the sales price if the transaction takes place in California or the seller resides in the state. Mr. Valentine has argued, and the auction houses will presumably also argue, that the California law interferes with the U.S. Copyright Act of 1976.
[ARIS Commentary: Collectors, galleries and auction houses that allegedly violate the California Resale Royalty Act may be creating security liens on resold artworks for down-stream buyers carrying rights of recovery in addition to or in lieu of money damage claims against the sellers. For instance, there is some indication that violation of the droit de suite regulation in the U.K. known as the 2006 Artist’s Resale Right Regulations, which will expand three-fold in 2012 to include the estates of deceased artists, may prevent U.K. authorities from granting export licenses for the offending resold artwork.]
See also “Sam Francis Foundation sues nine galleries for artists’ royalties,” Los Angeles Times, November 1, 2011.
November 1, 2011 - Art, photo collection going up for bids after being seized from Birmingham attorney
THE BIRMINGHAM NEWS - The IRS has seized a large collection of photographs and paintings worth approximately $500,000 including many works by emerging African-American artists from a formerly prominent lawyer, and will liquidate the collection at a public auction to satisfy the attorney’s outstanding IRS tax liens.
October 31, 2011 - Passionate investing on the rise: Spotlight on asset protection for collectors
ACE Private Risk Services® - As demand for and spending on fine art, jewelry, wine and other valuable collections continues to rise, it is increasingly important for high net worth individuals and their wealth advisors not only to understand the market trends but also to engage the experts who can address and manage a variety of risks. These risks include physical damage, theft and improper title or legal ownership involved with this asset class. These risks can start at the purchase transaction and extend through the life of ownership until the collector or members of his or her family decide to sell, donate, exhibit or execute estate strategies around the object.
October 26, 2011 - ACE Private Risk Services and ARIS Title Insurance Corporation announce marketing alliance to provide risk management solutions for collections of fine art and other precious items
BUSINESS WIRE - ACE Private Risk Services, part of the ACE Group focused on high-net-worth personal lines, is partnering with ARIS to help individuals, wealth advisors and institutions understand and address the full range of property plus title risks associated with collecting fine art and other precious items.
October 26, 2011 - Second lawsuit filed against gallery
MAINE ANTIQUE DIGEST - SEM Art Ltd., a Monaco-based gallery representing an unidentified buyer of artworks by Dana Melamed from New York-based Priska C. Juschka Fine Art, has sued Juschka in New York state court for not delivering three of twelve artworks that SEM allegedly purchased from Juschka at Art Basel Miami in 2009. In a related but earlier lawsuit against the gallery also filed in New York state court, Ms. Melamed alleges that Juschka under-stated the total sales price of the twelve artworks (including the three at issue in the SEM lawsuit) that Juschka reported to the artist that the gallery sold and thus failed to pay the artist her full share of the sales proceeds. The court in the first-in-time lawsuit had ordered the return of three Melamed works now in question in the SEM case to Ms. Melamed.
October 19, 2011 - Museum lays claim to Dr. Kevorkian’s art
COURTHOUSE NEWS SERVICE - The Armenian Library and Museum of America has sued in Massachusetts state court the personal representative of the estate of Jack Kevorkian and to be declared the owner of seventeen paintings by Dr. Kevorkian, the late physician who became infamous for his role in assisted suicides. The museum alleges that Dr. Kevorkian gifted the collection to the museum after an exhibition of the works. The estate alleges that the will of Dr. Kevorkian bequeathed all of Dr. Kevorkian’s assets including these paintings to his niece. Since the 1999 exhibition, the museum has maintained continuous possession of the pictures.
October 18, 2011 - Consignor protection bill introduced in New York
MAINE ANTIQUE DIGEST - Assemblywoman Rosenthal has introduced a bill to the New York State Assembly to increase protections provided to artists and their heirs and personal representatives when they consign artwork to dealers and galleries in the art market. The proposed legislation will bolster existing protections provided in the New York Arts and Cultural Affairs Law – clarifying the definition of heirs and representatives, specifying that funds held on behalf of artists by art merchants are held in statutory trusts and are not subordinate to consignees’ creditors’ claims in a bankruptcy proceeding, and creating private rights of action and the recovery of attorney fees by artists seeking to enforce merchants’ breach of the fiduciary duty.
[ARIS Commentary: The bill makes explicit the fiduciary obligations of art dealers and galleries to their represented artists and artists’ estates and establishes damages and consequences for such breaches. The drafters of the bill recognize the unfortunate effect that gallery failures and closures have had on the livelihood of artists and their families especially in the wake of the financial crisis and collapse of the Salander-O’Reilly Galleries. See ARIS News, June 22, 2011 et al.]
October 17, 2011 - Who owns this damaged masterpiece by Henry Moore?
THE ART NEWSPAPER - Henry Moore and the Contemporary Art Society donated in 1967 an important Moore sculpture that currently stands opposite the House of Parliament and is deteriorating because the City of Westminster, the Department of Environment and other government agencies have all denied ownership of the sculpture. Until legal title to the work is resolved, it cannot be restored or moved.
October 15, 2011 - Grossman: Judge might be asked to determine painting ownership
THE ERIE TIMES-NEWS - Erie County, the Northwest Pennsylvania Artist Association and the Erie Art Museum all claim ownership of a painting by the American Impressionist artist Frederick Childe Hassam, which is worth millions and currently hangs in a public library building. The county is considering filing a declaratory judgment action in order to sell the painting to fund an endowment for the county’s library collection. However, the museum and local arts community have stated that they will seek to block any such legal motion on the grounds that the Erie Art Club, the predecessor to the Erie Art Museum, purchased the painting in 1904 and has not relinquished title to work to the county. An attorney for the County Council opined that it will be difficult for the parties to prove ownership since there are no ownership records such as bill of sale.
October 12, 2011 - D.C. law firm sued over settlement for Picassos sold under Nazi regime
THE BLOG OF LEGALTIMES - Thomas Wach, the son of one of Paul von Mendelssohn-Bartholdy’s sisters, has filed a lawsuit in United States District Court for the District of Columbia against Byrne, Goldenberg & Hamilton, the law firm that represented the heirs of Mr. Mendelssohn-Bartholdy in the heirs’ WWII art restitution claims. The firm obtained financial settlements for the heirs from the Guggenheim Foundation and the Museum of Modern Art for two Picasso pictures that Mendelssohn-Bartholdy allegedly sold under duress during the Nazi-era. Mr. Wach alleges that the lawyers incorrectly did not include him as an heir or party to the settlement agreements and that he is entitled to a portion of the settlement funds.
[ARIS Commentary: The Wach case highlights two important trends in art litigation cases. Lawyers, fiduciaries, and other professionals who advise individuals or institutional clients around fine art and important collectibles are increasingly being sued for their role and on claims of inadequately or negligently navigating the art ownership risk for their clients. Second, even when parties are cognizant of an identified art title risk and have executed a settlement agreement addressing the title defect in the artwork – such as pursuant to a bankruptcy or WWII restitution settlement – that agreement does not guarantee that ownership to the subject art has been fully resolved.]
October 11, 2011 - Museum welcomes dispute over work
THE NEW YORK TIMES - The Mary Brogan Museum of Art and Science in Florida has sought to raise its profile as a regional museum and attract financial donations from its role in the middle of a WWII restitution claim for a 16th century painting on loan from an Italian state-run museum (see Alert News, September 9, 2011). The United States Attorney for the Northern District of Florida ordered the museum to retain possession of the painting until the ownership issue is settled. The director of the museum apparently did not consider the risk of WWII historical theft or know that the museum could have asked the State Department to declare the work immune from the seizure at least while the work was in the United States as the Museum of Modern Art did in 1998 after it faced a seizure order for Egon Schiele’s “Portrait of Wally” on loan from an Austrian museum. The relationship between the Italian museum and the Florida museum has become strained as a result of the pending dispute.
October 6, 2011 - Widow and ex-wife battle over collector’s icons
THE ART NEWSPAPER - The ownership of a collection of rare, museum-quality Russian icons is being contested in a Russian court by the widow, ex-wife and children of the late Russian collector and businessman Mikhail de Boire. Mr. de Boire’s ex-wife alleges that she donated 75 of the best icons to the State Pushkin Museum of Fine Arts in 2010 after lending the works for an exhibition at the Tsaritsyno Palace. However, Mr. de Boire’s widow claims that the icons are hers and were stolen by the ex-wife. Pending the court’s resolution of the dispute, the icons will remain in storage at the museum.
October 5, 2011 - Exchange artwork and collectibles and defer paying capital gain taxes
ASSET PRESERVATION INC. - Artwork and collectibles can be used for IRC 1031 tax deferrals if the owner satisfies certain conditions including holding the art or collectible primarily for investment. To prove to the IRS that their property was not held for personal use, taxpayers should treat their art or collectible like any other investment asset and seek expert advice when buying and selling, maintain records of all purchases and obtain art title insurance.
September 22, 2011 - Art title insurance provided by ARIS adopted by global art fund manager Artemundi Management Limited as standard protocol
BUSINESS WIRE - Artemundi Management Limited, part of the Artemundi Group (“Artemundi”), one of the world’s leading art investment funds, with $300 million invested in the art market since the 1990s, has taken the market lead and made art title insurance a standard part of its investment protocols to manage the art market title risks. The first transaction to fall under Artemundi’s new protocols is an important Willem de Kooning painting featured in the retrospective exhibition at the Museum of Modern Art in New York.
September 19, 2011 - Warhol painting among $2.8 million Irish bad bank auction
REUTERS - Ireland’s National Asset Management Agency (NAMA), created to purge Irish banks of over $42 billion worth of high-risk real property loans, will sell through Christie’s a debtor’s 14-piece art collection. This is the first time that the NAMA has auctioned art of a debtor, and the agency expects to liquidate additional fine art and tangible personal property tied to bad loans in the near future.
September 18, 2011 - Tony Curtis auction angers family
BBC - The fifth and last wife of the late Hollywood icon, Tony Curtis, has auctioned at Julien's Auctions in Beverly Hills, California, art and other Hollywood memorabilia the actor owned despite protests from Mr. Curtis’ five children. Mr. Curtis disinherited his children in revisions to his will written months before his death in 2010. The Curtis children have sought to contest their father’s will.
September 13, 2011 - Case of stolen Rembrandt intrigues art world
AUCTION CENTRAL NEWS - A drawing allegedly by Rembrandt circa 1630 valued at $250,000, which was stolen from an art exhibition at the Ritz-Carlton Hotel in Marina del Rey, was found abandoned and undamaged at a local church two-days after the theft. The Los Angeles County Sheriff’s Department has taken possession of the picture and has refused to release the drawing to the Linearis Institute, the entity that was exhibiting the work, because the institute has offered no bill of sale or other documentary evidence proving its ownership. The institute has also declined to reveal the name of the seller to law enforcement authorities.
September 9, 2011 - Mary Brogan Museum of Art & Science’s borrowed Italian painting: ownership dispute
ARTDAILY - The U.S. Attorney’s Office has ordered the Mary Brogan Museum of Art & Science in Tallahassee, Florida to hold and not return a 16th century Italian Renaissance painting, which the museum borrowed from the Pinacoteca di Brera museum in Milan, Italy for an exhibition, until U.S. and Italian authorities address a possible WWII restitution claim to the picture.
September 3, 2011 - Lake Forest family’s Renoir painting object of court fight about who is rightful owner
CHICAGO TRIBUNE - Due to a possible restitution claim by the heirs of Richard Semmel, a persecuted German Jewish textile mogul, the executor of the estate of Newton Korhumel, a steel industrialist, has been prevented from selling a Renoir painting which was scheduled to be auctioned at Christie’s Chicago. As is their standard practice, the auction house will retain the picture until the parties’ dispute is resolved. Mr. and Mrs. Korhumel purchased the picture in 1956 from a New York gallery. Mr. Korhumel's estate filed a declaratory judgment action in United States District Court for the Northern District of Illinois seeking to be declared the rightful owner of the painting. However, the lawyer for Mr. Semmel's estate asserts that Mr. Semmel is the rightful owner of the picture since he was most likely forced to sell it to finance his abrupt departure from Nazi Germany in 1933.
August 26, 2011 - Collector sues dealer for $5m in missing Picassos, Matisses, Klee . . .
COURTHOUSE NEWS SERVICE - George Ball has sued art dealer Scott Cook in United States District Court for the Southern District of New York to recover artwork that he entrusted to Mr. Cook to store as well as $5 million for artwork that Mr. Cook sold on Mr. Ball’s behalf at a Christie’s auction and absconded with the sales proceeds. Mr. Cook has allegedly already spent the proceeds from the auction sale of Mr. Ball’s artworks, closed his former New York-based business, and fled from the U.S. Prior to this incident, Mr. Cook reportedly had an excellent reputation in the marketplace as an honest and trustworthy art dealer.
August 23, 2011 - Ex-con superintendent found lacking as protector of art
THE NEW YORK OBSERVER - The superintendant of a Tribeca building, which houses the studio of the late Abstract Expressionist artist Shirley West, has allegedly stolen nearly 500 artworks by Ms. West. The artist’s niece entrusted the superintendent to safeguard the collection.
August 23, 2011 - Family’s claim against MoMA hinges on dates
THE NEW YORK TIMES - The U.S. Supreme Court will decide next term whether to grant the appeal of a replevin claim for three Grosz artworks brought by the German artist’s heirs against the Museum of Modern Art (see ARIS News, April 13, 2009), and revisit the question of whether New York’s three-year statute of limitation expired under the demand and refusal rule for these allegedly Nazi looted artworks. Some experts argue that cases involving art lost during WWII should be decided on the merits as suggested in non-binding international Holocaust-recovery declarations adopted by the U.S. government rather than procedural technicalities. Other experts argue that time limits are not just technical but speak to the issue of whether it is possible to accurately reconstruct historical occurrences and that it would be unfair to penalize rightful art owners by taking certain legal defenses out of the equation in WWII restitution cases.
August 17, 2011 - Huge diamond forfeited in Ohio to be auctioned
ART DAILY - A 43-carat yellow diamond seized by the U.S. Marshal Services from Paul Monea, an Ohio businessman convicted of money laundering and conspiracy, is to be sold at auction by the federal government. It is unclear how Mr. Monea acquired the diamond known as the “Golden Eye.” Mr. Monea’s two children, a New York minister and a California businessman, have claimed ownership of the diamond reported to be worth millions. The U.S. Court of Appeals for the Sixth Circuit affirmed a ruling permitting the sale of the diamond and the proceeds to be split between victims of Mr. Monea’s criminal activities and the federal, state and local law enforcement agencies that investigated Mr. Monea’s case.
August 12, 2011 - Man sues his uncle for a Warhol
COURTHOUSE NEWS SERVICE - Robert Fenton, husband of the art dealer known as Shaindy Fenton and trustee of the Fenton Family Trust, has sued his brother-in-law, Neil Balick, in United States District Court for the Eastern District of Pennsylvania to recover a blue Shaindy Warhol portrait, one of three Warhol commissioned portraits of his late wife. Mr. Fenton alleges that the trust loaned the picture to Mr. Balick on a temporary basis so that Mr. Balick could enjoy the painting but never intended nor did the trust transfer title to the artwork. (The source appears to have mistakenly mischaracterized the litigants’ family relationship.)
August 9, 2011 - In war over a Motherwell “Spanish Elegy,” the painting is modern but the lawsuits are Byzantine
ARTINFO - In the case of Killala Fine Art Limited v. Julian Weissman, Dedalus Foundation, Inc. et al in the United States District Court for the Southern District of New York, at issue is the authenticity of a Robert Motherwell painting sold by the art dealer Julian Weissman to the gallery Killala Fine Art and whether the Dedalus Foundation (which was created by the artist Motherwell to fund a variety of art programs including sponsoring the Motherwell catalogue raisonné project) is liable for changing its opinion about the attribution of the work. In a crossclaim, the foundation alleges that Mr. Weissman should be held liable for providing false and misleading information about the provenance of the work, which induced the foundation to attribute the work to Motherwell originally. The foundation claims that Mr. Weissman told the foundation that he purchased the work from a Kuwaiti princess when in fact, the foundation claims based on later-discovered information, Mr. Weissman acquired the work from an art dealer previously suspected of trafficking forged artworks.
August 3, 2011 - New York socialite jailed for allegedly stealing millions of dollars worth of historical documents
BUSINESS INSIDER - Barry Landau, a noted presidential historian and collector of American historical artifacts and memorabilia, has been charged with stealing important historical papers including documents signed by President Lincoln, Benjamin Franklin and President Roosevelt worth $6 million from the Maryland Historical Society, New York Historical Society and Franklin D. Roosevelt Presidential Library and Museum. According to prosecutors, Mr. Landau sold four stolen papers to a private buyer for $35,000.
August 3, 2011 - Prosecutors seek 10-plus years for ex-assistant who ripped off Pulitzer heir Kenward Elmslie
NEW YORK POST - James Biear, former assistant to Kenward Elmslie, grandson of Joseph Pulitzer, is awaiting sentencing for stealing art and other valuable personal property from his boss Mr. Elmslie, who suffers from Alzheimer’s Disease. Mr. Biear also sold some of the art that he stole from Mr. Elmslie including a Warhol crate "Heinz 57" to Jane Holzer, a protégée of Warhol, for $220,000 (see ARIS News November 24, 2009).
July 26, 2011 - Rosa Parks trust, estate tied up in lengthy court fight
FINANCIAL PLANNING - Six-years after civil rights icon Rosa Parks passed away, executors, the non-profit Rosa and Raymond Parks Institute for Self Development and family members are embroiled in a dispute over assets in Ms. Park’s estate including a considerable amount of civil rights memorabilia. A Michigan state trial judge has given lawyers representing the estate the authority to sell at auction and retain the sales proceeds of memorabilia to satisfy their unpaid legal fees because the estate is illiquid. Former executors and Ms. Park’s foundation have appealed the court’s ruling to allow the sale of memorabilia and to stop the future sale of memorabilia housed in New York auction houses.
[ARIS Commentary: Until resolution of questions surrounding the validity of Ms. Park’s trust and will, title to all of the memorabilia coming out of Ms. Park’s estate is clouded with uncertainty and potential liens by the competing heirs, adversely effecting the marketability, salability and valuation of these objects. Irrespective of the Michigan court’s ruling permitting the sale of the memorabilia in the midst of the dispute, current buyers of the memorabilia should be aware that they may be later subject to rescission, restitution, or indemnity claims based on for instance a reversal of the trial court’s decision by the Michigan appellate court.]
July 22, 2011 - Convicted art dealer gets 16 years in prison, loses Renoir
THE NEW YORK OBSERVER - Rocco DeSimone, a former art dealer based in Rhode Island, has been convicted of money laundering and mail fraud stemming from a fraudulent investment scheme. Mr. DeSimone collects fine art and Japanese swords, which are now being confiscated to repay the $6 million that he owes in restitution to victims of his scam.
July 17, 2011 - Fighting for his family portraits
THE TELEGRAPH - The Earl of Cardigan has challenged the past and upcoming sale, securing a last minute injunction to halt the sale, of 25 paintings taken from his ancestry home in Wiltshire, England by the trustees of his estate, who decided to sell the art to satisfy the earl’s £2 million debt following a divorce settlement. The trustees took the portraits including works by Sir Joshua Reynolds and other important British artists unbeknownst to the earl while he was out of the country and consigned them for sale at Sotheby’s. The first batch of paintings was sold in April 2011; the second batch has been enjoined from sale by the English court pending resolution of the earl’s claim. The estate trustees contend that the sale of the artwork is a necessary alternative to pay down the earl’s debt given the earl’s lack of liquidity to satisfy his divorce payments despite the earl’s ownership of several historic, valuable real estate properties.
July 13, 2011 - Arts patron accused of hiding assets
STAR TRIBUNE - Michael Antonello, a Minnesota insurance agent who owes millions in civil court judgments for his role in selling fraudulent life insurance policies, has been accused of thwarting payment to plaintiffs. Mr. Antonello transferred title of $3 million worth of his art and musical instruments to Michael J. Antonello and Associates Ltd. The company allegedly leveraged these objects as loan collateral to secure financing from a New York firm, which placed bank creditor liens on the works, on top of the plaintiffs’ judgment liens.
July 11, 2011 - Judge to decide ownership of “Jackie letter”
AUCTION CENTRAL NEWS - The U.S. District Court for the Northern District of Texas will determine the owner of a condolence note written by former first lady Jacqueline Kennedy to her sister-in-law Ethel Kennedy after the death of her husband Robert Kennedy. The letter was found amongst papers of a plumber, who once worked in the Kennedy home, after the plumber’s death. The plumber’s son sold the note to a Connecticut dealer, who in turn sold it to the Massachusetts collector, who consigned the letter for sale at Dallas-based Heritage Auction Galleries before it was seized by the FBI. The Kennedy children believe that the letter may have been stolen since it was never gifted, loaned or sold by the family. There is no evidence that any of the prior sellers or buyers were aware of the purported theft.
July 11, 2011 - De Vries withdrawn at Christie’s
ANTIQUES TRADE GAZETTE - A rediscovered 17th century bronze statue with an estimated value of £5 to £8 million was pulled from a sale the evening before it was to be auctioned off at Christie’s London. The auction house reported that it withdrew the work because new information came to light affecting the validity of the existing export license. The work was consigned by a German noble family.
July 7, 2011 - Pennsylvania family fights United States Treasury over rare 1933 gold coins
ART DAILY - The heirs of Israel Switt, a jeweler who died in possession of 10 never-circulated “double-eagle” gold coins that are worth an estimated $80 million, are contesting the U.S. government’s claim of ownership of the coins that were allegedly stolen from the U.S. Mint in Philadelphia in 1933. The heirs believe that the coins could have left the Mint legally. The U.S. Treasury seized the coins when the heirs took them to the Treasury to be authenticated. The government will likely argue that Mr. Switt was involved in the theft and because a thief cannot pass title through probate or other transference, the coins are government property.
July 1, 2011 - No ‘finders keepers,’ artist tells gallery
COURTHOUSE NEWS SERVICE - German artist Franz Erhard Walther has sued art dealer Keith Johnson and his gallery, Urban Architecture, in United States District Court for the Eastern District of New York to recover a collection of his canvas assemblages, photographs and drawings worth an estimated $2 million, which were consigned in 1988 to the John Weber Gallery, before the gallery filed for bankruptcy protection in 2001. Mr. Walther failed to recover the artworks during the Weber gallery's bankruptcy proceedings. In 2008, Mr. Johnson contacted Mr. Walther and informed him that he acquired a collection of his artworks from Mr. Weber and proposed a consignment arrangement with his gallery to sell the works; however, Mr. Walther refused a second consignment of the collection and asserts that he retains title to the works.
June 30, 2011 - Germany hands Netherlands 8 Old Masters bought in World War II
BLOOMBERG - Germany returned eight pictures to the Netherlands that Alfred Kummerle acquired before and during Nazi occupation of the Netherlands between 1940 and 1944 and that the East German government later seized. The eight works at issue were once owned by Dutch Jewish art dealers Jacques Goudstikker and Nathan Katz and have been housed at the Leipzig Museum. This case illustrates "how complex restitution questions can be, given the tortuous route many artworks took before and after World War II [since] the [Germany government's] Federal Office for Central Services had to weigh claims from not only the Dutch government and the Kummerle heirs, but also from the Conference on Jewish Material Claims Against Germany." The Claims Conference is an organization that recovers unclaimed Jewish property lost due to Nazi persecution.
June 30, 2011 - Barquet Group to seek joint administration with equity owner
THE DEAL - Ramis Barquet, a leading Latin American art dealer, and his solely-owned Chelsea-based gallery selling primary and secondary market artworks, have filed for joint administration and protection from creditors under Chapter 11 of Title 11 of the U.S. bankruptcy code in U.S. District Court for the Southern District of New York. The two largest unsecured creditors are Sotheby’s and SageCrest II LLC, which received over $6 million in debt assigned from ACG Credit Co. LLC (owned and controlled by Ian Peck) and sued the gallery and Mr. Barquet in United States Bankruptcy Court for the District of Connecticut.
June 21, 2011 - A resurgence in art buying over the web
THE NEW YORK TIMES - Online commercial fine art sales have increased in the last few years, and so has the proliferation of online art sales websites. Many new collectors are buying contemporary art and other lower priced art as an investment on the web. Online art sales are generally viewed as more accessible and transparent than private sales by art dealers or galleries.
[ARIS Commentary: Although online art sales are often perceived as more transparent than traditional private gallery sales, buyers should be aware of possible title risks when purchasing contemporary or other types of art online and even when priced below $100,000 or as low as $10,000. Only some online art sales and auction sites vet provenance (which in many cases is not the equivalent of the legal chain of title) and sellers' backgrounds. Online buyers often do not know who is selling the work (e.g., an art dealer, a private collector or a living artist) and whether the seller has the full right, title and interest and authority to sell the work. Several online art sales and auction sites are, however, properly managing the art market title risk by transferring the risk to a third-party insurer and offering buyers title insurance as part of the online sales transaction.]
June 18, 2011 - Fight over $300M art estate
NEW YORK POST - Clare Stone, the widow of the late Allan Stone, a famous New York art dealer and collector, has accused Lelia Wood-Smith, the appointed executor of the Stone estate, of impropriety in handling the $300 million Stone estate, which owns art by de Kooning and other Abstract Expressionists. Since Mr. Stone’s death in 2006, his heirs and the executors have disagreed over how to best manage the valuable art assets left in trust to Mrs. Stone and his six children. In particular, in the latest court filings, Mrs. Stone accused Ms. Wood-Smith of removing $200 million worth of art from a Stone home and taking other art in lieu of commission without approval of the court or trust.
[ARIS Commentary: Executors and trustees, especially those not familiar with the art industry, should take care to avoid pitfalls in managing trusts and estates with art holdings. Even advisors with the best intentions can make unintended missteps in navigating the complicated, unregulated art market.
Trustees must protect and preserve clients’ collectibles with the highest degree of skill and prudence, irrespective of the advisor’s familiarity with the art industry, or face potential claims of breach of fiduciary duty and duty of care. If selling works at auction (which is often perceived as the best way to achieve the highest price and neutrality for trusts and estates) or through private dealers, advisors must represent and warrant clear legal title to the works even though they lack sufficient knowledge and information about the chain of title of the consigned objects.
As in the Stone case, it can be challenging to corral multiple heirs to agree upon a single course of action in deciding whether to keep, gift, donate or sell certain artworks. If the executor sells estate art without the requisite approval of the court or trust beneficiaries, buyers of that artwork may be subject to a claw-back type of lien and defective title claim by one or several heirs, who disagree with the executor’s decision to sell the artwork.
In addition, if the fiduciary seeks the opinion of counsel on the state of legal title of the artwork, this opinion will be exempt from the attorney-client privilege and subject to discovery by the estate or trust beneficiaries if a title problem later arises and causes a loss to the beneficiaries due to the fiduciary’s mismanagement of the art asset. See United States v. Jicarilla Apache Nation, 2011 WL 2297786 (decided Jun. 13, 2011) (affirming the existence of the “fiduciary exception” to the attorney-client privilege).]
June 15, 2011 - Bad Blood: Czech government scrambles to recall international art loans, fearing they will be seized in $500 million dispute
ARTINFO - In light of an arbitration finding that the Czech government owes businessman Josef Stava and his company Diag Human $500 million for defamation, the Czech government has sought to withdraw and prevent seizure of its artworks currently loaned out to museums around the world. Mr. Stava has already seized two paintings and one sculpture from the Belvedere Gallery in Vienna, Austria on the basis of an Austrian court decision upholding the arbitration decision and continues to seek seizure and confiscation orders for loaned Czech art in the U.S. and various European countries. The Czech government has stated that this case will affect its art loan policy for many years in the future.
June 9, 2011 - Zell says L.A. art dealer took him for millions
COURTHOUSE NEWS SERVICE - Chubb Indemnity Insurance Company has sued David Tunkl and his art gallery Worldwide Masterpieces, Inc., in Superior Court in Los Angeles, California as the subrogee of The Samuel Zell Revocable Trust, Helen Zell and Samuel Zell, the well-known real estate investor and entrepreneur. Under the terms of Chubb’s property insurance policy, Chubb paid the Zells $5.8 million for their loss of three artworks (one Balthus and two Léger pictures), which in 2007 and 2008 the Zells consigned for sale with Mr. Tunkl and for which Mr. Tunkl never paid the Zells the sales proceeds. Mr. Tunkl allegedly admitted to selling the artworks without the Zells’s authority and spending the proceeds.
[ARIS Commentary: The $5.8 million insurance settlement reportedly paid by Chubb to the Zells dispels the notion that property insurers have not had to cover claims under certain versions of their fine art property insurance policies for conversion by dealers or galleries after the R.H. Love decision in United States District Court of Illinois. (See extensive discussion of the entrustment issue in ARIS Commentary to ARIS News from May 23, 2011.)
However, after the R. H. Love litigation, property insurers as a whole have sought to avoid covering similar conversion-entrustment scenarios by revising their all-risk policy language specifically to exclude fraudulent, dishonest or criminal acts by parties entrusted with covered property, and using new policy language explicitly to that effect. This new policy language has been raised and challenged in the aftermath of the Salander-O’Reilley Galleries downfall in separate cases by two insured parties (The Philadelphia Museum of Art and Renaissance Art Investors) against AXA Art Insurance.
The Chubb- Zells-Tunkl case highlights once again the significant uncertainty surrounding rights of recourse in the context of the frequent market practice of consignments gone array: consigning sellers, property insurers, dealers without sufficient assets and innocent buyers are each jockeying for recovery or a safe-harbor, but not all are properly managing the consignment risk through a true third-party risk transfer to a title insurer.
If the art dealer, Mr. Tunkl, whom Chubb is currently suing, lacks as he claims money to repay the loss (presumably why the Zells looked to Chubb for recourse rather than the dealer in the first instance), then Chubb as the subrogated holder of the right of recovery against the dealer might choose (as other similarly situated parties in the market have done in their cases against the buyers of their works) to pursue litigation against the buyers of the three paintings at issue to recover the pictures on the grounds that the buyers did not acquire legal title. However, to prevail under this approach, Chubb must demonstrate why the Uniform Commercial Code entrustment rules do not protect the buyers as buyers in the ordinary course (BIOC) and successfully argue either that Mr. Tunkl’s actions amounted to theft and under U.S. law a thief cannot pass clear legal title or that the buyers hold a status more akin to that of a merchant-dealer under the UCC. See Brown v. Mitchell-Innes & Nash, Inc., 2009 WL 1108526 (S.D.N.Y. April 24, 2009) (suggesting that certain buyers may be treated as merchants under the UCC and not obtain same protections as BIOCs if a plaintiff shows that a buyer ignored red-flags of impropriety in the transaction and failed to meet higher standard of inquiry).
A further complication in the Chubb-Zell-Tunkl case is that Chubb will have to reconcile its position in this case, i.e., that the dealer’s actions were theft or conversion, with its position in the R. H. Love litigation, i.e., that the dealer’s actions were no more than a breach of the consignment contract. Moreover, the Chubb-Zell-Tunkl case should be viewed within the larger context of the changes the property insurance industry has made to this industry’s policy language to exclude fraudulent, dishonest or criminal acts by parties entrusted with covered property and the fact that property insurance policies renew each year. Beyond legacy claims under old property insurance policies, in the future the debate over whether a dealer that has not paid a consignor constitutes theft or instead constitutes a breach of contract will be academic at least for claims between insured parties under their property insurance policies against their insurers.
It remains to be seen what will happen to the legal landscape in dealer entrustment cases after the property insurers are out of the equation (for the reasons described above), and courts must determine in a given case who will the bear the loss of a consignment-gone-array as between the seller-consigner and the good faith buyer (or buyer in the ordinary course under the UCC), when neither party has properly managed the risk with a title insurance policy and the title insurer acting as an escrow agent to ensure that all parties are paid.]
June 8, 2011 - Michael Werner Gallery sues trustee accused of hoarding painting
THE NEW YORK OBSERVER - The Michael Werner Gallery has filed a temporary restraining order in New York State court against Christie’s and James H. Rich, an art collector and trustee of the Carnegie Museum of Art, seeking to stop Mr. Rich from selling a Peter Doig painting that the gallery sold to Mr. Rich for $162,000 in 2004. The painting is scheduled to be sold at an upcoming Christie’s London auction with an estimate of $2.2 to $2.7 million. According to the gallery, at the time of purchase, Mr. Rich agreed to gift the entire work to the Carnegie Museum of Art but gifted only a 10% share and later repurchased the 10% share from the museum.
June 8, 2011 - Treasured Pissarro print turns into costly headache
THE NEW YORK TIMES - Sharyl Davis lost a Pissarro picture, which she purchased in 1985 for $8,500, in a federal civil forfeiture proceeding after spending $100,000 in legal defense costs (see ARIS News, June 6, 2011). Ms. Davis parenthetically stated in commenting on her loss: “[m]y $100,000 asset turned into a $100,000 liability” and “[f]ortunately most of my artists are still living, or were [at the time she purchased their work] so there’s no problem with the title.”
[ARIS Commentary: Ms. Davis, a self-described artist, collector and interior designer, is not alone in mischaracterizing the notion that title risks do not exist for contemporary works or works by living artists. For post-modern to contemporary art, the ownership risk often has to do with a host of matters such as creditors claiming a security interest in the art because the seller used the art to secure financing but did not pay back their debt to the lender; the seller failing to disclose a right-of-first-refusal clause in a bill of sale between the first dealer and the first buyer either intentionally or because the seller did not know that the clause existed; or the seller entrusting the work to a dealer or gallery for sale and the dealer selling the consigned work and not paying the seller the owed proceeds.]
June 6, 2011 - ‘Innocent buyer’ of stolen art loses out to French museum
NEW YORK LAW JOURNAL - The United States Court of Appeals for the Second Circuit affirmed the district court’s granting of the federal government’s forfeiture claim based on a violation of customs law and the National Stolen Property Act and rejected Sharyl Davis’s argument that she should retain ownership rights as an “innocent buyer” of the 1884 monograph work by Camille Pissarro. At the time of her purchase of the work in 1985 for $8,500 from a San Antonio, Texas gallery, Ms. Davis did not know that a thief had stolen the picture from the Museé Faure in Aix-les-Bains, France in 1981, smuggled the picture out of France and into the United States and consigned the picture for sale to the Texas gallery. The Department of Homeland Security working with French police asked Sotheby’s to withdraw the picture from sale in 2003 after it was consigned by Ms. Davis. The Court found that in the context of civil forfeitures under Title 19 the buyer must bear the loss and that there is no innocent-owner defense.
May 31, 2011 - Forged painting was once in collection of Steve Martin, German police say
THE NEW YORK TIMES - German prosecutors have charged four individuals with creating and selling through various dealers, galleries and auction houses over a 14-year period nearly 50 faked paintings allegedly by artists such as Heinrich Campendonk, Fernand Léger and Max Ernst for a total of $21 million. The forged paintings were sold with elaborate fake provenance histories as coming from the conspirators’ grandfather’s art collection and fake stickers on the frames.
[ARIS Commentary: The actor Steve Martin, one of the buyers of a faked work, noted that in this case, “the forgers were quite clever in that they gave it a long provenance and they faked labels, and it came out of a collection that mingled legitimate pictures with faked pictures.” Even though authenticity, authorship and attribution are not covered by art title insurance, these issues are related to the art market ownership risk, because fraudulent provenances nearly always accompany forged artworks. Vetting provenance information as a subset of legal title (see ARIS News, February 1, 2011, the Gerald Peters Gallery case) and correlating it to other title information is integral to the title insurer’s underwriting process.]
See also “German authorities crack brazen forgery ring that infiltrated auction houses and museums worldwide,” ARTINFO, November 9, 2010.
May 25, 2011 - Goya painting pitches Spanish baroness against son in EUR 6m court battle
THE GUARDIAN - Borja Thyssen has sued his mother Baroness Carmen Thyssen, one of Europe’s wealthiest art collectors, to recover two paintings worth an estimated 6 million euro. Mr. Thyssen alleges that his adoptive father and his mother’s husband, the late Baron Hans Heinrich von Thyssen, promised to gift him the disputed Goya and Giaquinto paintings as part of his inheritance. The paintings, now in the hand of the baroness, were previously exhibited at the Thyssen-Bornemisza museum in Madrid as part of a long-term and extended loan arrangement with the museum while the baroness negotiated the sale of her 600 million euro collection with the Ministry of Culture of Spain.
May 24, 2011 - An Italian painting in Kentucky, headed home
THE NEW YORK TIMES - The Speed Art Museum in Louisville, Kentucky has agreed to return a 14th century altarpiece that was stolen in 1971 from a villa in Goito, Italy to the Italian authorities. The museum purchased the work in 1973 from Newhouse Galleries in New York for $38,000 without knowledge of the prior theft. The work has remained in the museum’s store rooms for the past decade.
May 23, 2011 - The hottest current fine arts-insurance legal action to watch - In praise of appraisals
ARTNEWS - For fine art and collectible property insurance purposes, it is critical for collectors to understand what is covered and is not covered by their policies and to obtain correct and current appraisals. In a case called "the hottest current fine arts-insurance legal action to watch," the Philadelphia Museum of Art sued AXA Art Insurance after the former industry-leading, now bankrupt Salander-O'Reilly Galleries failed to pay the museum proceeds from the sale of two insured, consigned paintings.
[ARIS Commentary: When collectors leave or "entrust" their art with dealers, galleries, framers, conservators and others who are considered merchants selling goods of that kind under Article 2 of the Uniform Commercial Code (UCC) and that merchant sells the work without paying the consignor or in breach of the agreed upon sales price, there is little recourse available to the consignor apart from suing the merchant for fraud or breach of contract.
The debate continues among consignors, buyers and property insurers over who bears the risk of loss when dealers go bankrupt or otherwise cannot or do not pay consignors after the sale of a consigned work and how to resolve the claimed conflict between, on the one hand, the UCC entrustment provisions, which give a merchant-dealer legal capacity to transfer legal title of consigned artworks to a buyer in the ordinary course (BIOC), and, on the other hand, the UCC Article 9 provisions pertaining to perfected security interests, designed to create priority rules among competing creditors holding a security interest in the debtor's assets when the debtor defaults on a financial instrument and used by the art industry to create notice to a BIOC that some party other than the merchant-dealer owns all or a fractional interest in the consigned work. See Bender v. Carroll, No. 2009-civ-601375 (N.Y. Civ. Ct. filed May 6, 2009); Philadelphia Museum of Art v. AXA Art Insurance Corp., No. 2010-civ-00587 (N.D. Md. filed March 8, 2010); AXA Art Insurance Corp. v. Renaissance Art Investors, LLC, No. 2010-civ-5581 (S.D.N.Y. filed July 22, 2010).
In the wake of the R.H. Love litigation against Chubb's subsidiary Pacific Indemnity Company (in which the United States District Court in Illinois found that a private collector, who consigned paintings to the gallery for sale, could sue the collector's homeowner insurer under an "all risk" policy for loss from the gallery's failure to pay the proceeds of the consignment sale) the property insurance industry modified the standard policy language to clarify that property insurance policies do not cover this kind of loss. For instance, the all risk policy language at issue in the AXA-RAI case excludes coverage for "[a]ny fraudulent, dishonest, or criminal act or acts by: . . . (b) [a]nyone entrusted with the Covered Property."
Advocating that consignors file UCC-1's for their consigned art creates an interesting legal question for courts, because the filing of a UCC-1 (intended under the UCC to apply to the rights of creditors of the consignor against the consignor's assets) arguably states nothing more than what is obvious in the art industry, that is, that works sold on consignment are by definition owned by someone other than the dealer. There is some suggestion that a sophisticated collector and buyer might be treated as a merchant under the UCC and not obtain the same protections as a BIOC under the entrustment rules unless that party satisfies a higher standard of inquiry and investigates red-flags indicating a lack of propriety of the transaction. See Brown v. Mitchell-Innes & Nash, Inc., 2009 WL 1108526 (S.D.N.Y. April 24, 2009). Courts will likely struggle to nullify the entrustment rules by engrafting into the UCC a BIOC's duty to investigate and interpret the financial affairs of a selling dealer, the necessary outgrowth of giving legal meaning to the notice of UCC-1's as transformed to the art industry.
The issues become still more legally complicated in the wake of the Metropolitan Museum of Art-Gagosian Gallery case as museums now start to use UCC-1 filings to place the market on notice of promised or completed full or partial gifts of artworks to the museum (many partial gifts pre-date the 2006 amendments to the U.S. tax code which chilled factional gifts). See The Metropolitan Museum of Art v. Safflane Holdings, Ltd., No. 2011-civ-3143 (S.D.N.Y. filed May 10, 2011); Safflane Holdings, Ltd. v. Gagosian Gallery, Inc., No. 2011-civ-01679 (S.D.N.Y. filed March 10, 2011).
The desire of many art owners to maintain confidentiality including in how they identify themselves in a UCC-1 filing and the often multi-state dimension of art industry transactions among consignors, dealers and buyers further frustrates the efficacy of UCC-1 filings even if they are to be given some legal effect against BIOCs purchasing works from merchant-dealers.
Consignors can best manage the risks they attempt to solve via UCC-1 filings by requiring the consignee-dealer to agree in the consignment agreement (i) that the dealer will not sell the work except in escrow, with the title insurer company serving as escrow agent, as part of securing title insurance for the benefit of the buyer, at a cost that the seller and dealer can share; and (ii) that the dealer does not possess legal authority to transfer title to the consigned work except in conformity with the consignment agreement. Such a process will enable the title insurer to assure that all interests are properly satisfied in the sale transaction, as is done in real property transactions, as well as protect against the myriad of non-UCC title risks.
Buyers who equally insist that title insurance be part of the purchase transactions can avoid being drawn into the continuing disputes over whether the buyer qualifies as a BIOC and obtained clear legal title as well as gain protection against non-UCC title risks and avoid later debates with their own property insurer over questions of insurable interest in the subject artwork for any kind of future covered loss.]
May 11, 2011 - Met seeks return of ‘Innocent Eye Test’
COURTHOUSE NEWS SERVICE - The Metropolitan Museum of Art along with co-plaintiff Jan Cowles, who gave a 30% share of the painting at issue in 2001 to the museum, has filed a lawsuit in United States District Court for the Southern District of New York seeking to recover and to be declared an owner of a 1981 Mark Tansey painting. Ms. Cowles alleges that she purchased the picture from her son Charles Cowles before gifting 30% of it to the museum. In August 2009, allegedly without Ms. Cowles's knowledge or authority, while the painting was in Mr. Cowles's possession, he consigned and sold it through the Gagosian Gallery to two art collectors for $2.5 million. The collectors have sued the gallery for millions of dollars in damages also in United States District Court for the Southern District of New York for failing to notify them at the time of the purchase transaction of the museum's existing partial ownership interest in the painting. See ARIS News, March 11, 2011.
[ARIS Commentary: There is a growing trend in the legal landscape affecting the art industry establishing a duty of care and corresponding liability for art market professionals, who do not adequately protect their clients through research and other means from the exposure of defective legal title of fine art and other significant collectibles. See ARIS News, April 8, 2011 (potential liability for Warhol authenticity board); March 4, 2011 (potential liability for accountants to Salander-O'Reilly Galleries); February 2, 2011 (potential liability for Gerald Peters Gallery). Sophisticated collectors can suffer major financial losses by steadfastly relying on the art industry's old business model and traditional practices of art market professionals, who as a matter of course conduct highly variable due diligence on classic liens and encumbrances potentially infringing art that is the subject of multi-million dollar transactions and are incapacitated as non-market-neutral parties (or advisors to such parties) from conducting effective full due diligence on these risks given the still secret nature of the art industry. As in the Tansey case, galleries generally do not research the risk of joint ownership by multiple parties, or identify it even when such information is available in the public domain or through the gallery's special relationships and knowledge about an artist's body of work. Traditionally, galleries as in this case have relied on their ability to unwind the art transaction to make parties whole in the event of an art title issue, but that remedy does not redress a party's often significant detrimental reliance in making other decisions on the basis that they own the art, such as 1031 exchanges, trust and estate plans or charitable gifts of their art, as well as their desire to keep a unique piece of artwork and to avoid reputation-related issues, often leading to substantial financial loss independent of unwinding the transaction.]
See also "Buyer sues over a sale made and a sale not made," Maine Antique Digest, May 12, 2011.
May 9, 2011 - Painting “gift to dealer” case settled
THE ART NEWSPAPER - American contemporary artist Julie Heffernan and the Los Angeles-based Kopeikin Gallery have resolved their dispute over ownership of Ms. Heffernan’s painting entitled Self Portrait. The artist sued Mr. Kopeikin and his gallery in New York state court to recover a painting that she allegedly consigned to the gallery in 2005 for sale at a gallery exhibition. Mr. Kopeikin claimed that Ms. Heffernan gave him the picture, although he admitted that they never specified the particular work to be offered as a gift.
[ARIS Commentary: The Heffernan v. Kopeikin case highlights a common but avoidable title pitfall often impacting contemporary and primary market art. As a best practice for giving or receiving gifts of fine art or other important collectibles, both the donor and donee should insist on relying upon a written document detailing the name of the artist and the title, dimensions, medium and date of creation of the gifted object.]
May 9, 2011 - Art still serves up rich pickings for legal eagles
THE ART NEWSPAPER - Experts and practitioners in the field of art law have noticed an increase in lawsuits in the art market in the United States as well as a consistent level of litigation over art outside of the United States especially legal disputes involving issues of title and authenticity. More than ever before collectors, dealers, galleries, auction houses, museums and artists are turning to litigation to resolve legal questions about their art.
[ARIS Commentary: As art is increasingly viewed as an asset and treated as an investment, it follows that parties will take the necessary legal steps to protect and establish their right, title and interest in their art. Litigation is expensive and time-consuming, with the costs of litigation often being disproportionate to the value of the object. Experts agree that the best course of action is proactive risk management and mitigation.]
May 6, 2011 - Arizona car auction owner indicted for fraud
AUCTION CENTRAL NEWS - The owner of International Car Auction, an Arizona-based auction house specializing in selling classic American cars and street rods, has been charged with selling consigned cars and failing to pay the sales proceeds to consignors.
May 5, 2011 - Archive of artworks stolen by Nazis goes online
THE GUARDIAN - WWII archival records from the United States, Britain, Germany and other European countries have been digitized and are now available on a single web portal. Access to these historical documents will help researchers and families make more effective restitution claims for stolen paintings, sculptures, jewelry and other artifacts.
May 5, 2011 - Wealth managers unprepared for tomorrow's client - Krawcheck
THE WALL STREET JOURNAL - A leading financial expert predicted that private wealth managers and the investment management industry as a whole are not prepared to address the changing needs of high net worth individuals and their portfolios which may contain fine art and other important collectibles. Tomorrow’s clients are more likely to be women and members of the millennial generation, who place all forms of risk aversion as a top priority.
May 4, 2011 - SJM ex-director under scanner over artefacts 'theft'
THE TIMES OF INDIA - Tens of thousands of artifacts and antiques were stolen in the 1990’s from India’s Salar Jung Museum with the help of the former director of the museum. The current location of these missing objects is not known.
April 22, 2011 - Austrian Nazi victim’s heir to get Klimt painting from Salzburg’s modern art museum
ART DAILY - An Austrian art museum will return a Gustav Klimt painting entitled “Litzlberg am Attersee” estimated to be worth as much as $44 million to the heir of the original Jewish owner, Amalie Redlich. The painting was seized from Ms. Redlich’s apartment before she was deported to Poland in 1941.
[ARIS Commentary: There has been an increase in the frequency and severity of WWII and other types of historical restitution claims for fine art. Claimants have access to more information than ever before on the internet and in publicly available resources.]
April 20, 2011 - Venerable art dealer is enmeshed in lawsuits
THE NEW YORK TIMES - Guy Wildenstein, president of Wildenstein & Company and fifth-generation art dealer with galleries in New York, Tokyo and Paris, has faced a French police investigation and multiple lawsuits for his and his family’s art business practices (ARIS News, February 3, 2011). Criminal and civil charges leveled against Mr. Wildenstein include unlawfully keeping the art of long-standing clients after their passing, tax evasion and money-laundering.
[ARIS Commentary: Collectors should take steps to protect their art holdings for the benefit of their heirs by documenting in trust and estate plans the location of and ownership interest third-parties might have in their artworks to help to avoid potential loss, exposures related to guaranteeing clear legal title to the art, and confusion by younger generations who otherwise must attempt to track past transfers of the possession and title to family artworks.]
April 18, 2011 - Lenny Dykstra accused of bankruptcy fraud
COURTHOUSE NEWS SERVICE - Lenny Dykstra, the former New York Mets and Philadelphia Phillies major league baseball player, was charged with embezzling more than $400,000 worth of objects including sport memorabilia from his bankruptcy estate without the permission of the court appointed trustee. Mr. Dykstra filed for bankruptcy protection in 2009.
[ARIS Commentary: The Dykstra case follows on a smaller scale the case of Ralph Esmerian, the former high-end jeweler and owner of Fred Leighton, who admitted to bankruptcy fraud, embezzling and double-pledging $20 million worth of jewelry (see ARIS News, November 22, 2010, May 21, 2009, and May 1, 2008). Buyers of art and other important collectibles including jewelry and Hollywood or sport memorabilia should be aware of potential title risks related to state and federal bankruptcy cases. In particular, buyers should actively avoid acquiring art and other objects for prices below market value from sellers or debtors who lack the authority of the bankruptcy trustee to sell items from the estate or from sellers who are in financial distress and may likely and imminently file for bankruptcy protection and whose transactions the bankruptcy court can void and rescind.]
April 8, 2011 - Warhol v. insurer
COURTHOUSE NEWS SERVICE - The Andy Warhol Foundation and the Andy Warhol Art Authentication Board (the “Board”) has sued Philadelphia Indemnity Insurance in New York state court for $6.6 million, claiming that their D&O and E&O insurer refused to pay for legal costs the Board incurred between 2002 and 2010 in defending against the Simon-Whelan litigation, which was resolved by settlement and which tied to a claim first arising in 2002.
[ARIS Commentary: Although the Warhol Board case does not involve a legal title issue, the litigation against the D&O insurer serves as a warning as to evolving interpretations on coverage to the museum, trustees and management community, as well as other art market fiduciaries such as trust fiduciaries, all of whom may look to their D&O coverage, including property and casualty insurers (which includes D&O and E&O insurance products), for art industry matters. Since at least 2007, the D&O market has increasingly introduced clearer policy exclusions around title-related losses due to corporate or fiduciary decisions in order to assure that the D&O carrier does not become a de facto title insurer. D&O insurers are in general more closely looking at what it intended the scope of the D&O coverage to be in art world matters. Both trends can affect directors, officers or trustees and in the case of museums in its acquisitions, deaccessioning or charitable gift acceptances activities where financial losses flow as a result.]
See also ARIS News, March 11, 2010, “Museum sues insurer in Salander fiasco,” (Philadelphia Museum of Art versus AXA Art Insurance Company; refusal to pay for loss of two insured paintings consigned to Lawrence Salander after failure and inability of gallery to pay the proceeds to museum following consignment sale); Frigon v. Pacific Indemnity Co., No. 05-6214, 2007 U.S. Dist. LEXIS 17813, (D. N.D. Ill. Mar. 14, 2007) (property insurance coverage denied under “all risk homeowner’s policy”; dealer’s conversion (theft) of art).
April 6, 2011 - Armenian restitution claims grow
THE ART NEWSPAPER - Following the WWII restitution model, there has been a recent uptick in legal cases challenging the ownership by museums and private collectors of artifacts that were allegedly looted during the Ottoman Empire and Armenian massacres between 1915 to 1918 and 1920 to 1923. For instance, the Western Prelacy of the Armenian Apostolic Church of America has sued The J. Paul Getty Museum in California state court seeking to recover several pages of a Medieval Armenian bible that the museum claims it legally purchased from an Armenian family living in the U.S. in 1994 after a thorough review of the provenance.
See also “Statement from The J. Paul Getty Trust regarding the Canon Tables,” June 2, 2010.
April 4, 2011 - Rich are targeted in IRS audit offensive
THE WALL STREET JOURNAL - Over the past several years, the Internal Revenue Service (IRS) has cracked down on tax avoidance and increased its auditing practice of high-net worth Americans by as much as 10% for persons annually earning more than $10 million. The IRS audits wealthier taxpayers primarily through correspondence and requesting answers to detailed questions and copies of records including personal property and non-personal property asset appraisals.
[ARIS Commentary: U.S. art collectors, who are often part of this scrutinized class of wealthier taxpayers frequently audited by the IRS, should ensure that their art appraisals are IRS-compliant, which means that the appraisal must be completed by an independent appraiser and follow USPAP (Uniform Standards of Professional Appraisal Practice) standards. USPAP standards require appraisers to identify with specificity in their reports the economic attributes (such as provenance, ownership interests and other restrictions or encumbrances) that materially affect value and specify the assumptions or hypothetical conditions they use to render an opinion in light of the attribute (USPAP, Standard Rule 7-2(e)). There are growing market signs that if an appraisal report fails to contain the assumptions or hypothetical conditions surrounding the status of the legal title of the art or other tangible personal property appraised, then this failure will significantly impact taxpayers and the executed tax strategy around their assets.]
April 1, 2011 - Million-dollar-plus painting forfeited
MAINE ANTIQUE DIGEST - The United States District Court for the Southern District of New York has ordered that the oil on copper painting Leda ed il Cigno by Italian Renaissance artist Lelio Orsi be forfeited to the United States government as property brought into the U.S. in violation of customs laws. The order is based on a finding that the customs entry summary filed in 2006 when the former purchaser imported the painting into the U.S. falsely identified Great Britain as the country of origin of the work. Later sold by Sotheby's in June 2008 for $1,497,000, the second buyer rescinded the purchase after learning of a pending Italian criminal investigation into the earlier removal of the work from Italy. The painting will be returned to the Italian government pursuant to its request.
March 30, 2011 - Paris must justify its right to Zadkine's estate
THE ART NEWSPAPER - Nicolas Hasle, son of the late sculptor Ossip Zadkine, has challenged the alleged ownership by the Council of Paris of 300 works in his father's and father's wife's estate. An appellate court in Paris, France has held that the city council must explain its claim of superior ownership rights over that of the artist's son. Mr. Hasle was born outside of marriage in 1960 but was recognized as a legitimate heir by the French courts in the 1980s. The artist's wife, who died in 1981, allegedly bequeathed the artist's estate to the City of Paris.
March 30, 2011 - Clyfford Still Museum circumvents donor intent
CULTURE GIRL - A Maryland state court has ruled that the estate of Patricia Still, who was the late wife of the artist Clyfford Still, can release to the City of Denver four of the artist's paintings to be sold before the city formally acquires a second gift of 400 works from the Still collection. The city created the Clyfford Still Museum to house 2,000 works earlier gifted by Mr. and Mrs. Still. Although the sale of the four paintings, worth a combined estimate of $25 million, technically satisfies the AAMD's deaccession guidelines, critics have questioned whether the sale violates the donor's intent for the art collection as stated in the legal gifting documents. The gifts came with numerous strings attached including a prohibition on lending the art for exhibition and displaying other artists' works next to Still's works.
See also "Denver can sell works from Still estate," The Art Newspaper, March 28, 2011.
March 15, 2011 - Dallas museum is sued
THE NEW YORK TIMES - A lawsuit has been filed against The Dallas Museum of Art by Arnold Leon Schroeder, Jr., the stepson of the writer, publisher and close friend of Winston Churchill, Emery Reves, seeking the return of some 1,400 works of art valued at $400 million, including paintings by Van Gogh, Renoir and Pissarro, which the late Mrs. Reves donated to the Dallas Art Museum twenty-five years ago, and seeking damages. The claim of ownership surfaced after the Dallas Museum of Art celebrated last year the 25th anniversary of the donation, one the largest donations in the history of the museum. The suit, filed March 11, 2011, in federal court in Dallas, alleges that the museum's former director and two trustees conspired to circumvent French law by secreting the collection out of France and thus depriving the heir of his right under French law to half of his mother's estate. The museum ultimately built a wing to house the collection. The museum maintains that the collection was part of a charitable trust and foundation created by Emery Reves, which Mrs. Reves oversaw after her husband's death, and not part of Mrs. Reves' estate.
March 11, 2011 - Collector sues Gagosian Gallery for selling him a painting partially owned by Met
THE NEW YORK TIMES - A collector, who purchased a 1981 Mark Tansey painting in 2009 from the Gagosian Gallery, has sued the gallery for several million dollars in damages in United States District Court for the Southern District of New York for failing to inform him at the time he purchased the work that the Metropolitan Museum of Art already owned a 31% share of the painting. The gallery brokered the sale for the then-owner, Charles Cowles, a former Chelsea art dealer and publisher of Artforum, who represented at the time of the sale that he had clear title to the picture.
[ARIS Commentary: The Tansey case highlights the opaque nature of the art market in general and private treaty sales in particular and the often hollow nature of the representations and warranties of clear legal title traditionally relied upon in art sales transactions. A buyer’s inability to know who the actual owner-seller is reduces the efficacy of these representations and warranties, as does a misstatement of the status of the legal title of the work, even if made innocently, and not accurately identifying joint ownership interests or liens encumbering the art.]
March 9, 2011 - If you take street art off the street, is it still art?
THE WALL STREET JOURNAL - A mural allegedly by the graffiti artist Banksy is the subject of litigation between 555 Nonprofit Gallery and Studios and Bioresource Inc., the owner of the derelict Packard car plant building, where the picture was originally created and taken from a cinder-block wall. See ARIS News, May 29, 2010. The building’s owner has sued the gallery in Michigan state court in Wayne County for replevin claiming that the gallery lacked authority from the foreman to remove the picture worth an estimated $100,000.
March 4, 2011 - Accountants blamed in Old Masters art fraud
COURTHOUSE NEWS SERVICE - Renaissance Art Investors (RAI) has sued the former accountants and accounting firm of Mr. Salander and his gallery (the Salander-O'Reilly Galleries) in United States District Court for the District of New Jersey for over $40 million for allegedly aiding and abetting Mr. Salander's $120 million art fraud scheme in which among other things Mr. Salander sold art without paying consignors and sold the same painting multiple times. (See extensive ARIS News on the Salander matter, May 13, 2010, May 7, 2009, March 27, 2009, March 15, 2009, February 10, 2009, November 19, 2007, November 6, 2007 and November 5, 2007.) RAI alleges that the defendant accountants ignored red-flags and other warning signs about Mr. Salander's activities and prepared false financial and other records on which RAI and other investors relied in doing business with the gallery.
[ARIS Commentary: Accountants, attorneys and other advisors to parties buying, selling or investing in art should recognize their potential liability to third-parties for intentionally or negligently ignoring red-flags indicative of their client's improper business conduct when it is foreseeable that third-parties will rely on the professional's services to their clients and as a result lose money in their art-related transactions with the client. Although the RAI case focuses on alleged fraudulent and criminal conduct, the RAI case should serve as a wake-up call to professionals in this post-Madoff market to the broader potential professional liabilities for consciously or negligently failing to inquire and adequately confirm a client's legal ownership of the art assets the client is transacting, e.g., accounting firms which provide unqualified audit reports of the art-assets held by art investment funds or reports of lending portfolios of banks lending against art as collateral.]
February 16, 2011 - After two decades of secrecy, a German museum can finally unveil its mystery Monet
ARTINFO - In 1991, an anonymous woman donated a Monet painting to the Wallraf-Richartz Museum in Cologne, Germany, with the stipulation that the painting could not be exhibited during her lifetime. The donor acquired the work in Nazi Germany in the 1940s. The museum respected the donor’s wishes and has only recently made the whereabouts of the painting known.
[ARIS Commentary: The gifted Monet painting may have been lost, looted or stolen under duress during WWII. As a result, the museum may not have acquired clear legal title to the picture and the museum and its trustees may face claims and accountabilities for effectively hiding the painting for the past 20 years and preventing potential claimants from coming forward.]
February 10, 2011 - Lost for years, a trove of Chinatown art is tracked down
THE NEW YORK TIMES - The Executive Director of San Francisco’s Chinese Historical Society of America discovered (and eventually purchased 7 of 12) missing watercolors by Jake Lee, a well-respected 20th century Chinese-American painter, that were last seen hanging in Kan’s Restaurant. After the restaurant closed in the early 1990s, the works were stored in the garage of a former busboy of the restaurant, who recently claimed he threw away all but one of the pictures when he moved two years ago. In 2010, the Pasadena auction house, John Moran Auctioneers, sold the pictures, identifying at the time the consignors-owners as “private collectors."
February 7, 2011 - Australian trade launch fight against resale right
ANTIQUES TRADE GAZETTE - Australian dealers, galleries and auction houses have voiced their opposition to the Resale Royalty Right for Visual Artists Act of 2009, which is similar to the artists’ resale rights system in place in the U.K. art market. Under the Australian program, living artists including Aboriginal artists as well as the estates of artists who died less than 70 years ago are entitled to a royalty percentage every time that their art sells for more than $1000 AUS. Critics allege that the scheme is burdensome, bureaucratic and unfair in that it applies even when art is sold at a loss.
[ARIS Commentary: Following the U.K. trend, some Australian galleries and dealers may be trying to avoid paying the artists’ resale right levy by opting to take more works on consignment (i.e., stepping outside of the chain of title) rather than buying art directly from artists and selling their art as inventory. Galleries, dealers and buyers should be aware that their exposure surrounding levies of this form are not entirely eliminated when works are sold on consignment.]
February 3, 2011 - Artworks worth millions seized from Wildenstein Institute
THE TELEGRAPH - The heirs of two wealthy art collectors have claimed in separate, unrelated cases that Guy Wildenstein, the well-respected owner of the leading Parisian gallery the Wildenstein Institute, unlawfully kept more than 30 artworks belonging to their relatives. As part of the French authorities’ investigation, police have seized millions of dollars worth of art from the gallery.
February 1, 2011 - Provenance error results in lawsuits
MAINE ANTIQUE DIGEST - Steve Sell, an established oil businessman, has sued the Gerald Peters Gallery in U.S. District Court for the Northern District of Texas to recover the $1.5 million purchase price of a N.C. Wyeth painting that he alleges he bought because of the gallery’s negligent or intentional misrepresentation that the picture was on a 1908 cover of the Saturday Evening Post. The gallery admits that it mixed up two Wyeth pictures with the same title but claims that the value of the work was not affected by whether the picture was on the magazine cover.
[ARIS Commentary: Collectors should be aware of the critical yet often overlooked difference between the provenance and legal title of an artwork. Provenance relates to the location and prior possessors of an artwork from its creation to the present, whereas legal title relates more broadly to the past and present full right, interest and ownership of the work, which may or may not overlap with physical possession of the art. In the art world “possession is [not really] nine tenths of the law.” It is not uncommon for the quality, status and strength of evidence of certain past names in the provenance of a work to increase the valuation of an art work.]
January 28, 2011 - Banks move to keep their top clients in the picture
FINANCIAL TIMES - With art sales and prices in 2010 having reached historic highs - the first rise in three years - wealthy individuals are returning or turning for the first time to buying art as an alternative asset. Several banks are capitalizing on their clients’ renewed demand for art investments by launching art portfolio funds, art lending services and partnering with art advisory groups.
[ARIS Commentary: Those who are new to the art market, as well as seasoned collectors, investors, borrowers and lenders, are well-advised to recognize fully and to address the prevalent ownership risks in art transactions, which include for instance defective title from a seller's lien for unpaid state taxes, and which are exacerbated by the opaque nature of the market. Likewise, when buying a share of an art fund, investors should be cognizant of whether the fund discloses sufficient details about its buying and selling protocols to assess whether the fund has avoided exposures from acquiring works with defective title and whether it is guaranteeing clear legal title when selling fund assets. Protocols that do not properly manage these issues can in turn create contingent liabilities that can affect whether the fund can close and distribute profits without creating potential E&O liabilities and claw-back liabilities for investors. In robust sales environments, it is particularly not uncommon for buyers to deemphasize best risk management practices only later to face a variety of economic and legal exposures.]
To view the Financial Times article, go to the above link.
January 20, 2011 - Singer Boy George returns lost icon to Cyprus church
GUARDIAN - The pop star Boy George returned a 300-year old icon in the Byzantine style to the Cyprus Orthodox Church after a Bishop recognized it hanging on the singer’s wall while watching a television interview of the star. Boy George purchased the icon in 1985 without knowledge that it was stolen during the 1974 invasion of Cyprus.
January 16, 2011 - NYC landlord wants money from Lennon suit auction
FORBES - Mark Arrow, a New York City landlord, has sued Connecticut-based Braswell Galleries in New York state court to recover the proceeds from the sale of one of John Lennon’s suits consigned to satisfy a $20,000 debt of rent owned by Mr. Arrow’s former tenant. The gallery decided not to pull the item from the sale despite notice before the auction of the landlord’s claim.
[ARIS Commentary: This case poses the interesting question of whether the buyer of the Lennon suit (who paid $46,000 for it) obtained clear legal title from their purchase at the auction sale when the gallery was put on notice that the consignor’s property was allegedly encumbered by a financial lien.]
January 12, 2011 - Hopper’s estranged wife pulls star’s art from sale
THE INDEPENDENT - The estranged wife of the late actor Dennis Hopper has secured a temporary restraining order from a Los Angeles, California Superior Court stopping the sale of numerous artworks scheduled to be sold on January 12, 2011, on behalf of the Dennis Hopper Trust at Christie’s New York Interiors sale. Shortly before Mr. Hopper’s death, he filed for divorce claiming among other things that his wife had absconded with over a million dollars worth of his art collection.
January 12, 2011 - Fraud alleged in George Inness art sale
COURTHOUSE NEWS SERVICE - The art dealer 624 Art Holdings, LLC has sued Berry-Hill Galleries Inc. and its principals in New York state court for selling and trading five consigned artworks worth an estimated $2 million contrary to the parties’ arts administration agreement. The plaintiff alleges that the once well-regarded gallery failed to provide notice or payment of completed sales, and that a downstream buyer (Michigan art gallery R.H. Bluestein & Company) neglected to review the ownership history of a disputed painting by Whittredge. The plaintiff notes that it diligently filed UCC-1 financing and continuation statements putting potential buyers on notice of its ownership interest in the consigned pictures.
January 10, 2011 - Can’t afford a Picasso? How about a piece of one?
THE NEW YORK TIMES - With the continuing volatility in the equity markets, a new group of art funds in emerging markets like Russia, India and China has cropped up selling to investors private shares of pooled artworks. There are inherent conflicts surrounding art funds: proponents laud the democratization of trading art as a legitimate commodity with high returns and opening up of the traditionally secretive art market; others recognize the challenges for funds in securing desirable artworks, obtaining low or fair prices from resistant dealers or galleries and avoiding unwittingly laundering money or hiding corrupt assets.
See also “NY Times casts doubt on art funds,” Art Market Monitor, January 10, 2011.
January 7, 2011 - Woman wants her Renoir back
COURTHOUSE NEWS SERVICE - Bambi Byrens has sued her cousin, Barry Semler, in California state court for $10 million as well as conversion, punitive damages and litigation costs for failing to return her Renoir and Turner paintings and other family heirlooms stored at his home. Ms. Byrens claims that Mr. Semler has repeatedly refused to return her valuables and asserts full ownership rights in the disputed objects, which she would like to sell to pay off her debts and ongoing financial obligations.
January 7, 2011 - You bought it – but do you own it? Questions of ownership for art and collectibles.
HERITAGE - Over the past year the media has reported on numerous stories about bankruptcies, resurfaced stolen art, divorce and family disputes and foreign governments’ repatriation claims in which individuals, institutions and fiduciary advisors have had to address questions about whether they or their clients actually have clear legal ownership of their art and collectibles. Even if art and collectibles are purchased in good faith after having conducted thorough due diligence, there are no guarantees against future title claims given the art industry’s lack of transparency and regulation and the resulting adverse consequences of defective legal title including total loss of the object, legal fees and derivative damages such as loss of a charitable deduction.
January 6, 2011 - Sellers and buyers need to know who’s who
THE ART NEWSPAPER - In the case of Accidia Foundation v. Simon Dickinson in the English courts, a High Court in London found a dealer liable for taking a $1 million commission without disclosing it to the seller. The seller’s advisor and the dealer hired to find a buyer negotiated the fee as part of a $7 million sales price. The seller discovered the hidden commission after the buyer rescinded the transaction because of authenticity concerns.
[ARIS Commentary: This case shows the lack of transparency in the art market. In particular, how unidentified buyers and sellers, undisclosed dealers and agents (who may or may not have the seller’s authority to the sell the art) and the lack of paperwork, negatively impacts private treaty sales.]
See also “Leonardo case exposes back-room deals,” The Art Newspaper, January 6, 2011.
January 4, 2011 - Benin ivory mask at Sotheby's withdrawn from February sale
ANTIQUES TRADE GAZETTE - Sotheby’s has withdrawn from an upcoming London February sale, at the request of the consignors, heirs of British Lieutenant Colonel Gallwey, six lots including a 16th century ivory mask from the Kingdom of Benin in Nigeria having a total value of over £4 million. The Lieutenant was stationed in Africa during the Punitive Expedition in 1897 when much of the Kingdom of Benin’s art was destroyed or plundered. Several Nigerian government officials as well as an on-line interest group criticized the sale of these allegedly stolen tribal artifacts and called for their restitution to Nigeria.
December 16, 2010 - Feds seize 2 paintings stolen from Poland by Nazis
AOL - The U.S. government has filed a forfeiture action in the United States District Court for the Southern District of New York to seize two paintings by prolific Polish artist Julian Falat, which have been consigned to and are in the custody of Christie’s and Doyle in New York. Both pictures, valued at $50,000 each, were part of pre-WWII museum collections in Poland that were looted during WWII and published as wartime losses in Polish governmental reports. According to agents from Homeland Security Investigations, they could not find custom documentation showing that the works were lawfully imported into the U.S.
[ARIS Commentary: The government’s Falat forfeiture action alleging transportation of stolen property in interstate and foreign commerce, failure accurately to complete U.S. custom declarations and fraudulent or knowing concealment of stolen property after importation highlights the important and often overlooked encumbrance on art of export and import violations. There are serious adverse consequences for handling illegally exported or imported art including strict liability in some circumstances, seizure of art, fines and potential criminal liability including prison terms. It is challenging for collectors and other stakeholders in the art market to secure copies of relevant U.S and foreign customs papers and in such circumstances, absent taking other affirmative action, to show absolute good faith.]
December 9, 2010 - Metropolitan Museum sued for a Cezanne
COURTHOUSE NEWS SERVICE - Pierre Konowaloff, the great-grandson and sole heir of Russian industrialist and art collector Ivan Morozov, sued The Metropolitan Museum of Art in United States District Court for the Southern District of New York to recover a Cezanne painting worth an estimated $50 million to $70 million. Mr. Konowaloff alleges that the painting was looted in 1918 during the Russian Revolution and then illegally sold by the Soviet government through several straw galleries in 1933 to American collector Stephan Clark, who gifted the work to the museum on his death in 1960. This case is the second time that Mr. Konowaloff has sought through legal means to recover his family’s looted artwork. (See ARIS News, December 26, 2009, June 3, 2009, May 30, 2009, March 24, 2009, discussing similar lawsuit against Yale University over Van Gogh painting). The museum asserts that it has clear legal title to the painting and will defend against the lawsuit.
See also “Met Museum sued over Cezanne painting stolen by Bolsheviks from collector,” Bloomberg, December 8, 2010.
December 2, 2010 - Paris court orders sculptures returned to Calder estate
THE NEW YORK TIMES - After eight years of litigation, an appellate court in France has ordered the estate of Aimé Maeght (the Parisian dealer who represented Alexander Calder during his lifetime) to return an additional seven sculptures worth over $6 million to the artist’s estate. The French court has not yet ruled on whether Mr. Maeght’s estate must reimburse the artist’s estate for numerous Calder works that Mr. Maeght sold in 1976 after Mr. Calder’s death without reimbursing the artist’s heirs.
November 29, 2010 - Trove of Picassos surfaces, and so do questions
THE NEW YORK TIMES - More than 270 previously unknown works on paper by Pablo Picasso, worth an estimated $80 million, have surfaced after Pierre Le Guennec, a man who served as the artist’s electrician for three years, sought to have them authenticated by the artist’s estate. Mr. Le Guennec claims that Picasso gifted the works to him as compensation for his services to the artist. The artist’s heirs have sued Mr. Le Guennec in French court to recover the works, asserting that they were stolen and that there is no proof of or plausible explanation for the alleged gifts.
November 22, 2010 - Former Fred Leighton owner is arrested
THE WALL STREET JOURNAL - Ralph Esmerian, former owner of high-end jeweler Fred Leighton, was arrested and charged with bankruptcy fraud, wire fraud, and concealment of assets in United States District Court in the Southern District of New York (see also ARIS News, May 21, 2009, May 1, 2008). The criminal complaint alleges that Mr. Esmerian double-pledged personal and company-owned jewelry as collateral to secure nearly $200 million in loans and then sold pledged jewelry without notifying the lenders or bankruptcy court after filing for Chapter 11 bankruptcy protection for Fred Leighton.
See also “A red-carpet jeweler is charged with fraud,” The New York Times, November 22, 2010. http://www.nytimes.com/2010/11/23/nyregion/23jewels.html?_r=2
November 19, 2010 - A passion that knows no bounds
THE ECONOMIST - Phillips de Pury & Company gave free reigns to art dealer and consultant Philippe Ségalot to organize a contemporary art sale entitled "Carte Blanche," which achieved a record $117 million (including commission) for the auction house. Mr. Ségalot solicited consignments for all of the art, made purchasing recommendations to his clients, purchased art on behalf of his clients, and received a percentage of the buyer's premium for all works sold. Guarantees or irrevocable bids (in which anonymous third-party investors agree to buy lots at minimum prices and profit if works sell above the guarantee) were offered for 7 of 33 lots, with Mr. Ségalot and his colleagues purchasing 6 of the guaranteed lots at record prices.
[ARIS Commentary: The "Carte Blanche" sale is a reminder that the art market lacks regulation, in particular the lack of government regulation surrounding insider-trading and conflicts of interest in art transactions, areas which are heavily regulated, for instance, in the equity markets. Even if there is no untoward activity, in other markets it is illegal for buyers and sellers to rely upon the same advisor and for that advisor also to profit from the sales transaction. In addition, the increase in lots offered with financial guarantees and the unusual high prices achieved in the “Carte Blanche” sale for certain previously unpopular works demonstrates the lack of transparency in the art market and the lack of information available to buyers who do not have relationships with art advisors closely connected to the market.]
November 3, 2010 - Stolen Degas painting resurfaces at Sotheby’s auction
AFP - An Edgar Degas painting that was stolen from a museum in Le Havre, France in 1973 was pulled from Sotheby’s New York Impressionist & Modern Art sale. After a staff member at the museum recognized the painting in the auction catalogue, the office of the French Minister of Culture notified the auction house of its ownership claim to the picture. The painting was not listed as stolen with Interpol (the world’s largest international police organization) although it was included on a French stolen art museum database.
October 19, 2010 - Court sides with family on portrait
THE BOSTON GLOBE - An Appeals Court in Massachusetts found that the heir to the owner of a 245-year old family portrait, and not the property insurance company that paid out a $25,000 loss to the owner in 1977, has legal title to the painting, based on reimbursement to the insurer of the original loss payment and the subrogated rights language in the property insurance policy. When the picture was stolen in 1976, its appraised value was $25,000. After the picture was discovered in 2007, its appraised value was $400,000 to $800,000. The heir offered to reimburse the loss pay-out without regard for the value appreciation or interest, but the insurer claimed full ownership rights under the subrogation agreement.
[ARIS Commentary: The facts in this insurance case highlight a secondary theft quandary facing art property insurers, their insured and the overall art market, namely: whether property insurers upon paying a theft loss take full legal title to artworks under their subrogated rights or only a lien to the extent of their payment to the original insured. With either outcome, a title defect lingers and impacts the subsequent sale or other transaction of the artwork when it returns to the market.]
October 18, 2010 - Chelsea Art Museum could close
THE WALL STREET JOURNAL - The Chelsea Art Museum faces challenges to its existence since Director Dorothea Keeser failed to meet a bankruptcy court’s deadline (involving Ms. Keeser’s company that purchased the building) requiring the museum either to find a buyer or to pay back over $19 million owed the mortgage lender. The parties dispute the legal rights of the lender to take title and potentially sell the building that houses the museum. In a separate transaction in August 2010, Ms. Keeser pledged – in violation of regulations promulgated by the New York Department of Education Board of Regents – the museum’s permanent collection valued at $2.5 million to secure financing to pay down interest owed on the mortgage. The fate of the museum’s art collection is uncertain given the continuing property dispute, Board of Regents’ investigation and related bankruptcy proceedings.
October 18, 2010 - Plunder database lists 20,000 art objects stolen from France
BLOOMBERG - The U.S. Holocaust Memorial Museum and Conference on Jewish Material Claims Against Germany created a searchable on-line database of Nazi records (maintained by the Einsatzstab Reichsleiter Rosenberg) containing more than 20,000 art objects – half of which have not been returned to the original owner or their heirs – seized from Jewish collectors or entities in France during WWII. The database was established to assist families searching for their lost artworks as well as to assist museums and dealers in checking their holdings and inventory for Nazi-looted art.
October 14, 2010 - Museum of Fine Arts v. Seger-Thomschitz, Museum of Fine Arts, Boston, Plaintiff, Appellee, v. Claudia Seger-Thomschitz, Defendant, Appellant
LEAGLE - The United States Court of Appeals for the First Circuit affirmed a ruling by the United States District Court of Massachusetts dismissing on statute of limitations grounds a WWII restitution claim made by the heir of Austrian-Jewish collector Dr. Oskar Reichel for a Oskar Kokoschka painting in the collection of the Museum of Fine Arts in Boston (MFA) (ARIS News, May 30, 2009, January 24, 2008). The heir asserted that Dr. Reichel was forced to sell the Kokoschka picture due to Nazi persecution and that good title never passed to the MFA. After confronted with the WWII claim, the MFA undertook extensive provenance research; concluded that Dr. Reichel validly transferred the painting; and filed a declaratory judgment to confirm its rightful ownership. The Court held that because the heir discovered the location of the painting in Fall 2003 but demanded return of the artwork in March 2007, her claim fell outside the Massachusetts three-year statute of limitations period applicable to tort actions; thus the court did not rule on the merits of the parties’ ownership claims and counterclaims.
[ARIS Commentary: The appellate court’s statements in the final paragraph of its opinion highlight the increasing pressures in the market on museums and the requirement that museums augment their affirmative efforts in their due diligence review of the status of the legal title to the works in their collections, both those artworks that they previously acquired and those that they are acquiring today. The appellate court seemed to go out of its way to emphasize (i) that it could not address the merits of the substantive claims, (ii) that the court’s ruling “do[es] not vindicate the conduct of parties,” and (iii) that the MFA did not initiate a provenance investigation until being confronted with the heir’s claim as opposed to in 1973 when the museum acquired the painting. The court cautioned that although “[t]he timing of that investigation may have been legally inconsequential in this case[,] [m]useums should take all reasonable steps to resolve the Nazi-era provenance status of objects before acquiring them for their collections — whether by purchase, gift, bequest, or exchange, [consistent with the] American Association of Museums, Guidelines Concerning the Unlawful Appropriation of Objects During the Nazi Era (Nov. 1999), http://www.aam-us.org/museumresources/ethics/nazi_guidelines.cfm.” (Emphasis supplied.).]
See also “Court rules Boston museum can keep painting sold under duress in Nazi-held Austria during WWII,” Mail, October 17, 2010.
October 4, 2010 - Lawsuit: Sears wants Willis Tower artwork back
CHICAGO TRIBUNE - Sears, Roebuck & Co. and the Chicago-based investor group that purchased the “Sears Tower” building and renamed it Willis Tower in 2009 are in dispute over ownership and the ability to move the Alexander Calder sculpture entitled “The Universe,” which has been located in the lobby of the building since 1974.
October 4, 2010 - Norton Simon’s disputed ‘Adam and Eve’ getting closer look from Supreme Court
LOS ANGELES TIMES - The U.S. Supreme Court asked the U.S. Solicitor General to submit a brief on whether a California statute extending the statute of limitation period for Holocaust victims and their heirs to sue museums and galleries for the return of Nazi-looted artwork unconstitutionally encroaches on the U.S. government’s foreign policy. The U.S. District Court in Los Angeles and the Ninth Circuit Court of Appeals dismissed the replevin claim made by Ms. Von Saher (daughter-in-law of the Dutch art dealer Jacques Goudstikker) for a Lucas Cranach the Elder painting in the collection of the Norton Simon Museum in Pasadena on the basis of the voided California Holocaust art law.
See also “Under the U.S. Supreme Court: Goering, a museum and Nazi-looted art,” UPI, October 10, 2010. http://www.upi.com/Top_News/Analysis/Supreme-Court/2010/10/10/Under-the-US-Supreme-Court-Goering-a-museum-and-Nazi-looted-art/UPI-52691286695800/
September 24, 2010 - Avoid legal pitfalls when buying art
THE NEW YORK TIMES - Buyers of art should be aware of the possibility of unidentified encumbrances derived from past owners’ financial challenges including liens from unpaid federal or state taxes, collateral pledges on outstanding debts and fraudulent conveyances related to bankruptcy proceedings. In making acquisitions, collectors should think strategically about how best to protect themselves against potential art title claims as well as how encumbrances on their art may adversely impact their estate planning and future sales, donations or bequests of their art.
September 21, 2010 - U.S. returns valuable paintings seized from ex-banker to Brazil
THE WALL STREET JOURNAL - U.S. Immigration and Customs Enforcement and the U.S. Attorney for the Southern District of New York returned to Brazilian authorities two paintings owned by Edemar Cid Ferreira, the former head of collapsed bank Banco Santos, who was convicted and sentenced to 21 years in prison for orchestrating a $1 billion bank fraud. The two recovered pictures are part of a larger collection of missing works valued at $30 million that Mr. Ferreira used in a money laundering and international smuggling scheme: creating misleading shipping invoices and selling art with false titles and at understated values to evade a Sao Paulo Court’s asset freezing order.
See also “ICE recovers Brazilian masterpieces linked to bank fraud,” ICE News Releases, September 21, 2010.
September 21, 2010 - Here’s an idea. If you want the art you should pay for it. Promptly.
THE ART NEWSPAPER - Since the 2008 economic downturn, many dealers, galleries and auction houses have struggled to obtain payment from buyers. Sellers have offered discounts for fast payment; required buyers to pay in full before picking up their art; required non-refundable deposits; accrued interest on outstanding monies; and threatened to sue for non-payment.
[ARIS Commentary: When art buyers delay making payment or fail to pay the full purchase price, ownership of that art becomes murky. Depending upon the overall legal circumstances, whether the art was sold at auction or in a private sale and the conditions of the auction sale or terms of the private sales agreement, the seller, consignor, artist and buyer may hold or claim title to the art.]
September 16, 2010 - For sale: fraudster Marc Dreier’s art collection
CRAIN’S - More than 80 pieces from the art collection of Marc Dreier, who was convicted of fraud, conspiracy and money laundering (see ARIS News, December 10, 2008), and his law firm Dreier LLP will be auctioned at Phillips de Pury & Co. pending approval by the U.S. Bankruptcy Court of the Southern District of New York. The Dreier sale is one of many recent and upcoming solo art collection auctions driven by individual and corporate bankruptcies.
[ARIS Commentary: There are several risks in buying art sold subject to bankruptcy proceedings. For instance, the bankruptcy court’s approval and order of a liquidation sale may not cleanse the art from all non-creditor related title claims nor prevent claims by prior owners and creditors asserting replevin against downstream buyers on the basis of a prior fraudulent conveyance.]
September 12, 2010 - For collectors, a hard lesson in the art of the swindle
CRAIN’S - Numerous victims of criminally convicted New York City-based art dealer Lawrence Salander and the bankrupt Salander-O’Reilly Galleries are attempting to recover millions of dollar of losses caused by Mr. Salander’s fraudulent actions from their insurers. Renaissance Art Investors (RAI) filed a lawsuit in the United States District of the Southern District of New York for $22 million against AXA Art Insurance after the insurer denied the claim on the basis that the policy excluded fraud and many purchases alleged made by Mr. Slander on RAI’s behalf may have been shams not passing title to RAI.
August 19, 2010 - New York sues for return of Central Park drawings
Los Angeles Times - The city of New York has sued the seller of Central Park drawings originally owned by the Department of Public Works for $1 million in damages or return of the works, which were allegedly found in a Manhattan trash bin sometime before 1960. The City learned of the existence of the drawings when 86 of the 127 works were placed for sale with Christie's auction house. The 127 illustration drawings date from 1860 to 1885 and are stamped "Department of Public Parks." The City claims that it never authorized the destruction or abandonment of the drawings and that they were "lost or erroneously discarded."
August 18, 2010 - Fight to save Wedgwood collection from company pension scheme
THE ART NEWSPAPER - As a result of Waterford Wedgwood plc going into receivership in January 2009, a UK court is deciding whether art housed at the company-owned Wedgwood Museum can be sold to partially satisfy £134 million pounds worth of debt owed by the Wedgwood Pension Fund to former employees. The museum, which was formed in 1906, has in its collection thousands of ceramics, manuscripts and paintings valued at approximately £15 million pounds.
July 28, 2010 - Hungary sued in Holocaust art claim
THE NEW YORK TIMES - Heirs of the Jewish Hungarian banker Baron Mor Lipot Herzog have sued Hungary and several Hungarian museums in United States District Court in Washington to recover more than $100 million worth of art as well as to obtain an inventory accounting of all looted Herzog art in defendants’ possession. In 2008 after more than two decades of negotiations, a Hungarian court dismissed the Herzog family’s WWII restitution claim. Other countries including Germany, Poland and Russia may also have looted Herzog art in their museum collections.
July 20, 2010 - Leopold Museum to pay $19 million for painting seized by Nazis
THE NEW YORK TIMES - After more than a decade of litigation (see ARIS News, October 7, 2009), the Leopold Museum in Vienna, the United States government and the estate of Lea Bondi Jaray have settled a WWII ownership dispute to Egon Schiele painting’s entitled "Portrait of Wally". The painting was seized by Nazi authorities from Ms. Bondi Jaray’s Vienna art gallery in 1938 and subpoenaed as stolen property by the Manhattan District Attorney when it was on loan to the Museum of Modern Art in New York in 1997. As part of the court-approved settlement, the Leopold Museum will pay the estate $19 million; the estate will release its title claim to the painting; the Leopold Museum will note Ms. Bondi Jaray’s prior ownership of the painting in relevant provenance labeling; and the painting will be exhibited for a limited time period at the Museum of Jewish Heritage in New York.
July 14, 2010 - Artwork: You bought it, you (don’t?) own it!
THE HUFFINGTON POST - Collectors should be aware of the breadth and severity of title risks impacting art in the open market. Art ownership can be tainted – by criminal activity such as historical theft and crooked art dealers as well as civil disputes for instance concerning marital property and artists’ estates – even if collectors conduct due diligence and obtain warranties of clear title from sellers. Transferring the risk to a third-party through art title insurance is the only effective way to protect against all the primary losses due to defective title (that is loss of art, loss of financial investment, and legal defense costs) plus the derivative effects such as the destruction of an estate plan, loss of the charitable donation and loss of the tax deduction benefit.
July 6, 2010 - Art-broken: 40G pic loss
NEW YORK POST - Christie’s pulled a painting valued at $50,000 and believed to have been done by a student of Leonardo da Vinci from its June 9, 2010, Old Masters & 19th Century Art sale in light of competing title claims. The claimants consigned the painting in 2004 to Greenwich Antiques and Consignment and have been looking for its whereabouts since 2009 when that shop went out of business. The seller purchased it for $6,500 from a liquidation sale of the shop’s inventory.
May 29, 2010 - Detroit gallery hides Banksy’s graffiti art after threats
FREE PRESS - A non-profit art gallery in Detroit, Michigan has removed and hidden from its public exhibition space a mural painted by graffiti artist Banksy due to the controversy surrounding the gallery’s removal of the work from a derelict plant. It is unclear whether the artist, who may be deemed to have legally abandoned the work and in the past has refused to authenticate his works removed from outdoor spaces; the owner or disputed owners of the building on which the mural was painted, or the gallery, who claims to have gotten approval from a foreman at the site to take the mural, has clear legal title to this piece of street art.
May 21, 2010 - Say it isn’t Picasso – Paris art theft raises security and title concerns
ART LAW GALLERY - Five important paintings valued in excess of $120 million were stolen from the Paris Museum of Modern Art. This theft highlights the widespread problem of inadequate museum security throughout Europe and the United States as well as the spillover effect of art theft on the art industry – that is stolen artworks with defective title (especially less well-known works at lower price points) that are traded on the open market to unwitting museum and private buyers.
May 13, 2010 - Fraudster Salander to Sell Paintings at Christie's as Dealer Awaits Prison
BLOOMBERG - Christie’s New York will sell on June 9, 2010, in a dedicated session of its Old Masters & 19th Century Art sale a group of 130 paintings and sculptures from the inventory of Salander-O’Reilly Galleries LLC. This sale is proceeding pursuant to a chapter 11 plan approved by the Bankruptcy Court for the Southern District of New York. The seller has purchased for all works in the sale Art Title Protection Insurance ATPI® issued by ARIS for the benefit of the buyers to enhance buyers’ confidence in bidding and quell any potential concerns about third-party ownership claims.
See also "Christie's to Auction Off Old Master Art From Bankrupt Salander Gallery," Wall Street Journal, May 13, 2010.
May 10, 2010 - True art ownership
PRIVATE WEALTH - Prudent collectors should be aware of the financial and legal risks potentially impacting ownership of their artwork. In addition to the well-known and publicized risk of theft during WWII, clear legal title to art and other important collectibles may be infringed by ordinary or contemporary theft as well as other liens and encumbrances including those created by galleries and individuals due to financial pressures. Acquiring art title insurance is one precaution that collectors can take to protect themselves from loss of their art, litigation costs and the resulting consequences of defective title such as the destruction of an estate plan.
May 10, 2010 - Woman seeks to stop sale of Schindler’s list
COURTHOUSE NEWS SERVICE - A friend and heir of Oskar Schindler’s wife has sued a memorabilia dealer and his company in Supreme Court of the State of New York County of New York to enjoin him from selling for $1.5 million the original document naming the 801 Jewish individuals that Mr. Schindler saved from concentration camps during WWII, which inspired the book by Thomas Keneally and the movie by Steven Spielberg. The plaintiff alleges that she owns all right, title and interest in and to the so-called “Schindler’s List” document.
April 23, 2010 - Consignor demands $560K for landscape
COURTHOUSE NEWS SERVICE - Universe Antiques Inc., a New York company that buys antiques, is suing William Vareika Fine Arts Ltd., a Rhode Island company that buys fine arts, for breach of their consignment agreement and fraud in Supreme Court of the State of New York County of New York. The plaintiff alleges that it consigned the 19th century painting entitled “The Rainbow” to the defendant to sell to a third-party for $700,000 but the defendant only paid two of the ten owed installment payments.
April 23, 2010 - Tangled tale of a stolen Degas
COURTHOUSE NEWS SERVICE - Universe Antiques Inc. has sued three sellers who sold it a stolen Degas sculpture for conspiracy to defraud, unjust enrichment and restitution of the $225,000 purchase price in Supreme Court of the State of New York County of New York. The complaint alleges that the boyfriend of one of the sellers stole the statue from Norman Alexander, a retired businessman and art collector, and Mr. Alexander obtained a court order to recover the statue from Universe Antiques Inc., who sold a 50% ownership stake in the work to Rafael Collection, Ltd, a co-plaintiff in the case. The plaintiffs also allege that they reimbursed the losses suffered by Spanierman Gallery LLC, who sold the sculpture to a private collector for $450,000 and then provided a refund to their client upon rescission of the transaction.
April 7, 2010 - Gallery’s artworks seized
THE WALL STREET JOURNAL - American Capital Financial Services seized artwork from Berry-Hill Galleries, a New York gallery specializing in American Art that filed for Chapter 11 bankruptcy protection in 2005, pursuant to an order granted by the United States District Court for the Southern District of New York. According to the lender’s court application, the gallery owes the bank over $9.5 million and secretly sold over two-hundred paintings without reserving or paying any of the sale proceeds to the bank.
April 6, 2010 - Lawsuit filed over Eames Archives
THE NEW YORK TIMES - Wright auction house in Chicago has pulled from its Eames Auction archives of the 20th century furniture designers in light of a lawsuit filed by the designers’ daughter in Illinois Circuit Court. John and Marilyn Neuhart, design historians who collaborated with Charles and Ray Eames on numerous books and exhibits, consigned the archive. Ms. Eames claims that her parents never intended to gift the archive to the Neuharts and that the family still owns the papers, which consist of the largest private collection of Eames materials.
March 23, 2010 - BofA wants CNET founder’s art
COURTHOUSE NEWS SERVICE - ML Private Finance LLC, a financial company owned by Bank of America, sued and obtained in the United States District Court for the Southern District of New York a $21.6 million judgment for money owed by Halsey Minor, founder of CNET, and the Halsey McLean Minor Revocable Trust. (See ARIS News, September 3, 2008 discussing Sotheby’s lawsuit against Mr. Minor). ML Private Finance LLC is seeking court approval to recover Mr. Minor’s art, which was used as collateral for a $25 million loan, now in the possession of Christie’s and Paul Kasmin Gallery Inc., or the proceeds from the sale of Mr. Minor’s art.
See also “CNET’s Minor stirs auction fight for $17 million art collateral,” Bloomberg, March 26, 2010.
March 11, 2010 - Museum sues insurer in Salander fiasco
COURTHOUSE NEWS SERVICE - The Philadelphia Museum of Art has sued AXA Art Insurance Company (AXA) in the United States District Court for the District of Maryland for breach of contract arising out of the loss of two insured paintings that the museum consigned to Lawrence Salander of Salander-O’Reilley Galleries. Mr. Salander has been criminally charged with defrauding and stealing more than $90 million worth of art from his clients and has filed for bankruptcy protection personally and for his gallery (see ARIS News, May 7, 2009, March 27, 2009, March 15, 2009, February 10, 2009, November 19, 2007, November 6, 2007, November 5, 2007). AXA denied coverage on the basis that the museum did not suffer direct loss or damage to the paintings and the exclusion for government control over the property applied. The museum alleges the losses are covered because Mr. Salander and his gallery stole the pictures, sold them and then misappropriated the sales proceeds.
[ARIS Commentary: The legal theory (that when dealers and galleries sell consigned works without the authority to do so and fail to pay consignors the sales proceeds their actions are akin to conversion and theft) was first successfully pleaded in the case of Frigon v. Pacific Indemnity Co., No. 05-6214, 2007 U.S. Dist. LEXIS 17813, (D. N.D. Ill. Mar. 14, 2007) and is now widely accepted by the art industry. Thus, buyers should be aware that art previously sold by dealers and galleries facing financial challenges or bankruptcy proceedings may be subject to title claims raised by prior owners and consignors.]
March 5, 2010 - Ansel Adams’ son sues museum for prints
COURTHOUSE NEWS SERVICE - The son of photographer Ansel Adams is suing The Fresno Metropolitan Museum, which closed in January 2010 due to financial troubles, in Superior Court for the State of California to recover six original Adams prints that he donated to the museum in 1983. Dr. Adams seeks to enjoin the museum from selling these works at auction to help pay off the museum’s $4 million worth of debt as well as a declaratory judgment stating that his donation was a restricted gift that the Directors cannot dispose of at their discretion.
[ARIS Commentary: The Adams case highlights the title risks plaguing museums involved in bankruptcy proceedings or other distressed situations, in particular, claims between the institution or its general creditors and its donors, who previously gifted art to the museum and now object to their art being liquidated.]
February 22, 2010 - Tussle over $1.4 million Warhol painting
COURTHOUSE NEWS SERVICE - Stephen Lachapelle has sued Nancy Bishop in California Superior Court in Los Angeles County for declaratory judgment of ownership of the Warhol painting entitled “Portrait of Linda Cossey with Camera,” which sold at Christie’s London February 11, 2010 sale for $1,374,750. Mr. Lachapelle claims that in 1990 he loaned Ms. Bishop $25,000 based on a handshake to purchase the painting, but Ms. Bishop never repaid the money. Ms. Bishop alleges that she is the rightful owner. Until Mr. Lachapelle and Ms. Bishop settle their ownership dispute with a written agreement or court order, the successful bidder’s title to the painting is in flux and Christie’s will retain the sales proceeds.
[ARIS Commentary: Buyers should be aware of the risk of creditor and bank liens potentially infringing art sold at auction or in private transactions. It is challenging for laypersons without access to confidential information about the provenance history of an artwork to discover whether upstream owners have used their art as loan collateral and whether sellers obtained possession of their art from default by a borrower.]
February 21, 2010 - Artwork caught in custody battle
HOUSTON CHRONICLE - Joanne Herring, known for her alliance with Representative Charlie Wilson in supporting anti-communist forces in Afghanistan, is suing in Texas civil court in Harris County Geoffrey Rice to recover an 18th century Scottish painting entitled “Portrait of a Man” that she reported stolen from her home in 1986. Mr. Rice, who consigned the work to Sotheby’s for sale, alleges that he purchased the painting in 1983 from Hart Galleries (see ARIS News, April 28, 2009) but has no documentary evidence or bill of sale. Sotheby’s has pulled the painting – worth an estimated $15,000 to $20,000 – from auction and will continue to hold it pending resolution of the ownership dispute.
[ARIS Commentary: Litigation expenses often far exceed the financial value of art subject to ownership disputes. In the Herring case, both parties will likely spend more than $20,000 (that is the high estimate for the work) on attorney fees in a trial set for 2011. Art title disputes can be fierce battles especially when both parties are good-faith purchasers with emotional or sentimental attachments to the art.]
See also "Charlie Wilson’s art war,” New York Post, February 22, 2010.
February 11, 2010 - Judge in Italy orders return of Getty Bronze
LOS ANGELES TIMES - A judge in Italy has ordered the J. Paul Getty Trust and Getty Museum in Malibu, California to return to Italy a bronze statue known as the Victorious Youth dated 300 B.C. to 100 B.C. This decision is the latest ruling in a long litigation battle between the museum and Italy. The Getty indicated it will appeal the decision on the basis that it has had legal title to the statue for more than 30 years, beginning shortly after the statue was discovered in international waters.
February 10, 2010 - Sotheby’s sues Chinese buyers for nonpayment of art won at sale
BLOOMBERG - Sotheby’s is suing in the Judiciary of the Hong Kong Special Administrative Region of the People’s Republic of China several Chinese individuals, who successfully bid for antiquities and paintings and then later refused to pay the auction house. This cultural-political protest practice garnered headlines in February 2009 when a bidder refused to pay for two animal fountainheads at Christie’s Paris auction of Yves Saint Laurent’s art collection (see ARIS News, March 3, 2009).
February 9, 2010 - Collector sues gallery over Basquiat helmet
[ARIS Commentary: Collectors should be aware of inherent title risks and potentially unfavorable bankruptcy and UCC laws when consigning or transferring physical possession of their art to galleries and dealers.]
ARTINFO - An art collector is suing Katzuhito Yoshii and Yoshii Gallery in New York State Supreme Court in New York County for selling a Jean-Michel Basquiat sculpture for $300,000 without the authority to do so. The plaintiff alleges that he did not consign the work for sale but rather loaned it to the gallery as a favor. The plaintiff is suing Mr. Yoshii for breach of bailee duties, conversion, fraud and $500,000, the estimated total value of the sculpture.
January 29, 2010 - The Art World’s Gordon Gekko
THE WALL STREET JOURNAL - Asher Edelman, the notorious former Wall Street banker, art collector and owner of New York-based art gallery, Edelman Arts, Inc., (see ARIS News, December 3, 2009 discussing Mr. Edelman’s seizure of art at another gallery’s booth with assistance of the U.S. Marshals at Art Basel Miami Beach 2009), has created an art financing company, Art Assured Ltd. Mr. Edelman, who allegedly raised $12 million from investors for his new business, intends to join boutique lenders and banks accepting art as loan collateral (see ARIS News, October 22, 2009, July 30, 2009) as well as the small niche of financiers offering private guarantees for artworks consigned to public auction.
[ARIS Commentary: With the rise of third-party financiers like Mr. Edelman increasingly providing private, undisclosed guarantees for art worth thousands to millions of dollars, sellers will likely become more comfortable consigning artworks to auction and there will likely be more lots per sale although there will also likely be less transparency in auction sales concerning sellers' identity and their ownership interests in consigned works.]
January 12, 2010 - Artists miffed over Rothschild Foundation’s missing grant money
THE NEW YORK TIMES - The Judith Rothschild Foundation – created by the will of the trust’s namesake artist to give grants to contemporary artists’ estates and art organizations – has defaulted on numerous 2009 grants worth over $100,000. Numerous grantees, who filed complaints with the State of New York Office of the Attorney General, have alleged that the sole trustee of the foundation illegally purchased thousands of drawings by emerging artists with foundation money contrary to the terms of the artist’s will.
[ARIS Commentary: The Judith Rothschild Foundation case is a prime example of the title risk of lack of authority to purchase art and challenges related to limited oversight of charitable organizations in the trust and estate context. The April 2009 to January 2010 exhibition at the Museum of Modern of Art entitled “Compass in Hand: Selections from the Judith Rothschild Foundation Contemporary Drawings Collection,” publicly displayed for the first time part of the foundation’s multi-million dollar art collection donated to the museum and exposed the foundation to the grantees’ potential claims. The New York Attorney General will likely investigate whether the trustee was authorized to acquire and gift the exhibited drawings as well as acquire other art in the foundation’s collection and whether the museum acquired clear legal title to works gifted by the foundation.]
See also “The Vanishing Benefactor,” The Wall Street Journal, January 14, 2010.
January 7, 2010 - Tavern in the red: Famed eatery forced to sell the silver
THE WALL STREET JOURNAL - Tavern On The Green, the landmark restaurant in New York City’s Central Park, which filed for bankruptcy in the United States District Court for the Southern District of New York after losing its operating license and with $8 million in debt, will be selling at public auction all of the restaurant’s silver, china, décor and lighting. New York City has claimed that around a dozen items slated for the sale including wood paneling and signage cannot be sold because they are part of the structure of the building and owned by the City. The bankruptcy court is expected to determine the owner of these disputed objects.
January 6, 2010 - Art thieves grab $1.15 million Degas as heists spread
BLOOMBERG - A pastel drawing by Degas worth €800,000 was stolen from the Musée Cantini in Marseille, France. The Degas work was on loan from the Musée D’Orsay in Paris for a traveling exhibition. There is growing concern over art theft in France given theft of this Degas picture, theft of 30 works worth over €1 million from the villa of a private collector in southern France, theft of a Picasso sketchbook from the Picasso Museum in Paris as well as prosecution of stolen art ring operating at Hôtel Drouot in Paris (ARIS News, December 7, 2009). Authorities are investigating whether there are any connections among the multiple high-profile art thefts in France. (See also “Art thefts rock France for second time in a week,“ The Financial Times, January 3, 2010.)
December 26, 2009 - Yale: Suit over Van Gogh work imperils other art
THE NEW YORK TIMES - In Motion to Dismiss papers filed in the United States District Court of Connecticut in litigation between Yale University and Pierre Konowaloff over ownership of “The Night Café” (see ARIS News, June 3, 2009, May 30, 2009, March 24, 2009), Yale argues that if the court finds that the university lacks clear legal title to the Van Gogh work because it was nationalized by the Russian government in 1918, then the court will cloud title to billions of dollars worth of art in the international market and adversely affect United States foreign relations with Russia. Yale also claims that the statute of limitations period has passed. The claimant asserts that the case should be decided on its facts without regard to diplomacy with Russia, which is not a party to the lawsuit.
December 9, 2009 - Family feud imperils a prized Spanish art collection
TIME - A key issue in the multimillion-dollar inheritance dispute between Borja Thyssen and his mother Carmen Cervera is ownership of over one thousand important artworks currently housed at the Thyssen-Bornemisza Museum pursuant to a loan agreement which is set to expire in 2011. (See also ARIS News, September 9, 2009 “Spain cannot shake suit over Nazi looted art” discussing WWII restitution claim for Pissarro painting in the collection of the Thyssen-Bornemisza Museum.) Mr. Thyssen claims he is co-heir of the entire collection and full owner of two works including a Goya painting and estimated to be worth a combined €7 million that were gifted by his father. The fate of the Thyssen art collection is unknown, that is, whether a long term loan to the Spanish government will be renegotiated and renewed or the collection will be divided between Mr. Thyssen and Ms. Cervera and possibly sold at auction.
December 7, 2009 - The art of the trade
MAINE ANTIQUE DIGEST - Museums often acquire art through donations (such as promised gifts, long-term loans that turn into gifts, “fractional” or “partial” gifts and charitable remainder trusts) as well as exchanges with museums and dealers or a combined gift and swap transaction.
[ARIS Commentary: Museums and dealers should be aware of possible title risks in acquiring traded art, which is on the rise, and protect themselves by ensuring that the party on the other side of a swap has clear legal title and the right to transfer the title of the exchanged art. For example, art that a museum trades for another work must generally be deaccessioned in accordance with the donor’s bequest, the institution’s collection management policy and any applicable state museum laws. The downstream-buyer of the relinquished work will likely not know that the selling dealer acquired the work through a museum exchange.]
December 7, 2009 - Preliminary charges vs 9 in Paris auction sweep
THE NEW YORK TIMES - An auctioneer and several commission agents associated with the prestigious Paris-based Hôtel Drouot, a large umbrella organization for smaller auction houses selling fine art, antiques and antiquities, are the subject of a police investigation and preliminary charges for their involvement in an alleged stolen art ring. French authorities discovered stolen art, frames and furniture including a previously misidentified Gustave Courbet painting in the homes of the targeted auction house employees, who have allegedly been involved in these art thefts since 2001.
December 5, 2009 - Italian police seize £90m art stash from Parmalat founder
TELEGRAPH - Italian officials seized numerous artworks by Cezanne, Degas, Picasso and Van Gogh worth an estimated $150 million dollars hidden by Calisto Tanzi, the founder of the bankrupt dairy company Parmalat. Prosecutors are investigating whether Mr. Tanzi, who denied owning valuable art assets and has been convicted for market-rigging and other charges, had offered to sell some or all of his collection.
December 3, 2009 - U.S Marshals seize Degas, Miro works at Art Basel Miami
BLOOMBERG - As Art Basel Miami Beach 2009 opened, U.S. Marshals seized over $6 million dollars worth of art including paintings by Degas, Leger, Miro and Klein from the booth of Zurich-based Galerie Gmurzynska. The Marshals executed a private default judgment for over $750,000 dollars that the New York-based gallery Edelman Arts, Inc. (litigating as an assignee of XL Specialty Insurance Corp.) obtained in the United States District Court for the Southern District of New York against Galerie Gmurzynska for purportedly damaging a Robert Ryman painting while it was on consignment. This is the first time that art has been seized at Art Basel Miami Beach, one of the largest, most important modern and contemporary international art fairs.
[ARIS Commentary: The U.S. government’s seizure of art from the booth of a Swiss gallery to satisfy a New York federal court order represents the current trend in the international art market to treat art as a financial asset akin to inventory in other industries. Although the U.S. Marshals Service will most likely try to auction the impounded art and use the proceeds from the sale to satisfy the judgment and legal fees, the seized art may be unsalable due to surrounding ownership disputes. For instance, the seized art may have been consigned to the gallery and thus subject to title claims brought by consignors and the gallery will most likely file suit to recover possession of the impounded art.]
December 2, 2009 - Prince of Liechtenstein threatens major Royal Academy show
THE ART NEWSPAPER - Prince Hans-Adam II of Liechtenstein has stated that unless the UK government promptly grants an export license for an Alonso Coello painting, which the Prince purchased from the collection of Lord Northbrook in London in 2006, he will not lend over 100 artworks for the planned September 2010 exhibition of the “Liechtenstein Collection” at the Royal Academy of Arts. For nearly three years, the Coello painting has been impounded in London while HM Revenue & Customs investigates the Prince’s export license application for the Coello work, one of nine paintings sold from the Northbrook collection. In addition, HM Revenue & Customs must generally allow a UK buyer (in this case the National Gallery has expressed an interest and a desire to conduct fundraising) to match the £2 million pound purchase price the Prince paid for the Coello painting.
[ARIS Commentary: Many European countries including the United Kingdom have broad customs regulations for cultural property, which make it time-consuming and difficult for foreign buyers to export newly purchased art. In this context, foreign buyers may not obtain clear legal title to art exported without a proper license or to art that is subject to an on-going licensing investigation.]
November 24, 2009 - Recovered Warhol 'Heinz 57' crate leads to arrest
BLOOMBERG - James Biear has been charged with criminal possession of a Francis Picabia drawing as well as mail and wire fraud for stealing and selling an Andy Warhol sculpture from the home of his employer, Kenward Elmslie, grandson of publisher Joseph Pulitzer. Mr. Biear represented to two art dealers and the down-stream purchaser, a New York collector who paid $220,000 dollars for the Warhol crate, that the Warhol work was a gift from his uncle and that he had clear legal title and the right to transfer the title to the work.
November 24, 2009 - Expanding personal investment options: Trading and borrowing against fine art
ART DAILY - Given the uncertainty in the financial markets, many investors are diversifying their portfolios by including up to ten percent in art, which today is widely recognized as a viable, traded asset class. Industry experts suggest that currently it is an opportunistic time to buy certain kinds of art across various price points. In addition, owners are increasingly using their art to borrow against, and many lenders are allowing borrowers to maintain possession and display their art collateral in their home or office. To protect themselves, art lenders are requiring appraisers to follow USPAP (Uniform Standards of Professional Appraisal Practice) in appraisals.
[ARIS Commentary: USPAP guidelines provide that encumbrances, ownership interests and the provenance of the personal property may have an economic impact on the value of the art. In order to assure the efficacy of the USPAP appraisal, clear legal title should not routinely be assumed and the use of extraordinary assumption or hypothetical condition in the appraisal can create acceptability issues.]
November 21, 2009 - German auction house pulls painting disputed in Nazi-era restitution claim
STARTRIBUNE - Lempertz, a Dusseldorf-based auction house, withdrew a painting from an upcoming sale in light of a WWII reclamation claim made by the estate of Max Stern (see ARIS News, November 5, 2009, November 22, 2008). The estate is seeking to recover hundreds of paintings that Mr. Stern sold at the same Lempertz auction house in 1937 pursuant to Nazi orders. Since that time, Lempertz has repeatedly sold and attempted to resell artwork owned by Mr. Stern.
November 16, 2009 - Validity of verbal deals under dispute
THE ART NEWSPAPER - Moscow-based art dealer Gary Tatintsian has sued Luhring Augustine Gallery, co-owned by Roland J. Augustine, past President of the Art Dealers Association of America, in the Supreme Court of the State of New York for breach of contract and unjust enrichment. Mr. Tatintsian, who over several years acquired $10 million dollars worth of art from Luhring Augustine Gallery, alleges that the gallery failed to supply certain artworks in accordance with the parties’ amended verbal agreement. Luhring Augustine Gallery has filed a motion to dismiss disclaiming the validity of an amended agreement.
[ARIS Commentary: This litigation between sophisticated art market insiders, that is an international, Russian art dealer and respected, contemporary New York gallery, highlights the challenges in the old-world art industry model in which parties traditionally relied upon handshakes and oral agreements in art transactions ranging from thousands of dollars to multi-million dollar deals. Buyers should be aware that when acquiring, consigning or selling art without a written agreement the statute of frauds doctrine, which provides that certain kinds of contracts must be memorialized in a signed writing, may invalidate verbal purchase agreements if and when contested in court.]
November 13, 2009 - UK museums can return looted art
BBC - The Holocaust (Stolen Art) Restitution Act allows museums in England and Scotland to return artworks stolen during WWII to claimants and their heirs in accordance with recommendations of the Spoliation Advisory Panel. Before this law was enacted, British institutions had to make ex-gratia payments to claimant families based on the valuation of the looted artifact in the national museum’s collection.
November 10, 2009 - Henkel heir, mistress settle suit on $48 million in two Hirsts
BLOOMBERG - Udo Fritz-Hermann Brandhorst, heir to the Henkel AG & Co. fortune and a major art collector, and his former New York-based art dealer mistress, Venetia Kapernekas, agreed to an out-of-court settlement resolving their ownership dispute of various artworks as well as custody of their daughter. In February 2009, Mr. Brandhorst blocked Ms. Kapernekas’ sale of two Warhol paintings she consigned to Sotheby’s in London -- one which Mr. Brandhorst gifted to Ms. Kapernekas and one which he gifted to their daughter. Ms. Kapernekas claimed an ownership interest in two Hirst works worth an estimated $48 million dollars on the basis that Mr. Brandhorst acquired the works as investments for her benefit.
November 10, 2009 - Ancient texts heading back to Vienna
COURTHOUSE NEWS SERVICE - A bible and commentary dated 1516-1517 that was stolen during the November 1938 pogroms in Vienna, Austria was pulled from a June 2009 auction at Kestenbaum & Co. in New York and is being restituted by the Swiss consignor to the Jewish Community of Vienna. U.S. Immigrations and Customs Enforcement discovered the provenance of the books and that the books were stolen property that had been smuggled into the USA.
November 5, 2009 - Providence couple embroiled in search for Nazi art
MUSEUM SECURITY NETWORK - Agents from the Art and Antiquities branch of U.S. Immigration and Customs Enforcement (ICE) searched Mr. and Mrs. Bissonnette’s home and seized pursuant to a warrant evidence related to the sale or transfer of art illegally imported into the country. Last year, the First Circuit Court of Appeals affirmed the Rhode Island District Court’s decision that Mrs. Bissonnette must return a Winterhalter painting that she inherited from her stepfather to the estate of Max Stern, a German Jewish art dealer, who sold off his inventory including the Winterhalter painting pursuant to Nazi orders during WWII (see ARIS News, November 22, 2008). During settlement negotiations with the Stern estate, Mrs. Bissonnette shipped the painting to Germany. The painting has since been returned to the Stern estate and is now on loan to the Montreal Museum of Fine Art. ICE officials have not commented on the nature of the investigation.
October 27, 2009 - Auction house Ritchies forced into bankruptcy
THE GLOBE AND MAIL - Ritchies, a Canadian-based auction house, has been forced into bankruptcy. For several months, Ritchies has been in financial distress and has failed to pay consignors for their artworks sold in May 2009 (see ARIS News, July 22, 2009).
October 22, 2009 - Nazi looted paintings discovered at Southern Methodist University, future home of the George W. Bush Presidential Library
FORBES - Two paintings by Spanish master Bartolome Esteban Murillo that were stolen by the Nazis in 1941 from the Rothschilds home in Paris were discovered in the collection of Southern Methodist University’s Meadows Museum. It is unclear whether the paintings, which are valued at around $10 million dollars, were properly restituted after WWII before being donated to the museum. The museum has agreed to list the updated provenance of the pictures on its website in accordance with Nazi-era research and disclosure guidelines promulgated by the American Association of Museums and the Association of Art Museum Directors.
October 22, 2009 - Creditors seize Dutch museum’s art collection
ARTINFO - ABN AMRO has seized $48 million dollars worth of art from the collection of the Scheringa Museum to satisfy the museum’s namesake founder Dirk Scheringa’s outstanding debts. Mr. Scheringa, an avid art collector and owner of DSB Bank, which filed for bankruptcy in the Dutch courts, pledged his art collection to secure financing. It is unknown whether ABN AMRO will try to sell any of Mr. Scheringa’s art. In April 2009, it was widely reported that ABN AMRO had similarly seized valuable art used as loan collateral by Dutch businessman Louis Reijtenbagh (see ARIS News, April 27, 2009, April 22, 2009, April 17, 2009, and April 3, 2009).
October 8, 2009 - Breaking: Astor trial concludes; Anthony Marshall convicted of theft
THE WALL STREET JOURNAL - Anthony Marshall, the son of the late New York philanthropist Brooke Astor, was convicted of stealing millions from his mother’s $200 million dollar fortune including several of his mother’s artworks as she suffered from Alzheimer’s disease. Mr. Marshall’s attorney was also convicted of five charges including fraud, conspiracy and forgery.
[ARIS Commentary: The Astor case magnifies on a large financial scale the common challenges facing family estates that include art collections. For instance, family members often dispute among themselves which family member owns and has the authority to sell artworks in the estate especially when the decedent’s last will and testament is amended by an elderly person having questionable mental capacity.]
October 7, 2009 - Dispute over Schiele painting heads to trial
COURTHOUSE NEWS SERVICE - The United States District Court for the Southern District of New York held that there is a factual issue for trial in the WWII art restitution case involving Egon Schiele’s painting entitled the “Portrait of Wally.” The U.S. government seized the picture over ten years ago when it was on loan from the Leopold Museum in Vienna to the Modern Museum of Art in New York. At issue is whether the painting was stolen by the Nazis in 1939 from the Jewish owner Lea Bondi. The painting is currently being stored in a warehouse in Queens, New York.
October 5, 2009 - US Department of State investigates Museo del Prado
THE ART NEWSPAPER - The U.S. Department of State is investigating whether the Museo Nacional del Prado in Madrid, Spain violated a federal law that prohibits trafficking of artworks nationalized by the Cuban government and owned by U.S. citizens. Under U.S. law, trafficking is broadly defined and includes possession. The museum exhibited two paintings by Spanish artists that were owed by the Florida-based Fanjul family before they fled Cuba and the Castro regime expropriated their vast art collection (see ARIS News, February 25, 2009).
September 14, 2009 - The art of the lawsuit
CRAINS CHICAGO BUSINESS - For over twenty years, numerous clients have sued Chicago-based art historian and dealer Richard Love of R.H. Love Galleries for mishandling their funds and assets including failing to deliver sold paintings, making false representations about art investments and refusing to pay consignors for sold artworks. The most recent lawsuits against Mr. Love were filed in state court in Illinois and involve up to $3 million dollars.
September 13, 2009 - The dealer; the $10m and the missing art treasures
THE OBSERVER - Former leading U.K. antiquities dealer Robin Symes is being sued by his late partner Christo Michailidis's family for allegedly selling without authority a multi-million pound collection of Eileen Gray art deco furniture and other objects. Mr. Symes was convicted and served jail time in 2005 for illegally selling a £3 million pound Egyptian statue.
September 12, 2009 - Stolen art by Warhol is sought in California
THE NEW YORK TIMES - Ten paintings by Andy Warhol from the artist’s “Athlete Series” were stolen from the home of Richard Weisman, a California businessman and art collector. Experts predict that the stolen pictures, which Mr. Weisman tried unsuccessfully to sell in 2007, will be difficult for the thieves to sell because of the iconic nature of the portraits and the insular market for Warhol works.
September 9, 2009 - Spain cannot shake suit over Nazi looted art
THE COURTHOUSE NEWS SERVICE - The United States Court of Appeals for the Ninth Circuit held that the government of Spain cannot claim sovereign immunity in defense of a WWII restitution claim for a painting by Camille Pissarro, which it acquired in 1993 as part of the $327 million dollar acquisition of the art collection of Baron Thyssen-Bornemisza. The appellate panel found that the lower court must determine whether the plaintiff must first seek redress in Spain or Germany before litigating in the United States.
August 26, 2009 - Glaser heirs reject UK spoliation ruling
THE ART NEWSPAPER - The heirs of Curt Glaser are seeking to appeal the U.K. Spoliation Advisory Panel’s recommendation to the Courtauld Gallery not to restitute eight drawings. This is the first time that a party proceeding before the Panel has rejected the Panel’s findings. Given the Glaser heirs’ pending WWII-related art claim, it will be risky for the museum to lend or exhibit these drawings in another jurisdiction.
August 24, 2009 - Aboriginal busts withdrawn from auction
ARTINFO - Sotheby’s withdrew from auction in Melbourne, Australia two Aboriginal busts with a combined pre-sale estimate of over $500,000 U.S. dollars in light of protests by Aboriginal leaders. The leaders urged Sotheby’s and the consignors not to profit from the sale of Aboriginal works and to return the sculptures to the indigenous community
August 19, 2009 - Appeals court overturns Holocaust looted-art law, but Norton Simon suit continues
THE LOS ANGELES TIMES - The United States Court of Appeals for the Ninth Circuit ruled that a California law allowing claimants to sue museums and galleries until 2010 for recovery of Nazi-looted art is unconstitutional. The plaintiff (the heirs of Jacques Goudstikker) may still pursue their restitution case if they can prove that they filed their case within California’s general three-year statute of limitations, that is, within three years after discovering that the Lucas Cranach the Elder painting at issue – valued at $24 million dollars – was in the collection of the Norton Simon Museum.
[ARIS Commentary: California’s special Holocaust statute of limitations, which is one of the state’s four Holocaust-related laws the court struck down on constitutional grounds, highlights the tension between federal laws setting foreign policy for WWII reparations and state laws regulating museum practices and the art market. As a result of this tension, parties can incur substantial legal expense and years of litigation over threshold legal and jurisdictional issues in WWII-related art title disputes.]
August 11, 2009 - Instant art on the auction block
THE WALL STREET JOURNAL - Polaroid Corporation is seeking permission from the U.S. Bankruptcy Court for the District of Minnesota to liquidate the company’s photography collection through Sotheby’s in private and public sales. After filing for Chapter 11 bankruptcy protection in December 2008, the company sold the majority of its assets but excluded from the sale its thousands of iconic photographs, which have not yet been appraised.
August 8, 2009 - A Brancusi masterpiece, mired in a custody fight
THE NEW YORK TIMES - Two brothers, two high-profile art collectors and Romania are involved in litigation in New York, Oslo and Paris over a 1913 Brancusi sculpture worth an estimated $40 million dollars assuming clear legal title. Since 1976 when the work was exhibited at the National Museum of Art of Romania, the government of Romania has claimed title to the statue as a national treasure. Brothers Alexandru and Alvaro Botez, whose grandparents acquired the work in 1914 from the artist, allegedly agreed to sell the work in 2005 to Norwegian businessman Mr. Sveaas and then in 2007 to Studio Capital, a Belize company owned by Mexican financier Mr. Martinez. The current location of the sculpture is unknown.
August 5, 2009 - Leibovitz may have better luck in bankruptcy court
BLOOMBERG - In light of photographer Annie Leibovitz's financial challenges, which include a pending $24 million dollar breach of contract lawsuit brought by an art lender and a federal tax lien of over $1 million dollars (see ARIS News, July 30, 2009, February 24, 2009), legal experts suggest that Ms. Leibovitz should file for bankruptcy to preserve her assets and to satisfy her creditors' liens.
July 30, 2009 - Lender sues Annie Leibovitz
THE NEW YORK TIMES - Art Capital Group, Inc., a specialized art finance company, has sued photographer Annie Leibovitz in Supreme Court of the State of New York for breach of a $24 million dollar loan agreement (see ARIS News, February 24, 2009). According to the lender, pursuant to the parties’ agreement in exchange for the credit line the lender obtained the right to sell Ms. Leibovitz’s right, title and interest to all of her photographs as well as her two homes. The lender is seeking a declaratory judgment to compel Ms. Leibovitz to provide access to her homes to appraise and value her assets.
July 22, 2009 - Auction-house partnership going, going, gone
[ARIS Commentary: The Ritchies incident highlights the continuing economic pressures in the art market. The incidence of consignors not being paid and the title exposures to the buying and selling market had been most evident to date in the private sector. See ARIS News and Commentary May 7, 2009 (discussing then-latest lawsuit stemming from the bankruptcy of Lawrence Salander and the Salander-O’Reilly Galleries brought by defrauded consignor John McEnroe and others against downstream buyers); see also ARIS News and Commentary November 20, 2008 (“Jail sentence for Memphis antique gallery owner who cheated consignors”) and ARIS News July 15, 2009 (updating new charges in the Salander-O’Reilly Galleries matter).]
CANWEST NEWS SERVICE - Sotheby’s has terminated its seven-year auctioning partnership with Canada-based Ritchies due to a number of instances of Ritchies not timely paying its consignors following a Sotheby’s-Ritchies joint sale in May. With the association scheduled to renew on August 1, 2009, Sotheby’s commented that “failing to promptly pay consignors after a sale is a ‘cardinal sin’ in the auction business . . . and Sotheby’s [will not] renew this agreement.” Sotheby’s has assured payment to the consignors who have not yet been paid.
July 15, 2009 - Art dealer Salander faces new charges as former deputy arrested
BLOOMBERG - The New York County District Attorney’s Office filed additional charges against Lawrence Salander and the now defunct Salander-O’Reilly Galleries as well as new charges against Leigh Morse, the gallery’s former director, for her role in defrauding investors, consignors and artists (see ARIS News, May 7, 2009, March 27, 2009, March 15, 2009, February 10, 2009, November 19, 2007, November 6, 2007 and November 5, 2007). The criminal indictments name twenty-eight victims including the artist estates of Gaston Lachaise, Elie Nadelman and Robert de Niro Sr. in what has been called the largest art fraud case in New York City’s history. District Attorney Robert Morgenthau noted that “the moral of this case is, be careful who you consign your artwork to.”
July 15, 2009 - Court removes an obstacle for Fisk University in struggle over Stieglitz art sale
[ARIS Commentary: If the Georgia O’Keefe Museum decides not to appeal, the lower Tennessee state court must decide on remand whether to permit Fisk University to sell a 50% stake in the O’Keefe-Stieglitz art collection for $30 million to the Crystal Bridges Museum. The on-going litigation involving Fisk University demonstrates the multitude of practical and legal challenges in enforcing donors’ restrictions on gifted artworks as well as the deaccessioning dilemma facing institutions that lack liquidity but own valuable art assets.]
THE NEW YORK TIMES - The Court of Appeals of Tennessee held that the Georgia O’Keefe Museum lacks standing to prevent Fisk University from selling artworks donated by Ms. O’Keefe. Over fifty years ago, Ms. O’Keefe donated the ninety-seven-piece Alfred Stieglitz Collection plus four of her own paintings to the university, stipulating various conditions including that the works could not be sold and must be displayed together. The museum alleged that because the proposed sale violated Ms. O’Keefe’s gift conditions, ownership of the collection should revert to the museum as the successor in interest to the O’Keefe estate.
July 10, 2009 - Red faces in Paris as ‘destroyed’ Cartier-Bresson snaps resurface
THE INDEPENDENT - The widow of French photographer Henri Cartier-Bresson is warning sellers and buyers that several prints donated to the French government that were supposed to have been destroyed in 1991 have reappeared on the art market. The prints were part of a collection of over five-hundred images damaged by a flood while being stored by the Centre National des Arts Contemporain. Rather than being destroyed by the museum according to the photographer’s instructions, some or all of these prints may have been stolen or recovered from the trash.
July 8, 2009 - Nazi-era claim rejected in court
ARTINFO - The United States District Court for the Eastern District of Louisiana granted summary judgment for Sarah Blodgett Dunbar, ruling that she was the owner of an Oskar Kokoschka painting that she inherited in 1973 from her mother, who purchased the work in 1946 from the art dealer Otto Kallir. The heir of Oskar Reichel sought restitution of the painting claiming that the Nazis confiscated it in 1939 when the painting was consigned to Mr. Kallir (see ARIS News, May 30, 2009, January 24, 2008). Following Louisiana’s Civil Code provisions, the court held that even if the work had been stolen or sold under duress during WWII, Ms. Dunbar acquired clear legal title because of her open and continuous possession of the painting for more than ten years.
[ARIS Commentary: Louisiana is unique among U.S. jurisdictions in its adoption of a civil code containing a prescriptive ownership period similar to European jurisdictions such as France, Germany and Switzerland in which a party may acquire clear legal title to stolen art if the party has maintained unchallenged possession of the work for a certain period of time (even if the transferor did not have clear legal title). The general rule in other United States jurisdictions is that a thief cannot obtain clear legal title to stolen art and for this reason good faith purchasers and other downstream parties cannot obtain clear legal title to the work regardless of how long these parties have possessed the artwork.]
July 7, 2009 - Judge denies Jackson’s mother
THE WALL STREET JOURNAL - A California state court judge named a lawyer and record executive listed in Mr. Jackson’s will as temporary special administrators of the estate until an August hearing, when the court is expected to appoint permanent executors and rule on the validity of the will. Mr. Jackson’s estate consists of millions of dollars in assets and debts (see ARIS News, June 28, 2009).
[ARIS Commentary: It may be challenging for executors to the Jackson estate to manage their fiduciary duty and sell the art and other property in the Jackson estate to pay off creditor debts. Executors will most likely have to sign a full warranty of clear legal title to offered assets (even though they may lack knowledge, information and documentation about potential liens encumbering Mr. Jackson’s property). If any objects are sold with an unknown title defect such as a creditor lien, then the sales transaction may be unwound at any time in the future – even after the estate is settled – based on rescission of a public auction or an indemnity claim brought by a buyer in a private sale, creating uncertainty and lack of finality to the estate proceedings.]
See also “Jackson worth $100M more than he owed?”
The Seattle Times
, July 6, 2009.
July 1, 2009 - Merkin art to be sold as hedge in Madoff case
THE WALL STREET JOURNAL - J. Ezra Merkin, a hedge fund manager charged with concealing over $2 billion dollars worth of client investments with Bernard Madoff, has negotiated the sale of several Rothko paintings and Giacometti sculptures for $310 million to an unidentified buyer (see ARIS News, April 14, 2009, January 8, 2009). Mr. Merkin highly leveraged his art collection; PaceWildenstein art gallery, which represents the Rothko family, has a $42 million lien on several of Mr. Merkin’s Rothko paintings and HSBC Bank USA, N.A. has a $19.3 million lien on several of Mr. Merkin’s other artworks. New York Attorney General Andrew Cuomo approved this sale of Mr. Merkin’s art assets, which are already the subject of a freezing order, provided that after paying liens, commissions, taxes and other fees the remaining $192 million sales proceeds are held in escrow for potential restitution of defrauded investors.
See also “Merkin selling art frozen in lawsuit for $310 million,”
, June 30, 2009.
June 29, 2009 - Czech institute to help recover Jewish property
REUTERS - Nearly fifty countries and non-governmental organizations participating in the Prague Holocaust Era Assets Conference have agreed to improve efforts to return artwork and other property looted by the Nazis and to form a permanent standing committee based in Terezin, Czech Republic to monitor WWII restitution claims.
See also “Holocaust conference urges more efforts on looted art,”
Bloomberg, June 29, 2009.
June 28, 2009 - Michael Jackson’s estate: The fallout will be monumental
USA TODAY - Legal experts expect it to take years to settle the estate of Michael Jackson given the complicated task of assessing the value of Mr. Jackson’s estate which includes various expensive artworks, and the amount of outstanding debts owed to creditors as well as an estimated $80 million in estate taxes owed to the state and federal government.
[ARIS Commentary: Given the complexities surrounding the Michael Jackson estate, it may be difficult to determine whether legal title to the estate’s assets are affected by loan pledges, gift promises to beneficiaries or other creditor rights. In addition, property in the estate may become subject to bankruptcy protection. It will be particularly challenging to value Mr. Jackson’s art and memorabilia assets since unlike all other asset classes in which uncertain title adversely affects property value, art appraisers have traditionally assumed (without inquiry) that the artworks they are valuing have clear legal title. The Michael Jackson estate may well have a proper basis to seek lower values of the art assets for estate tax purposes based on the difficult-to-determine risks of liens and encumbrances; however, this may also impact the estate’s ability to sell these assets at fair market value.]
See also “Large tax bill looms for Jackson estate,”
, July 10, 2009.
June 25, 2009 - Art insurance: Clean as a Rockwell
MARTINDALE - Collectors and investors of art are advised to consider acquiring title insurance for their potentially "defective art." Title insurance protects parties from losing their art due to title claims and spending money on legal fees to defend their art ownership. Parties are increasingly seeking to mitigate the art title risk given the facts that nearly all art has some gap or question in the provenance or chain of title, U.S. jurisprudence does not always favor good faith purchasers, and art market is non-transparent and unregulated, characteristics which can produce a variety of different kinds of title risks.
June 24, 2009 - £1.5m Pissarro painting looted by Nazis withdrawn from auction
TELEGRAPH - Christie's withdrew a Pissarro painting from auction due to a family dispute between two heirs of Samuel Fischer, the original Jewish owner of the painting. The Nazis looted the painting during WWII, and a Swiss court restituted it to Mr. Fischer's granddaughter in 2007; however, Mr. Fischer's great-grandson alleges competing ownership rights to the painting. The heirs failed to agree how to split the proceeds from the sale before the scheduled auction.
[ARIS Commentary: The Fischer case highlights the expanding nature of title risks tied to historical theft such as family disputes after restitution or other settlements and the challenges when art is pulled from auction including negative publicity, non-refundable marketing expenses, potential decrease in value of art and varying but significant collateral effects such as the destruction of a reverse IRC Section 1031 art exchange when the relinquished property is to be auctioned at or near the end of the exchange period.]
June 23, 2009 - Art restitution conference in Prague
THE NEW YORK TIMES - An internationally-attended conference on Holocaust-era assets will be held in Prague, Czech Republic, this week, the purpose of which is to assess efforts to recover looted artwork since the 1998 Washington Conference on Holocaust Era Assets was held and to define new ways to improve provenance research and restitution efforts around the world.
See also “Heirs race to find Nazi-looted art before time runs out,”
The Washington Post, June 22, 2009.
[ARIS Commentary: The Prague conference is likely to renew public interest in and continue to spur WWII-related art ownership claims.]
June 18, 2009 - Debbie Reynolds’ Hollywood museum enters Chapter 11
THE WALL STREET JOURNAL - Debbie Reynolds’ Hollywood Motion Picture Museum, a non-profit corporation owning the largest private collection of Hollywood memorabilia worth an estimated $60 million, has filed for bankruptcy in United States Bankruptcy Court for the Central District of California. The museum leveraged the collection to secure a $1 million loan and is seeking bankruptcy protection to prevent the lender from selling off memorabilia in the collection to satisfy the outstanding debt.
See also “Hollywood memorabilia caught in Olathe man’s legal mess,”
Kansas City Star, June 24, 2009.
June 17, 2009 - Mixed fortunes for Judaica in wake of Madoff
THE ART NEWSPAPER - J. Greenstein & Co., Inc.’s Judaica auction sale, which had twice as many lots as usual, included many objects consigned by Jewish victims of Bernard Madoff’s financial Ponzi scheme who are seeking to raise capital (see ARIS News April 20, 2009, April 14, 2009, January 8, 2009). Judaica objects have inherent title risks because such ceremonial items often have no provenance history, are not traceable, are frequently faked or forged, and were looted during WWII from synagogues in Europe. After WWII, many Judaica objects were mistakenly given to new congregations and pillaged congregations are now seeking restitution of their ceremonial objects.
June 14, 2009 - Signed, sealed, delivery: Stamp sold for $375K
INDYSTAR - The estate of J. David Baker sold an 1869 Lincoln stamp for $375,000 after the United States District Court for the Southern District of Indiana held that it was the rightful owner of the stamp, which was stolen from Mr. Baker’s home in 1967. An insurance company and an individual, who allegedly bought the stamp twenty years ago at a flea market, also asserted title to the stamp.
June 11, 2009 - 24 charged in crackdown on Native American artifact looting
LOS ANGELES TIMES - After a two-year investigation, federal and state law enforcement officials have arrested and charged twenty-four people with stealing and trafficking ancient Native American artifacts from federal public and tribal lands located in the Four Corners area in violation of the Archaeological Resources Protection Act (ARPA) and the Native American Graves Protection and Repatriation Act (NAGPRA). This case represents the largest Native American artifact theft case in United States history involving excavators, dealers and collectors and over 200 objects such as pottery, masks and jewelry worth over $300,000.
See also “Arrests made in operation targeting network selling stolen
Native American artifacts,”
Federal Bureau of Investigation, June 10, 2009.
June 9, 2009 - 2 paintings found in Toronto Goodwill bin could fetch $50,000 each
CBC NEWS - Waddington’s auction house in Canada plans to sell two paintings by the 19th century European painter Federico del Campo that were dropped off at a Goodwill facility. Goodwill does not know who donated the works and whether the donor was aware of their attribution or value. The paintings will be sold with no information or documentation about their ownership history.
June 4, 2009 - Ukraine suffered “colossal” looting during World War II
THE ART NEWSPAPER - New research suggests that the Ukraine suffered tremendous, previously unrecorded losses of cultural property during WWII. According to experts, most of the missing artworks are important pieces, many of which may be the subject of restitution claims in the future.
June 4, 2009 - Huge bequest by literary agent
THE ART NEWSPAPER - Over two thousand drawings and other art objects from the estate of Joseph McCrindle were gifted to more than thirty museums in the United States and Europe. The total collection is estimated to be worth approximately $20 million.
[ARIS Commentary: It may be challenging for executors and recipient museums to document the chain of title for art objects in the McCrindle collection given the fact that Mr. McCrindle acquired most of the works in the 1960s and 1970s before the advent of heightened art transactional and due diligence standards. Similarly, in accordance with current Internal Revenue Service auditing trends (see ARIS News, March 2, 2008), the charitable gift tax deduction and appraisal of the McCrindle art collection will likely be scrutinized by the Art Advisory Panel of the Commissioner of Internal Revenue because the works have not been in the public domain for several decades and were acquired before the art industry began to focus on art title risks.]
June 4, 2009 - Attorney in contempt for helping client sell Picasso
COURTHOUSE NEWS SERVICE - The United States Court of Appeals for the Fifth Circuit has upheld a civil contempt order against an attorney who advised his client to sell a Picasso painting, which was subject to a freeze order in a fraud case brought by the Securities and Exchange Commission. The appellate court confirmed that the work was covered by the freeze order because the work was in the defendant’s possession in his home even though the defendant’s mother owned the painting. The painting was sold for over $400,000 to raise cash for the defendant’s living expenses and litigation costs. On remand, the United States District Court for the Northern District of Texas will likely order the painting to be delivered to the receiver, but it is unclear whether the buyer, United Financial Markets, Inc., will receive a refund of the purchase price.
[ARIS Commentary: Attorneys, advisors, and other stakeholders should be aware of the potential for personal liability when selling or advising clients to sell art that may be encumbered by liens such as bankruptcy seizures or freeze orders. Similarly, parties should proceed with caution before signing absolute warranties of clear legal title to consigned works when they lack sufficient personal knowledge and documentation to make such representations accurately or where there is uncertainty in the legal determination bearing on clear title to the offered work.]
June 3, 2009 - Yale sued over Van Gogh painting seized by Soviets
THE WALL STREET JOURNAL - The great-grandson of a Russian industrialist has countersued Yale University in United States District Court of Connecticut to recover Van Gogh’s “The Night Café” (see ARIS News, May 30, 2009, March 24, 2009). The parties disagree over whether seizure of the painting in 1918 amounted to theft and if clear legal title to the painting passed to any subsequent owners including the university.
[ARIS Commentary: Historical theft claims, especially those involving state confiscation of property without compensation, present complicated title risks for downstream owners and buyers because of different interpretations of factual circumstances and unsettled doctrines under United States and international law such as due diligence obligations when acquiring art and whether public exposure of the art impacts when a statute of limitations period begins.]
May 30, 2009 - Massachusetts judge rules in favor of Museum of Fine Arts, Boston regarding Kokoschka work
ART DAILY - The United States District Court of Massachusetts has ruled in a declaratory judgment action brought by the Museum of Fine Arts that the museum is the rightful owner of an Oskar Kokoschka painting, which the heir of the Austrian Jewish owner Oskar Reichel alleged was sold under duress during WWII (see ARIS News, January 24, 2008). The court held that the heir’s restitution claim was barred by a three-year statute of limitations and that Mr. Reichel’s sale of the painting to the art dealer Otto Kallir in 1939 was a voluntary uncoerced transaction.
See also “MFA wins legal claim to valuable painting,”
The Boston Globe, May 30, 2009.
[ARIS Commentary: The Museum of Fine Arts case reflects a growing trend by museums and other non-profit institutions to seek to quiet title to art in their collections by filing declaratory judgment actions, efforts which reduce the risks associated with owning art with uncertain legal title, but require the institutions to expend often limited financial resources on litigation costs that they cannot recover even when successful in the court proceedings. See, e.g., Toledo Museum of Art v. Ullin, 477 F. Supp. 2d 802 (N.D. Ohio 2006); The Detroit Institute of Arts v. Ullin, No. 06-10333, 2007 WL 1016996 (E.D. Mich. Mar. 31, 2007); ARIS News and Commentary March 24, 2009 (discussing lawsuit brought by Yale University to retain ownership of Van Gogh painting).]
May 27, 2009 - Antiques Roadshow painting sale halted after claim it was stolen
NORTHAMPTON CHRONICLE & ECHO - Sotheby’s pulled from a New York auction a Winslow Homer portrait in light of ownership claims that the painting was stolen more than twenty years ago from the Blake family estate in Ireland. Before the sale, Sotheby’s conducted extensive due diligence on the picture, which had been featured on the popular television program Antiques Roadshow, including checks to ensure it was not stolen and contacting members of the Blake family.
[ARIS Commentary: Despite extensive public exposure of a work and due diligence research by an international auction house, unanticipated title risks may still encumber art and as a result the work may be unmarketable until the claim is settled and stakeholders may become entangled in lengthy, expensive litigation.]
May 22, 2009 - Changing the art on the White House walls
THE WALL STREET JOURNAL - President and Mrs. Obama are in the process of redecorating the private residence, offices and public rooms in the White House with modern art created by African-American, Asian, Hispanic and female artists on loan from federal museums as well as private galleries and individual collectors.
[ARIS Commentary: Individuals and galleries loaning their art for public display at the White House for the prestige of being connected to the Obama administration and to increase the market value of a particular artwork should be aware of potential title risks associated with public exposure and exhibiting their art at a high-profile location.]
May 22, 2009 - National Gallery settles suit over Soutine painting
THE WASHINGTON POST - The National Gallery of Art in Washington, D.C., and the estate of Lorette Jolles Shefner have reached an ownership agreement regarding the 2004 sale of a Soutine painting. In its complaint filed in the United States District Court for the Southern District of New York, the estate alleged that two Soutine experts fraudulently induced Mrs. Shefner to sell them her painting for well below fair market value, who in turn immediately resold the work for double the price to the National Gallery of Art, and that the museum conducted little to no due diligence on the ownership history of the work or how the experts acquired the painting. Pursuant to the settlement, the estate will retain title to the painting, the museum will recover the purchase price and the painting will remain on loan at the museum for seven years.
See also “Soutine suit settled over bargain ‘beef,’”
Artinfo, June 1, 2009.
[ARIS Commentary: The Shefner case reflects the continued heightening of due diligence obligations of downstream buyers to investigate clear legal title to artworks outside of the WWII historical theft context. The Soutine painting is the first work that the National Gallery of Art has deaccessioned from its permanent collection on the basis of a non-WWII related title claim. Under the changing industry standards, good faith buyers are charged with having certainty that the seller did not acquire the work under fraudulent circumstances, an issue which is heightened in the current market where buyers are attempting to secure works at below market values, and face the risk of rescission of the transaction, loss of the object as well as loss of the gain in value over time.]
May 21, 2009 - Esmerian property removed from American Folk Art Museum
MAINE ANTIQUE DIGEST - Sotheby’s took possession of several artworks that the renowned jeweler Ralph Esmerian loaned and promised to gift to the American Folk Art Museum. Mr. Esmerian is heavily indebted to the auction house for purchasing art on credit (see ARIS News, May 1, 2008). Sotheby’s has seized approximately $20 million worth of Mr. Esmerian’s art and is involved in litigation with Halsey Minor over the May 2008 sale of Mr. Esmerian’s “Peaceable Kingdom” painting by Edward Hicks for allegedly failing to disclose its financial interest in the painting (see ARIS News, September 3, 2008).
May 18, 2009 - Mogul’s $3 million paddle battle lands bitter bidders in court
BLOOMBERG - A collector has sued Christie’s in United States District Court for the Southern District of New York seeking a declaratory judgment that he was the successful bidder of a Sam Francis painting, which was part of the May 13, 2009 Post-War and Contemporary Art Evening Sale. The collector alleges that he holds legal title to the painting because the auctioneer orally accepted his $3 million telephone bid and then dropped the hammer and that it was improper for the auctioneer to reopen bidding and accept a higher $3.2 million bid from someone in the room.
May 18, 2009 - 2 disputed Indian wampum belts pulled from auction
THE NEW YORK TIMES - Sotheby’s pulled from auction two ceremonial Indian wampum belts consigned by the estate of a private collector in light of ownership claims raised by the Onondaga Nation. Native American Indian leaders allege that the sacred belts, which record the nation’s laws and customs, are community property of the Onondaga Nation and that for this reason a collector cannot acquire the title to or the authority to sell or transfer such objects. Both belts were deaccessioned before 1970 from the collection of the Museum of the American Indian and exhibited at The Metropolitan Museum of Art in 1983.
[ARIS Commentary: Consignors should ensure that they have clear legal title before offering art for sale privately through a dealer or gallery or at public auction. Liens or encumbrances might infringe on the title to offered artworks unbeknownst to the consignor even when the work has been part of a private collection for decades or exhibited at leading museums.]
May 7, 2009 - John McEnroe sues dealer over a Gorky
COURTHOUSE NEWS SERVICE - John McEnroe and Morton Bender have sued art dealer Joseph Carroll in New York state court for conversion, unjust enrichment and restitution in connection with a Gorky painting in which Mr. McEnroe and Mr. Bender each allegedly own a 50% interest through their dealings with Lawrence Salander (see ARIS News, March 27, 2009, March 15, 2009, February 10, 2009, November 19, 2007, November 6, 2007, November 5, 2007). The complaint alleges that Mr. Carroll acquired the painting in sham transactions with Mr. Salander and thus Mr. Carroll did not acquire legal title to it even as a buyer in good faith under the New York Uniform Commercial Code (UCC).
[ARIS Commentary: The latest lawsuit stemming from the bankruptcy of Lawrence Salander and the Salander-O’Reilly Galleries and now brought by both Mr. McEnroe and Mr. Bender illustrates a larger, developing trend in art law jurisprudence in which consignors and collectors who have been outright defrauded or whose consignment agreements have been breached in other ways are suing downstream buyers (or seeking indemnity from property and casualty insurers under all-risk homeowner’s policies under theft or conversion doctrines) for loss of their artwork based on the theory that the UCC provides little to no protection to buyers who should have been aware of improprieties surrounding the art transaction. As different courts begin to struggle with the limits of voidable title doctrines under the UCC, some courts have carved out “red-flag” exceptions to the traditional UCC protections afforded good faith purchasers for example when the sales price was obviously below market value, the negotiations or procedure of the sale were outside industry norm or controversial, or if no or inadequate steps were taken to verify the ownership history. See Zurich American Insurance Co. v. Felipe Grimberg Fine Art, No. 08-1300, 2009 U.S. App. LEXIS 9937 (2d. Cir. May 7, 2009); Brown v. Mitchell-Innes & Nash, Inc., No. 06-7871, 2009 U.S. Dist. LEXIS 35081, at *7-8 (S.D.N.Y. Apr. 24, 2009).]
May 6, 2009 - Dealer returns painting lost in Nazi-era forced sale
BLOOMBERG - Richard Feigen, a leading New York art dealer, has returned an Italian baroque painting from his personal collection to the heirs of Max Stern, a Jewish art dealer who was persecuted during WWII (see discussion of other art restitutions to Stern heirs, ARIS News, April 21, 2009, November 20, 2008). Mr. Feigen purchased the picture in 2000 from Lempertz auction house in Cologne, Germany, the same auction house that liquidated Mr. Stern’s gallery in 1937.
May 4, 2009 - Fremont settles suit over Ansel Adams prints
THE WALL STREET JOURNAL - Fremont General Corporation, a former mortgage lender, has agreed to allow the California Insurance Commissioner to keep $4.1 million in sales proceeds from a 2008 auction of Ansel Adams prints allegedly owned by Fremont Indemnity Company, an insurer which the State of California took control over in 2003. Several months after the auction, Fremont General Corporation filed for bankruptcy protection. The Commissioner argues that Fremont General Corporation did not have title to or the right to sell the Adams works because it improperly acquired possession of the collection from its insolvent subsidiary.
April 28, 2009 - Hart Galleries owners sentenced to 14 years
HOUSTON CHRONICLE - Mr. and Mrs. Hart, the owners of an art and antique gallery in Houston, Texas, pleaded guilty to stealing more than $4 million from their clients. After filing for bankruptcy in 2003, criminal charges were brought against the Harts for failing to pay consignors for their sold objects.
April 27, 2009 - ABN Amro secures Reijtenbagh art collection
NRC HANDELSBLAD - ABN AMRO secured one of the most valuable paintings by Rembrandt in Mr. Reijtenbagh’s art collection, which was used as partial collateral to secure a €52 million loan with ABN AMRO as well as more than $340 million in loans from Credit Suisse and JPMorgan Chase & Co., who both sued Mr. Reijtenbagh in New York state court (see ARIS News, April 22, 2009, April 17, 2009, April 3, 2009). Although ABN AMRO agreed to seek repayment of the rest of Mr. Reijtenbagh’s debt through his non-art assets, Credit Suisse and JPMorgan Chase & Co. continue to seek reimbursement for Mr. Reijtenbagh’s outstanding loans from missing artworks.
[ARIS Commentary: The Reijtenbagh case illustrates how large, global banks are vulnerable to art title risks (from historical and contemporary theft to traditional liens and encumbrances) when borrowers use their art as security for loan transactions. Bank auditors and loan risk managers should be cognizant of the fiduciary duty to recognize exposure to art title risks. ARIS expects to see increasingly stringent risk management requirements surrounding the global art title risk within financial institutions and from outside auditors both when banks use art as loan collateral and set reserves for these loans and when banks value their own corporate art collections for balance sheet purposes.]
April 26, 2009 - Gideon Welles’ heirs battle over Lincoln artifacts
HARTFORD COURANT - The Welles, Brainard and Smith branches of the family of Gideon Welles, Secretary of the Navy under President Lincoln during the Civil War, are suing each other in Connecticut state court over ownership of historical documents and artifacts discovered in an attic in 2004. In addition, two boxes containing valuable Welles papers were stolen in 2006 and are still missing. The United States National Archives and Records Administration has indicated that the U.S. government will claim title to the official government letters from President Lincoln to Secretary Welles if the stolen papers are found.
April 25, 2009 - More artworks sell in private in slowdown
THE NEW YORK TIMES - Many collectors are choosing to sell their art in private sales to maintain their anonymity (and keep confidential what may be their financial need), to prevent the uncertainty surrounding auction sales and to meet liquidity needs more quickly.
[ARIS Commentary: There has been a systemic shift in the art marketplace with more art being sold in private sales and less art being sold in public auction sales. This change – driven by distressed sellers, who have seen the value of their real estate, stock and other investment holdings collapse – has augmented the lack of transparency in the art market and correspondingly increased buyers’ title risk exposure.]
April 22, 2009 - De Young selling tribal art as family squabbles
SAN FRANCISCO CHRONICLE - As part of the on-going Annenberg family dispute that is the subject of
several court cases in California, Florida and New York (see ARIS News, October
6, 2008), the city of San Francisco and the de Young Museum of Fine Arts have
agreed to sell 76 works from the Jolika Collection of Papua New Guinea art,
which was gifted to the museum by Mr. and Mrs. John Friede, one of the Annenberg
heirs. Proceeds from the sale are earmarked to settle
a portion of the inheritance dispute. Mr. Friede’s half-brother, Thomas Jaffe, however,
opposes the sale of the 76 works as well as the sale of a $10 million Bonnard
painting jointly owned by the heirs.
See also “San Francisco fights to protect Jolika collection,”
Artinfo, April 22, 2009.
April 22, 2009 - Dutch bank challenges JPMorgan, Rijksmuseum over masterpiece
MSN NEWS - ABN AMRO has sued businessman Louis Reijtenbagh in a district court in
Amsterdam to secure Mr. Reijtenbagh’s art collection, which was used as loan
collateral. Mr. Reijtenbagh has allegedly double-pledged his art collection to
both ABN AMRO and JPMorgan Chase & Co. (the latter of which has sued him in the
United States District Court for the Southern District of New York) and has sold
a Dutch Old Master painting to the Rijksmuseum, which had been used as loan
collateral (see ARIS News, April 17, 2009, April 3, 2009).
See also “ABN AMRO joins race for Reijtenbagh art-source,”
Reuters, April 23, 2009.
April 21, 2009 - U.S. seizes Old Master lost in Nazi-era forced sale
BLOOMBERG - United States Immigration and Customs Enforcement seized a 17th century Dutch portrait from a New York gallery and returned it to the estate of Max Stern, a Jewish art dealer persecuted by the Nazis. The seizure marks the first time that law enforcement authorities have seized a WWII Nazi-Era work based on a forced auction sale and follows the ruling in the United States Court of Appeals for the First Circuit (see ARIS News, November 20, 2008) that WWII Nazi-Era forced sales constitute an illegal taking. Although registered in the Art Loss Register database, the work was not identified as stolen. It is unclear whether the London dealer, who sold the work to the New York gallery, will be reimbursed by the prior seller.
April 20, 2009 - Two judges on Madoff case may spur assets battle, lawyer says
BLOOMBERG - The federal judges presiding over Bernard Madoff’s criminal and bankruptcy cases may have divergent approaches to handling Mr. Madoff’s assets including his art collection (see ARIS News, April 14, 2009, January 8, 2009, January 2, 2009). The United States District judge presiding over the criminal case has temporarily frozen more than $100 million of Madoff’s assets. The United States Bankruptcy Court judge has appointed a trustee to manage the collection and distribution of Madoff’s assets to Ponzi scheme victims.
April 20, 2009 - Christie’s sets up corporate sales division
ARTINFO - Christie’s has created a division to assist corporations facing mergers, bankruptcies and insolvency with selling their art collections. The auction house expects sales of corporate art to accelerate in the coming year due to the financial downturn.
[ARIS Commentary: Christie’s new division focused on the sale of insolvent corporations’ art collections and the legal wrangling over dispersal of the Madoff art assets exemplifies the increasing incidence and significance of distressed sellers introducing art into the marketplace. The Madoff criminal and bankruptcy cases also highlight a potential conflict between treating title to artwork purchased with criminally misappropriated client funds as void and bankruptcy court-authorized sale of debtors’ art assets to satisfy creditor claims. In addition to this potential conflict, title defects may predate the debtor’s purchase of artworks and impair clear title despite a bankruptcy court-approved liquidation sale of the work.]
April 17, 2009 - JPMorgan Chase claims rights to Rijksmuseum-owned painting
ARTINFO - JPMorgan Chase & Co. has asserted a financial interest in a 17th century painting by the Dutch master Berckheyde, which was used as loan collateral by defaulting-borrower, Dutch businessman Louis Reijtenbagh (see ARIS News, April 3, 2009). The Rijksmuseum acquired the painting from Mr. Reijtenbagh in September 2008 in what it alleges was a legal sales transaction for full value. The picture is currently on loan to the National Gallery in Washington, D.C.
[ARIS Commentary: The Rijksmuseum’s acquisition of the Berckheyde painting aptly shows how the lack of transparency in the art market adversely affects even world-class cultural institutions. The museum most likely had no knowledge when it purchased the work that Mr. Reijtenbagh, a well-respected financier, had pledged the work as collateral and that it was encumbered by JPMorgan Chase & Co.’s creditor lien. Since the painting is currently on loan to a museum in the United States, if the bank files suit in a United States federal or state court, it will likely ask that the work be seized and the museum prevented from taking the work back to the Netherlands until the ownership dispute is resolved.]
April 16, 2009 - Art dealer claims he was swindled
COURTHOUSE NEWS SERVICE - A Beverly Hills art dealer has sued the seller of a stolen Granville Redmond painting for fraud in United States District Court for the Central District of California. Before buying the work, the dealer attempted to verify that the painting was not stolen by checking with law enforcement authorities and stolen art databases and hired a private investigator. Los Angeles police subsequently seized the picture from the down-stream purchaser.
See also “Stolen painting leads to lawsuit,”
Maine Antique Digest, June 16, 2009.
[ARIS Commentary: The lack of transparency in the art market affects not only individual collectors but also commercial dealers and galleries who buy and sell art as inventory and who, as transaction principals, regularly do not have access to complete or accurate information about prior owners and the provenance history of works given the nature of the art industry. Contemporary art theft (one of many global art title risks) is a $6-billion-a-year industry on the rise, with a significant number of art thefts going unreported to law enforcement authorities and stolen art databases.]
April 14, 2009 - Rothko collector charged in Madoff scandal
ARTINFO - The New York Attorney General has charged Ezra Merkin, an investor and art collector, with fraud for concealing investment of $2.4 billion of his clients’ money with Bernard Madoff. Since 2003 Mr. Merkin has assembled an important collection of Mark Rothko works valued today at $91 million (see ARIS News, January 8, 2009).
See also “Madoff middleman Ezra Merkin charged with fraud for secretly
steering $2.4 billion in investor assets into Madoff’s Ponzi scheme,”
State of New York, Office of the Attorney General, April 6, 2009.
[ARIS Commentary: Fraud charges brought against Mr. Merkin are another example of a financial scam involving a collector with art holdings (in this case valuable, well-known Rothko paintings) encumbered by creditor liens and subject to potential government liens or seizure. Future buyers of Rothko works seeking to take advantage of lower prices from distressed sales and the dip in the art market should be aware of title risks related to Rothko works.]
April 13, 2009 - MOMA sued over German works
THE NEW YORK TIMES - The Museum of Modern Art (MOMA) is being sued by the heirs of the German expressionist artist George Grosz in New York federal district court for restitution of three Grosz works. The complaint alleges that MOMA knew or should have known that the histories of the works trace back to several “sham transactions” involving the estate of the artist’s Jewish art dealer as well as Dutch and German art dealers who laundered art stolen during WWII. MOMA has not presently commented on the pending litigation.
See also “George Grosz’s heirs sue MOMA on paintings,”
Courthouse News Service, April 13, 2009.
April 9, 2009 - Colorado investment manager accused in Ponzi case
USA TODAY - The Securities and Exchange Commission has charged Shawn Merriman, a Colorado investment fund manager, with defrauding clients of $20 million in a Ponzi scheme. Mr. Merriman allegedly used investor funds to purchase nearly 200 artworks by Old Masters such as Rembrandt and Rubens as well as similar collectibles including a vintage automobile and sports memorabilia. Government officials have seized Mr. Merriman’s art collection and $7 million of his assets.
See also “Local money manager faces Ponzi-scheme allegations,”
Denver Post, April 9, 2009.
[ARIS Commentary: The Merriman Ponzi scheme, although on a smaller scale than the Madoff Ponzi scheme (see ARIS News, January 8, 2009), is equally devastating to victimized investors and one of the many financial frauds to come to light in recent months having an impact on the art market. Fraudsters such as Mr. Merriman and Mr. Madoff often used misappropriated client funds to acquire valuable artworks and in turn have created complicated liens and encumbrances on millions of dollars worth of artworks that have since entered or that will eventually enter the art market.]
April 3, 2009 - JPMorgan sues Dutch investor Reijtenbagh over loan
REUTERS - JPMorgan Chase & Co. sued the wealthy Dutch Reijtenbagh family in New York state court seeking a temporary restraining order to enforce its rights to valuable artworks by artists such as Monet, Picasso and Rembrandt used as collateral on a $50 million loan. The bank claims that Reijtenbagh breached the loan agreement by transferring artworks without authorization from the defendant’s apartment in New York to outside of the United States.
[ARIS Commentary: Given the current financial environment, it is increasingly common for individual collectors and corporate or nonprofit entities to use their art as collateral and security to obtain loans (see ARIS News, February 24, 2009). As borrowers – like the Reijtenbagh family in the JPMorgan Chase & Co. case – who have possession of their art used as loan collateral default on their commitments and transfer or sell their art in breach of loan agreements, ARIS predicts there will be an influx of art with undisclosed creditor liens in the market and down-stream, good faith buyers will increasingly and unwittingly acquire artworks encumbered by bank claims.]
March 27, 2009 - Art dealer is charged with stealing $88 million
THE NEW YORK TIMES - Former top New York art dealer Lawrence Salander was arrested and indicted for stealing up to $100 million from collectors, artists and investors. Mr. Salander’s alleged fraudulent behavior includes selling the same art (to which he lacked title) multiple times and double-pledging art as loan collateral, failing to reimburse consignors for sold art, and defrauding art investors, with the implicated artworks spanning from Renaissance Old Masters to 20th Century American works. Mr. Salander and his defunct gallery have been protected by bankruptcy proceedings since November 2007.
See also “New York County District Attorney’s Office, News Release,”
March 26, 2009.
[ARIS Commentary: The Salander-O’Reilly Galleries matter highlights that $88 million to $100 million worth of inventory in the art market, which ties back to Mr. Salander’s and the Salander-O’Reilly Galleries’ activity over a fifteen year period, presents risks of title claims. The financial and reputation-related risks to good faith buyers who purchase works unknowingly tied to Salander-O’Reilly Galleries is heightened when one recognizes the long-standing art industry practice of sellers, through their art advisors, dealers and other agents, withholding their identity from buyers and the cumulative effect of this practice on clear legal title to subsequent buyers.]
March 27, 2009 - A tug of war over Robert Motherwell
THE NEW YORK TIMES - Competing lawsuits were filed in the Supreme Court of the State of New York and the U.S. District Court for the Southern District of New York between the Dedalus Foundation, which protects the legacy of the artist Robert Motherwell, and Joan Banach, former Foundation curator, collection manager and board member. The Foundation alleges that Ms. Banach stole at least 10 works (some of which she sold without authority and some of which she still has in her possession) and is seeking return of the Motherwell works as well as $5 million in compensation plus punitive damages. Ms. Banach alleges that the Foundation unjustly terminated her because she challenged the Foundation President’s judgment about the authenticity of works attributed to Motherwell and is seeking reinstatement of her Foundation position as well as an undetermined amount of monetary damages.
March 24, 2009 - Yale sues to retain ownership of Van Gogh painting
THE NEW YORK TIMES - Yale University has filed a declaratory judgment action in U.S. District Court in Connecticut to quiet title to Van Gogh’s “The Night Café” and to block the heir of the Russian industrialist Ivan Morozov from reclaiming the artwork. The painting was seized during the Communist Revolution and later sold by the Soviet government before being donated to the University by an alumnus almost fifty years ago.
See also “Russian aristocrat’s heir reclaims Van Gogh painting ‘looted’ by
Telegraph, May 28, 2009.
[ARIS Commentary: The Yale University lawsuit reflects a number of recent trends in art title cases and increasing burdens on museums and other non-profit
institutions, who when discovering artworks in their collections with title defects are seeking more control over the dispute through filing preemptive legal actions to remove clouds over ownership (see ARIS News, February 28, 2008, January 24, 2008, December 7, 2007). In recent years, historical repatriation claims have grown beyond the WWII context to include title claims based on other historical events such as WWI, the Russian Revolution, the Cuban Revolution (see ARIS News, February 25, 2009) and the
Chinese Opium Wars (see ARIS News, March 3, 2009). These cases reflect a growing
global attitudinal shift and increase in title risk exposure for art around the world, are adding to the fiscal pressures on museums and other non-profit entities, and require complex risk-management decisions to be undertaken by management and trustees since the next generation of historical restitution
claims include unsettled international law issues involving reciprocity of state actions and the application of different government’s laws on property, forum non conveniens, choice of law and statutes of limitations.]
March 24, 2009 - New York court orders return of $600,000 book stolen in WWII
BLOOMBERG - The U.S. Southern District Court of New York has ordered a collector to return a 16th century book worth an estimated $600,000 to the German Stuttgart Staatsgalerie. The book, which was taken by a U.S. army captain from Germany during the end of WWII, was purchased for $3,800 in good faith eight years ago from an art dealer in St. Louis, Missouri.
March 24, 2009 - Museum sued for return of rare stone tablet
COURTHOUSE NEWS SERVICE - Edward Low is suing the Ohio Historical Society Museum in Ohio state court for conversion of a rare stone plate, which he found in the ground in West Virginia in 1942. The museum has had physical possession of the tablet since 1971. At issue is whether the plate was gifted to the museum or loaned for research and public display purposes.
[ARIS Commentary: In light of the current debate over the practice of deaccessioning artworks from museum collections (as evidenced by the controversies surrounding the National Academy Museum and the Rose Art Museum (see ARIS News, January 27, 2009)), as well as the long-term fiscal challenges facing museums, the issue of lender and donor restrictions has become increasingly important for non-profit institutions. Museums should be cognizant of title risks and potential claims connected to artworks donated and loaned, especially where there is no documentation of the gift or loan, the gifting documentation is vague or contains burdensome provisions, the loan agreement is for an indefinite period or the artwork is “abandoned” or the subject of “stale loans” where donors and lenders cannot be indentified or located.]
March 19, 2009 - Theft claim halts sale of Zoffany portrait from Versace’s Como villa
THE TIMES - A Johann Zoffany painting in the collection of the late fashion designer Gianni Versace was allegedly stolen 30 years ago unbeknownst to Mr. Versace. Heirs of Major George Maule, who is depicted in the portrait, identified the work from an article publicizing the Sotheby’s London auction. The picture, which had been in Versace’s collection since around 1994, was recently attributed to Zoffany and was not listed in any stolen art databases.
March 15, 2009 - Who owns Arshile Gorky pirate painting?
COURTHOUSE NEWS SERVICE - Morton Bender has filed suit in New York federal court to reclaim his 50% ownership stake in a Gorky painting, as well as monetary damages for conversion and unjust enrichment. Mr. Bender alleges that without his knowledge or consent Joseph Carroll entered into sham sales transactions with Mr. Salander, who owned the other 50% in the work. Edelman Arts, who currently has possession of the Gorky painting, displayed it for sale at the March 2009 Armory Show in New York. It is not known how and when Edelman Arts acquired the painting.
[ARIS Commentary: ARIS predicts that in the coming months and years there will be more litigation against innocent down-stream buyers, who unknowingly acquire artwork with financially-related liens and encumbrances (see ARIS News, February 10, 2009). Edelman Arts, who may or may not have known about Mr. Bender’s alleged 50% interest in the work, intended to sell the Gorky work at the Armory Show.]
March 13, 2009 - Mary Boone sues collector
ARTINFO - Mary Boone Gallery is suing an Ohio collector in New York state court for failing to pay for a work by Will Cotton. The collector allegedly agreed to purchase the work for the discounted price of $32,000 but later tried to cancel the transaction.
[ARIS Commentary: It is not uncommon for buyers to renege on payment of their art purchases after the sale. This occurrence has increased as the financial global downturn has impacted even the wealthiest art buyers. For instance, Sotheby’s sued Halsey Minor for non-payment of three paintings worth $16.8 million (see ARIS News, September 3, 2008). It is, however, unusual for private art dealers and galleries to sue their clients for failing to pay for purchased artworks. Litigation is generally considered a last resort if extended payment terms, exchanges or discounts are not viable options. When buyers default in their payment of artwork, title to the work becomes clouded and uncertain unless and until resolution can be achieved through litigation, settlement negotiations or some other means.]
March 3, 2009 - Bidder refuses to pay, stating protest of looting
THE WALL STREET JOURNAL - The winning bidder of two animal fountainheads allegedly looted from China in
1860 has refused to pay for the works as a form of political protest. The
statues sold for €31.4 million at Christie’s Paris auction of designer Yves
Saint Laurent’s art collection. The Tribunal de Grande Instance in Paris denied
a Chinese foundation’s request to stop the sale in light of its repatriation
claim and ordered the group to compensate the defendants for their legal fees.
Christie’s, who engaged in discussions with the Chinese for many months but
stated that the legal ownership of the fountainheads was clearly confirmed, has
not indicated whether it will sue the bidder for payment, return the works to
the consignor, or offer the works to another buyer most likely at a discounted
[ARIS Commentary: As one art dealer noted, the Chinese animal head case
brings to the forefront the notion that has been brewing for some time in the
art market, that is that people are more sensitive to issues of provenance and
that if a work lacks pedigree, it cannot be sold and there will be problems.
Despite the French court ruling allowing the sale to proceed and the protest bid
made by the Chinese patriot, China has vowed to continue to seek the return of
the sculptures through all necessary channels including litigation and
diplomatic relations. This case presents continuing, difficult political, moral
and legal questions under international and various state laws. It will likely
involve protracted litigation and expensive defense costs irrespective of the
validity of arguments countering China’s title claim to the sculptures, i.e.,
that any applicable international cultural property conventions do not apply
retroactively or that the statute of limitations has passed over 100 years after
See also “China-art sales may drop as bidder refuses to pay,”
Bloomberg, March 3, 2009.
March 2, 2009 - Gagosian Gallery and Chris Burden hit legal obstacle in launch of glittery show
LOS ANGELES TIMES - The Gagosian Gallery entered into an agreement with Stanford Coins & Bullion, a company owned by the alleged fraudster Allen Stanford, to purchase $3 million worth of gold bars through Dillon Gage Group, a rare coin dealer. The gold blocks were to be shown in an upcoming exhibit at Gagosian Gallery’s Beverly Hills showroom; however, as a result of a temporary restraining order freezing Mr. Stanford’s assets obtained by the Securities and Exchange Commission (SEC) in U.S. District Court for the Northern District of Texas, Dillon Gage Group has not sent the Gagosian Gallery the gold bars or refunded the $3 million purchase price.
February 25, 2009 - Fanjul family statement on U.S. Department of State investigation against Bruno Scaioli
THE EARTH TIMES - The U.S. State Department is investigating whether Bruno Scaioli, an Italian-Argentinean art dealer, has violated Cuban sanctions legislation, which bars individuals from trafficking in property confiscated by the Castro regime. The Fanjul family, whose art was seized by the Cuban government after they fled the country in 1961, believes that Mr. Scaioli has at least one of their paintings.
[ARIS Commentary: ARIS predicts that in the coming months and years there will be an increase in historical theft claims related to artworks seized by the Fidel Castro regime after 1959 and sold by the Cuban government on the international art market to raise state funds.]
February 25, 2009 - Huillier indicted and arrested in Scottsdale
MAINE ANTIQUE DIGEST - Robert Huillier, an antique appraiser based in Scottsdale, Arizona, has been indicted and arrested on fraud and theft felony charges for allegedly defrauding approximately 70 individuals out of $2.5 million in cash and property. Victims have reported that Mr. Huillier failed to return consigned property, pay proceeds from the sale of consigned property and reimburse funds invested in antiques and other estate property.
February 24, 2009 - That Old Master? It’s at the pawnshop
THE NEW YORK TIMES - Owners of valuable artworks are increasingly leveraging their art as collateral to secure cash. A number of lenders specializing in high-end art loans have seen their business grow by approximately 40% in the last six months. Loans against art are typically based on a proportion of the art’s valuation with interest rates ranging from 6% to 16%. If the owner defaults on the loan, the lender typically asserts the right to sell the art and collect the proceeds, which can often result in title claims and litigation.
[ARIS Commentary: With more collectors, galleries and artists facing financial challenges and using their art as collateral to obtain much needed cash, buyers should be aware of the risk of inadvertently purchasing art encumbered by creditor liens. Not all lenders maintain physical control and possession of art used as collateral for loans. Moreover, lenders and owners often dispute the term arrangements in their loan agreement. Despite apparent title risks to buyers, owners and lenders, experts predict that there is a real and growing need for art loans in the market.]
February 10, 2009 - Stuart Davis’ son wants Dad’s paintings back
COURTHOUSE NEWS SERVICE - The son of American modernist painter Stuart Davis has sued Joseph P. Carroll, the buyer of 16 of his father’s paintings, in New York Southern District Court for conversion, replevin and unjust enrichment, and is seeking $3 million in damages and return of 8 of the pictures. Mr. Davis alleges that Mr. Carroll knowingly illegally acquired Davis paintings that were on consignment with Salander-O’Reilly Galleries at prices far below fair market value around the time that the gallery was near financial collapse. Mr. Carroll may have already resold the Davis paintings at issue in the lawsuit.
[ARIS Commentary: This is the first widely reported case stemming from the Salander-O’Reilly Galleries bankruptcy in which a consignor is seeking redress from a down-stream buyer after not being paid by the gallery for the purported sale of consigned works.]
February 10, 2009 - Collector says dealer snookered her for a Julian Schnabel painting
COURTHOUSE NEWS SERVICE - A private collector is suing art dealer Mary Dinaburg in New York Southern District Court for fraud, negligent misrepresentation and unjust enrichment, and is seeking compensatory and punitive damages. The collector alleges that Ms. Dinaburg sold her a John Wesley painting for $118,000 and then converted it by reselling it the next day without her approval. Although the collector contends that the resale of the Wesley work was illegal, she accepted from Ms. Dinaburg a $200,000 credit. The collector contends that Ms. Dinaburg induced her to purchase for $290,000 (using the credit plus a cash advance) a Julian Schnabel painting, which is only worth around $100,000.
January 27, 2009 - Brandeis to close art museum, sell Warhol as endowment slips
BLOOMBERG - In light of the financial crisis and economic recession, Brandeis University is closing its Rose Art Museum and selling over 6,000 works in its collection. Most of the collection was donated and consists of contemporary American works by artists such as Jasper Johns and Andy Warhol. The university is taking this unusual step as part of larger cost-cutting initiatives to preserve its educational mission.
January 22, 2009 - Art worth millions confiscated from Australian dealer
ARTINFO - For several months, investors and consignors have unsuccessfully sought to recover money for their sold artworks from Sydney art dealer Ronald Cole. As a result, Australian police raided and seized over 400 paintings worth millions of dollars from Mr. Cole's gallery and private properties. Like many other art dealers, Mr. Cole noted that he is suffering from financial problems in a difficult market.
January 15, 2009 - Auctioneer arrested, felony charges filed at state level
MAINE ANTIQUE DIGEST - Over 80 former clients have filed complaints against auctioneer Timothy W. Conroy for failing to return unsold consigned works and failing to pay sales proceeds. The Attorney General for the State of New York has instituted criminal proceedings against Mr. Conroy for felony grand larceny and breach of a stipulation to pay debts owed to consignors now estimated at over $400,000. Convictions for charges against Mr. Conroy pending in the courts in both Onondaga and Cayuga Counties carry up to seven years in state prison and authorize local authorities to shut down Mr. Conroy's auction business.
See also "Consignors say Conroy owes them money,"
Antique Week, December 12, 2008.
January 8, 2009 - Wary art dealers, collectors swap galleries for cheap storage
BLOOMBERG - Individual collectors, galleries, dealers, museums and other businesses with art holdings are downsizing and cutting costs by storing their art in specially designed warehouse facilities, which charge rent according to square footage. Several art and antiques storage companies have recently expanded and are benefitting from the recession.
[ARIS Commentary: Parties storing their art in warehouse facilities should be aware that art handlers and storage companies may obtain a lien and seize their art pursuant to UCC or state law (after following statutory notice requirements) to satisfy outstanding fees. Warehouse liens will become more prevalent as individuals and entities who had previously sought to reduce expenses by storing their art become insolvent and unable to pay their bills. Buyers should be cognizant of potential title claims brought by parties whose artwork was previously stored, seized pursuant to warehouse liens and sold by storage companies.]
January 8, 2009 - Merkin's art advisor bought expensive Rothkos, lost millions
BLOOMBERG - Numerous collectors have approached Ezra Merkin seeking to buy his $150 million Rothko collection. Mr. Merkin is a New York financier who lost over $1 billion of his and his investor’s funds in the Madoff Ponzi scheme. Several of Mr. Merkin’s former clients have sued him for fraud in New York state and federal court and obtained an order barring him and his funds from withdrawing, liquidating or dissolving assets.
See also "N.Y. judge restrains Merkin from shutting down funds in Madoff lawsuit," USA Today, January 7, 2009.
[ARIS Commentary: Art transactions involving sellers (such as Mr. Merkin) facing liquidity problems and high-stake financial litigation present serious title risks. Such parties may not have the right to sell their artwork or other tangible personal property given the interests and liens of creditors and other aggrieved parties.]
January 2, 2009 - Art imitates crunch, with few exceptions
THE WALL STREET JOURNAL - The economic downturn that dramatically took hold in the fourth quarter of 2008 has impacted the art market broadly – from private dealers to the auction houses as well as the museum community facing fiscal challenges. However, choice works are still realizing record prices. Notably, ownership due diligence is significantly increasing in art transactions. In October 2008, the auction market disclosed for the first time in the sales catalogue that a title insurance policy was paid for by the seller accompanying a work sold at auction in order to mitigate risk for the seller and buyer and to facilitate a higher valuation of the offered work.
January 2, 2009 - Bernie Madoff’s gift to the art market
ART MARKET MONITOR - Despite initial predictions for 2009 as lacking in a bankable supply of quality art sales, high-end works will likely come to market as a result of sellers needing liquidity to settle their estate, divorce or debts. Many well-respected collectors were victims of the Madoff $50 billion Ponzi scheme, and their only liquid asset is art. The bankruptcy of Dreier LLP will also bring to market Mr. Dreier’s and the firm’s estimated $30 to $40 million art collection.
December 10, 2008 - Sotheby’s pulls Belafonte’s Martin Luther King papers from NY auction
HAMILTON SPECTATOR - Three important papers related to Martin Luther King, Jr., consigned by the performer Harry Belafonte, including a handwritten draft of Dr. King’s 1967 anti-Vietnam speech estimated to be worth $750,000 to $1.3 million, were pulled from auction. The King estate alleges that Mr. Belafonte improperly acquired a collection of Dr. King’s papers; Mr. Belafonte argues that Dr. King and others legally gifted him these items.
December 10, 2008 - Dreier update: client funds missing, details on Dreier’s art collection
LAW - Marc Dreier, sole equity partner of the law firm Dreier LLP, may attempt to sell artwork from his personal and the firm’s collection to settle debts arising out of several civil and criminal cases. The collapse of Dreier LLP is expected to involve claims of loan defaults and former clients seeking a return of their escrow funds. The U.S. Attorney’s Office has already filed criminal charges against Mr. Dreier in tandem with charges brought by the Securities and Exchange Commission (SEC) for allegedly defrauding several hedge funds of over $100 million. The SEC has filed a temporary restraining order in the U.S. District Court for the Southern District of New York to freeze Mr. Dreier’s and Dreier LLP’s assets including all of the valuable artworks located at the firm’s headquarters in New York City.
December 8, 2008 - $235,500 demanded for Nazi-looted art
COURTHOUSE NEWS SERVICE - The 1991 buyer of a French cubist painting is suing Christie’s in U.S. District Court for the Southern District of New York for selling the painting, which was allegedly stolen during World War II from the Parisian art dealer Paul Rosenberg. The Rosenberg family has demanded return of the painting and Sotheby’s has refused to sell it. The buyer is seeking to recover the present value of the painting or the $235,000 purchase price plus interest.
November 27, 2008 - In Mexico, an ownership fight sends an art collection into hiding
THE NEW YORK TIMES - Natasha Gelman’s collection of Mexican art, including famous works by Frida Kahlo and Diego Rivera, is the subject of a title dispute in a Mexican court among Robert Littman (an American curator to whom Mrs. Gelman bequeathed by will all of her artwork), Jerry Jung (Mrs. Gelman's cousin who is challenging Mr. Littman’s handling and control of the collection) and Francisco Fuentes Olvera (one of Mr. Jung’s lawyers who purchased under Mexican law the succession rights to Mrs. Gelman’s estate from her half-brother). Last spring, Mr. Littman removed the Gelman collection from the Cuernavaca Museum to an undisclosed location. The parties continue to dispute inheritance and trust and estate issues under Mexican law and whether the lower court judge’s decision wrongly ignored applicable law. Simultaneously, a Mexico City prosecutor has filed criminal charges against Mr. Littman.
November 20, 2008 - Jail sentence for Memphis antique gallery owner who cheated consignors
AUCTION CENTRAL NEWS - The owner of a Memphis gallery, Crump-Padgett Antique Gallery, which filed for bankruptcy in June 2004 in U.S. Bankruptcy Court, has been sentenced to jail for not paying hundreds of clients (both collectors and dealers) for the sale of their consigned jewelry, antiques and other objects, as well as evading state sales taxes. Ms. Padgett owes creditors approximately $1.4 million but is only liable to restitute a fraction of that amount because liquidation of the gallery’s inventory did not satisfy all of the debts owed, and following Tennessee law, the state criminal court judge set restitution based on the defendant’s ability to repay.
[ARIS Commentary: With the weakening art market, it is inevitable that countless dealers and galleries will eventually seek bankruptcy protection. Consignors are increasingly at risk of having a total or partial monetary loss of their property. Cases so far have involved dealers and galleries who, once thought to be financially solid, sell consignors’ artworks before filing for bankruptcy and do not pay the consignors, leaving consignors to pursue remedies for theft and as unsecured creditors in bankruptcy proceedings. Often bankruptcy liquidation sales of galleries’ inventory – which according to bankruptcy law includes consignors’ artworks – fail to raise sufficient funds to fully repay creditors. In addition to placing the consigning owners at financial risk, purchasers who buy previously consigned works (sold by defunct or bankrupt dealers and galleries) are likely to face claims that the work is stolen property whose clear title cannot pass to the innocent buyer following the precedent of Frigon v. Pacific Indemnity Co., No. 05-6214, 2007 U.S. Dist. LEXIS 17813, (D. N.D. Ill. Mar. 14, 2007).]
November 20, 2008 - Court rules painting was ‘stolen’ by Nazis
THE PROVIDENCE JOURNAL - The First Circuit Court of Appeals has affirmed Rhode Island Chief District Court Judge Lisi’s decision to return a Winterhalter painting to the estate of Max Stern, a persecuted German Jewish art dealer. This case is historic because it is the first time a U.S. court has recognized that a forced sale is equivalent to a theft. It will be relied upon as legal precedent by future WWII claimants, as well as the Stern estate to pursue restitution of hundreds of other missing artworks.
November 20, 2008 - The fine art of surviving the crash in auction prices
THE WALL STREET JOURNAL - Over the past few weeks, prices of contemporary, modern and Impressionist artworks decreased by approximately 30%. In addition, the disparity in prices between average and exceptional works has greatly widened. The recent decline in the art market has caused auctioneers and dealers to institute changes to their business models, including making cutbacks to their organizations, seeking to sell only targeted, high-end artworks and putting the risk of sale back onto collectors by not offering guarantees.
[ARIS Commentary: Despite the burst of the art-market bubble, some commentators have suggested that the volume of art sales points to the strength of the art market as opposed to any weakness. There are opportunities for buyers to obtain reasonably priced art at auction or through galleries and dealer. As certain collectors, who have bought a particular artist in bulk or leveraged their collections take financial hits, exceptional artworks will also come to the market, many of which may not have been traded for decades. Buyers will thus have the opportunity to purchase reasonably priced, great artworks and structure sales transactions according to their own terms, including purchasing title insurance to ensure that they acquire clear legal title.]
November 14, 2008 - Suit proceeds against Christie’s auction house over fake Basquiat
LAW - A Supreme Court of the State of New York has allowed Mr. Guido Orsi – who purchased a fake Basquiat work for $185,000 from Tony Shafrazi Gallery, Inc. – to sue Christie’s under theories of fraud and fraudulent inducement. Mr. Orsi alleges that Christie’s listed the work in its February 1990 catalogue as an authentic Basquiat picture with the provenance “acquired directly from the artist” even though the Authentication Committee of the Estate of Jean-Michel Basquiat raised concerns about the authenticity of the work before the sale and had asked Christie’s to withdraw it. If Mr. Orsi prevails, the court indicated that the plaintiff could seek remedies under UCC §2-721 including damages for loss of profits, which could amount to $2 million (the current value of an authentic Basquiat painting), as well as punitive damages.
[ARIS Commentary: This case raises important issues about the relationship among authenticity, provenance and legal title to art. As some commentators suggest, see
The Art Law Blogspot - Fraud on the (art) market?, the case will have far-reaching legal implications because of the liabilities which auction houses and potentially other parties will have for giving private warranties of provenance and opinions of authenticity upon which subsequent purchasers in the chain of title may rely. Although there are legal differences between insuring title versus insuring authenticity, the fact patterns supporting legal title and authenticity are usually interrelated. A third-party guarantee of legal title through title insurance is the only true means to avoid the type of long-term title (provenance) related exposures this case highlights.]
November 13, 2008 - Lehman to sell $8 million of art to pay creditors
BLOOMBERG - Lehman Brothers Holdings, Inc., which filed for bankruptcy last month, plans to sell $8 million of its art warehoused in New York and Paris. As a means to stop art-handlers from seizing the art under New York and French law in order to satisfy overdue bills, Lehman has asked the U.S. Bankruptcy Court to allow Lehman to pay the $20,000 of unpaid handling and storage costs. Barclays PLC, which has acquired Lehman's North American division, holds a right-of-first-refusal lien on all of the artworks held in Lehman's former Manhattan headquarters.
November 10, 2008 - Artworks show up in Beverly Hills pawnshops
ARTINFO - High-end pawnshops in California have seen a surge in their business, including artworks signed by leading artists such as Picasso, Rauschenberg and Warhol. As in the real estate mortgage market, the pawn lending market has experienced decreased redemptions of loans and increased customer defaults.
November 4, 2008 - Auction season opens with little enthusiasm
THE NEW YORK TIMES - As anticipated by dealers, collectors and art advisors, the art market is showing signs of turmoil amid the global financial crisis. The important fall auction season began with mixed results. A handful of works sold above pre-sale estimates including Malevich's "Suprematist Composition," which sold for the record-price of $60 million under a pre-auction irrevocable bid. The majority of works sold far below their estimates, which were set this summer. Many other works failed to sell entirely.
[ARIS Commentary: Initial fall auction results suggest that select works will continue to sell at high prices but that buyers are more tentative in their decision-making process. The market also shows concrete signs that liquidity exigencies are taking hold on the sale-side of the auction market, especially for less than top-tier works, as sellers have become nervous about lukewarm responses to pre-sale estimates. ARIS has seen an influx of artworks in the market that have been used to bridge liquidity needs and are encumbered by a variety of traditional liens, as well as an increasing frequency of these works moving through the private sector, compounding title exposures to buyers.]
October 30, 2008 - Minneapolis Institute restitutes Leger painting
ARTINFO - After a decade of researching the WWII provenance of a Fernand Leger painting in its collection, the Minneapolis Institute of Arts has returned the work to the French heirs of the original owner, Alphonse Kann. The painting (worth an estimated $2.8 million) was bequeathed to the museum in 1961 by a patron who purchased it in the early 1950s from a then-leading gallery in New York. The restitution decision follows the museum's receipt of a claim for the painting in 1997.
October 6, 2008 - A collection of tribal art is embroiled in a modern family feud
THE NEW YORK TIMES - A New York court has ruled that Sotheby's may take possession of 54 works in the Jolika Collection that John Friede used as collateral to secure a $25 million loan from Sotheby’s. The New York court also placed a restraining order on 99 other works in the collection. The 4,000-piece Jolika collection worth $90 million is the subject of on-going litigation in Florida between John Friede and his two brothers and in California between John Friede and the de Young Museum of Fine Arts in San Francisco to whom John Friede allegedly gifted the entire collection.
October 1, 2008 - Wrangling over resales
ARTINFO - The use and enforcement of resale clauses in the contemporary art market are rapidly increasing. A relatively little known practice until recently, these clauses are incorporated into gallery or artist bills of sale for primary market transactions. The clause requires the buyer to offer the work back to the dealer or artist (some clauses are limited to a specific period after the primary market sale such as five or ten years) and prohibits the buyer from reselling the work in the secondary market unless the dealer or artist has first declined to exercise its right of first refusal. Dealers, artists, collectors and advisors hotly debate the merit of such agreements from a market-control standpoint.
[ARIS Commentary: The withdrawal of "Flower Ball Blood (3-D) V," 2007, by Takashi Murakami from auction at Christie’s London in June 2008 highlights the trend of using resale clauses and the risks which this trend poses to secondary market buyers (or possessors by other means of ownership such as by gift or descent) who, due to the non-transparent nature of the art market and existing transaction standards, will not know whether a resale clause is tied to the work and whether it has been honored. The Murakami case remains in litigation in a Tokyo District Court.]
September 23, 2008 - De Young Art Collection embroiled in family feud
ARTINFO - The 4,000-piece Jolika Collection is the subject of a title dispute between brothers (John and Robert Friede and Thomas Jaffe) and the M.H. de Young Memorial Museum. Courts in Florida and California have issued contradictory orders as to which brother owns the works and when the works can be sold. The museum alleges that it owns and acquired title to the entire collection through gifts from John Friede. Mr. Friede, however, who allegedly used the art as collateral for $30 million liens to his brothers, has said that he cannot sell or transfer any of the artwork until the IRS has assessed inheritance taxes owed.
September 22, 2008 - International stand-off over tribal art sale in Paris
ANTIQUES TRADE GAZETTE - The Mexican Embassy obtained a court order halting the auction in Paris of 85 lots of Pre-Colombian objects worth an estimated €5 million. The Mexican government alleges that the works were illegally exported from its territory. The auctioneer accused Mexico of acting in bad faith because almost all of the works came from well-known private collections with fully documented provenances.
September 21, 2008 - Beaverbrook saga goes back to court
THE GLOBE AND MAIL - The heirs of Lord Beaverbrook and the Beaverbrook U.K. Foundation are appealing a judge’s decision granting title to 85 of 133 artworks in Lord Beaverbrook’s hundred-million-dollar collection to the Beaverbrook Art Gallery. The title dispute focuses on whether the artwork was gifted or has been on loan to the gallery since the 1950s and 1960s. Litigation in the case has been on-going since 2006, and the parties have incurred over $5 million in legal costs.
September 15, 2008 - Who owns the artworks of Martin Ramirez?
MAINE ANTIQUE DIGEST - The estate of the artist Martin Ramirez (1895-1963) has filed suit in New York to recover 17 Ramirez works, which a therapist acquired 45 years ago while Ramirez was an adult patient in a California psychiatric hospital. The estate alleges pursuant to California law that no one, including specifically prohibited hospital personnel, could have acquired legal title to Ramirez works while he was involuntarily committed because he lacked the capacity to consent to gift or otherwise transfer his artwork. The therapist, who attempted to sell the works at auction in New York, has filed suit in California seeking a declaratory judgment to quiet title.
September 3, 2008 - Sotheby's sues CNET founder for $16.8 million in fees
BLOOMBERG - Sotheby's is suing Halsey Minor, the founder of CNET Networks Inc., for failing to pay $16.8 million for three paintings, including Edward Hick's "Peaceable Kingdom." Mr. Minor plans to file a counterclaim alleging that Sotheby’s failure to disclose its financial interest in the Hicks work affected the price. Ralph Esmerian had pledged it to Sotheby’s and Merrill Lynch as loan collateral, plus also promised to donate it to the American Folk Art Museum.
September 2, 2008 - Lorello pleads guilty
MAINE ANTIQUE DIGEST - A former state employee plead guilty to stealing thousands of historical documents and artifacts from the New York State Library and Archives. Following an investigation by the Attorney General, Mr. Lorello was ordered to pay restitution to buyers who unknowingly purchased stolen items from him on eBay or at collector’s shows and have returned the stolen items to the state.
August 26, 2008 - Lawsuit over disputed Warhol will go forward
THE NEW YORK SUN - A New York state court rejected John Chamberlain's request to dismiss a lawsuit filed by the former Warhol assistant, Gerard Malanga. The litigation raised questions about the legal title and authenticity of the painting known as “315 Johns.” The court found that the statute of limitations did not bar Mr. Malanga from seeking to recover the painting and/or punitive damages for the alleged $5 million dollar purchase price.
August 25, 2008 - A case of conflicting principles that's as good as gold
THE VANCOUVER SUN - A Canadian court divided title to five rare gold coins between the heir of the purchaser and the heir of the owner (who reported the coins stolen ten years ago) based on evidence of proof of ownership. The parties agreed to ignore the British Columbia law, which provides that good title passes when goods are sold in the open market, because all other Canadian provinces follow the legal principle that one cannot pass better title than one possesses.
August 19, 2008 - Ex-lawyer found guilty in stolen art trial
THE BOSTON GLOBE - A former Massachusetts lawyer was convicted of knowingly possessing six stolen paintings. Mr. Mardirosian stored his client’s stolen paintings in Switzerland for twenty years before agreeing to return (via intermediaries and a shell company) a Cezanne work in exchange for title to the remaining works. The parties dispute whether Mr. Mardirosian legally acquired title to the works in lieu of a finder’s fee or through illegal extortion.
August 18, 2008 - New Jersey makes claim for a Jefferson letter; collector sues for its return
MAINE ANTIQUE DIGEST - Last spring, a letter by Thomas Jefferson was pulled from auction after the Attorney General of New Jersey claimed it was a public record belonging to the state. Former President Jefferson’s letter dated 1807 was addressed to the New Jersey legislature. The consignor sued the auction house to release the letter but the auction house has refused to do so until the parties reach an agreement or a court issues a non-appealable order
August 8, 2008 - North board admits talks about painting's future are at impasse
THE SUN CHRONICLE - A small town in Massachusetts and the local school board disagree on who owns and whether to sell a Russian painting donated over fifty years ago. The donor's family has threatened to sue if the work (worth an estimated $1 million) is sold, even if the proceeds are used to fund school art programs. Officials acknowledge that the painting will not be sold anytime soon given the on-going dispute.
August 4, 2008 - Chief Nazi-loot researcher sees art claims mounting in Germany
BLOOMBERG - The lead German researcher (managing the German government’s agency tasked with helping museums address looted art claims) stated that he expects the pace of restitution claims not to slow down but rather to continue at the same pace over the next 10 years. During the Nazi regime, an estimated 650,000 works of art were plundered and displaced from their original owners.
July 22, 2008 - Estate is owner of stolen paintings
MUSEUM SECURITY NETWORK - A federal judge has ruled that three paintings by Courbet, Hamilton and Hassam stolen more than 30 years ago will be returned to the estate of the heirs of the original owner. The paintings were stolen by gunned robbers from Mrs. Persky’s Rhode Island home in 1976. The successor to the insurance company, which paid the insured for the theft claim, asserted title to the paintings. Other parties involved in the dispute included the estate of the heirs to Ms. Persky’s estate, the alleged good faith purchaser, as well as the lender who had possession of the works for 10 years.
July 16, 2008 - Authorities seize Ferreira collection Lichtenstein
ARTINFO - Federal agents seized a Lichtenstein work from a Los Angeles private collector, who purchased the work in 2007 for $1.3 million from a gallery who had the work on consignment from another local gallery. The painting is one of 30 works owned by Edemar Cid Ferreira (who recently went bankrupt in connection with the collapse of Banco Santos) and according to Brazilian officials is believed to have been illegally exported in a money-laundering scheme. The 2007 purchaser is suing the two galleries for breach of contract for the defective title and encumbrances on the work.
July 10, 2008 - Senate panel close to deal on donations of artwork
THE NEW YORK TIMES - The Senate Finance Committee has proposed amendments to try to loosen restrictions imposed in 2006 on "partial gifts." Partial gifts allow collectors to claim tax deductions for donated increments of artwork promised to be fully gifted over time. Proposed amendments include provisions: Making all partial gifts subject to binding contracts to prevent heirs from reneging on gifts after donor's death, giving collectors 20 years as opposed to 10 years to donate full ownership, permitting subsequent deductions on increased valuations rather than capping valuations at the first partial gift, and requiring the IRS Art Advisory Panel to approve appraisals.
July 5, 2008 - Art theft! Lawsuits! Spielberg!
LAS VEGAS SUN - Norman Rockwell’s "Russian Schoolroom," which was stolen in 1973 from Mr. Solomon, while it was on display at a Missouri gallery; purchased in 1988 at a New Orleans auction by Ms. Cutler; and then sold in 1989 to Mr. Spielberg, represents the inherent problems associated with private indemnities in art transactions. Mr. Solomon only listed the stolen work with the FBI. The New Orleans and Missouri auction houses are no longer in existence, both went bankrupt. Ms. Cutler claims to be a good faith purchaser. Costs in the legal case, involving title to the painting, have already exceeded the work’s current $700,000 value and the case is expected to continue.
July 4, 2008 - Private collectors hit by Nazi art claims
DUTCH NEWS - The NRC Handelsblad Dutch newspaper recently reported that private collectors, not just museums, are increasingly being targeted by claimants alleging that their family’s art was stolen during World War II. Most such collectors bought their art in good faith through regular channels. Since a work cannot be sold once it has been identified as “stolen,” collectors are being forced to return the work, reach a settlement, or litigate.
June 26, 2008 - Suit claims a Warhol is not, well, a Warhol
THE NEW YORK TIMES - Former Warhol assistant, Gerard Malanga, is seeking title to a painting previously thought to have been created by Warhol. Mr. Malanga claims that he and two friends created the work depicting Chamberlain in 1971. He also claims that he lost track of the work’s storage location and was shocked to learn from Mr. Chamberlain that he had sold the work for $5 million dollars in 2004.
June 26, 2008 - Betrayal, theft and a family feud in the art world
MUSEUM SECURITY NETWORK - Chicago police arrested the daughter-in-law of the late op-artist, Viktor Vasarely, for removing hundreds of Vasarely works from a gallery’s storage facility. Ms. Taburno-Vasarely insists the works belong to her and that she was protecting the works from the gallery owner, who was trying to sell them without her authority. Since 1995, the Vasarely heirs and foundation have been involved in litigation in France over title to the bulk of the artists’ works.
June 14, 2008 - A wake up call for the antiquities market
INTERNATIONAL HERALD TRIBUNE - The Association of Art Museum Directors’ June 2008 report has already impacted the art market. The guidelines encourage museums to only acquire an antiquity if they have solid proof the object was outside the source country by 1970 or was legally exported thereafter. In recent auctions, sales of antiquities with well-documented early provenances have grossly exceeded pre-sale estimates. Prices for such works are expected to continue to rise in the next three to five years.
June 8, 2008 - Why the rise of the private museum is rewriting the rule of the market
THE ART NEWSPAPER - Private collectors are increasingly buying art to build their own private museums. This new trend is changing the dynamics of art transactions. Dealers are now giving special access, discounts, and attention to those opening up independent exhibition spaces. Dealers noted, however, that they are mindful of conducting due diligence on private museum buyers, who might say anything to gain access to material or sell works from their collection in the future.
May 30, 2008 - Art deals more often involve art of litigation
LAW.COM - Lawyers are spending more time litigating disputes involving works of art. They attribute this trend to the increased prices for works, art deals spanning international borders and the growing number of new, well-funded collectors. The informal traditions of art transactions involving little more than a handshake are now deemed inadequate protection given the financials and litigious environment of today's art market.
May 22, 2008 - Search continues for Picasso etchings reported stolen from Gallery Biba
PALM BEACH DAILY NEWS - Thieves burglarized and robbed two well-known Picasso etchings from Gallery Biba in Palm Beach, Florida. The two stolen works, "Le Repas Frugal" and "Jacqueline Lisant," are worth an estimated total value of around $450,000. Police are investigating whether the thieves were familiar with the gallery’s layout and inventory.
May 22, 2008 - 19th century painting found in raid
CAPE COD TIMES - Police seized a 19th century painting by Robert Farren from a residential home in Cape Cod, Massachusetts. The homeowner, who is a building inspector, was promptly arrested and charged with two counts of receiving stolen property. Investigators discovered the painting during a raid to recover stolen coins and jewelry, but they believe the painting was part of the same heist. Officials are now attempting to identify the owner of the painting.
May 19, 2008 - Experts fall out over Van Gogh's 'last painting'
GUARDIAN NEWS - An alleged Van Gogh painting stored in a bank vault in Athens, Greece is the subject of an authenticity and title dispute. The picture, which might have been one of the artist’s last paintings, was looted by the Nazis from a French Jewish family and “liberated” by a Greek resistance fighter in 1944. Under Greek law, the work most likely belongs to the current possessor and not heirs of the original Jewish owners.
May 18, 2008 - Switzerland returns plundered Constable painting to Jewish family
EUROPEAN JEWISH PRESS - An art gallery in Geneva, Switzerland, is returning a 19th century painting by John Constable to the heirs of the Jaffe family. The picture entitled "Dedham from Langham" was confiscated from the Jewish collectors, John and Anna Jaffe, in Nice, France and sold at auction in 1943. It was donated by a private collector in the 1980s and has been exhibited at the gallery ever since.
May 1, 2008 - Esmerian kin claim antique jewelry collection isn't his to sell
BLOOMBERG - New York jeweler Ralph Esmerian’s sister and her four children are suing Mr. Esmerian claiming that the special jewelry collection that he pledged as loan collateral to Merrill Lynch is property of the family's trust. One of the most important pieces in the collection allegedly owned by the trust is a diamond brooch once owned by Napoleon III and recently purchased by the Louvre for $10.7 million.
April 24, 2008 - Malevich heirs reach amicable settlement with Amsterdam
ARTINFO - After years of litigation involving a long-standing dispute over whether the 1958 dealer had authority to sell the Russian avant-garde artist Malevich’s collection, the city of Amsterdam and the heirs of the artist have reached a settlement. The heirs will take title to five of the most important works and the rest will remain in the city’s collection.
April 21, 2008 - Put a diamond under stress, and you might crack
INTERNATIONAL HERALD TRIBUNE - Christie’s auction of Ralph Esmerian’s collection of rare jewels, which Merrill Lynch accepted as collateral for $177 million in loans, has been canceled. Mr. Esmerian disputed Merrill Lynch’s low valuation of the jewelry and has filed for bankruptcy, in the wake of breaking his promised gift of Edward’s Hick’s “Peaceable Kingdom” to the American Folk Art Museum to satisfy debts owed to Sotheby’s.
April 14, 2008 - Is street turmoil coloring art market?
THE WALL STREET JOURNAL - Art dealers remain cautious about the strength of the art market. Signs that it might be softening include the fact that Sotheby’s accounts receivables doubled in 2007, allowing buyers more time to pay for their purchases, and it along with Christie’s are still paying high guarantees to secure masterpieces and supply for their big sales.
April 9, 2008 - Should you invest in art?
VILLAGE SOUP - Art is an investment class, which has seen tremendous growth in recent years. However, there are numerous risks associated with holding art as an asset, including its subjective pricing, lack of short term liquidity, as well as complicated legal and tax issues related to estate planning and charitable gifting.
April 5, 2008 - Museum arranges to return stolen art to Italy
THE GRAND RAPIDS PRESS - The Grand Rapids Art Museum in Michigan is repatriating two Italian 14th century panels. The museum acquired the pair in 1947 from a reputable New York art dealer. An article published in 1978 first put the museum on notice that the panels were stolen in 1902 from a 16 panel altarpiece in a church in Abruzzo, Italy.
April 3, 2008 - At odds over art
THE NEW YORK SUN - The philanthropist Eli Broad’s decision to leave his art collection to a private foundation instead of the Los Angeles Museum of Art reflects the tension between museums and wealthy donors over whether donated works should be on public view and whether a donor’s collection should be kept together. Mr. Broad’s announcement illustrates the new trend in creating private family foundations that operate as lending libraries to museums and other educational institutions.
April 2, 2008 - France to cut red tape, provide free loans to revive art market
BLOOMBERG - The French Cultural Minister introduced reforms to increase France’s position in the global art market, which fell to fourth place behind China. She hopes her plan allowing guaranteed minimum prices and interest free art loans will also benefit private and corporate collectors.
April 2, 2008 - Art museums struggle with provenance issues
THE CHRISTIAN SCIENCE MONITOR - Across the country, art museums are struggling with how to handle the continuing problem of acquiring objects or receiving gifted objects, which may have been looted or smuggled and/or have gaps in their provenance history, especially in light of several recent high profile legal actions against museums.
April 1, 2008 - London dealer forced to return Souzas
THE ART NEWSPAPER - An English court ordered a London dealer to return two paintings worth £350,000, which had been missing since the 1990s. The judge found that the dealer failed to meet the burden of proof to establish that he was a good faith purchaser because he did not keep detailed or accurate records about the sales transaction.
March 26, 2008 - Scotland Yard seizes £10m old masters
GUARDIAN NEWS - Scotland Yard seized two works by an 18th century Italian artist worth £10 million, which were illegally exported from Italy without the necessary licenses for important paintings. The Crespi family sold the pictures in 2005 to an Italian dealer, who later sold them to an English dealer, who allegedly sold them to a US buyer.
March 21, 2008 - Mortgage crisis hits cultural institutions
LOS ANGELES TIMES - Several major cultural institutions in California, including the Los Angeles County Museum of Art whose losses are approaching $2 million, have mounting financial problems due to the sub-prime mortgage crisis and resulting soaring interest rates on construction bonds. In most cases, interest rates have more than doubled since 2007.
March 21, 2008 - Painting looted by Nazis is recovered by family of murdered Polish owner
TIMES ONLINE - A 17th century Dutch painting was pulled from a Christie's auction after it was discovered by the Polish Embassy in London that it was stolen from an antique dealer, who was murdered in the Warsaw ghetto. The heirs of the original owner and the consignor negotiated a settlement agreement and the painting is to be sold at Christie's next month.
March 20, 2008 - Art forgery operation broken up by FBI and Spanish police
GUARDIAN NEWS - Seven individuals, including art dealers from Italy, Spain and the United States, have been charged with creating and selling fake prints purportedly by Picasso, Miró, Dalí and Chagall. The international art forgery ring made around $5 million dollars in the sale of thousands of fake works, with fake certificates of authenticity, on eBay and in galleries, including some in Florida and Illinois, to thousands of collectors around the world.
March 19, 2008 - Russia votes to return looted stained glass to Germany
ARTINFO - The Russian lower house voted to return six 14th-century stained-glass windows that were taken from a German church by Russian forces during World War II. The upper legislative house and the president must still approve the bill. For decades, Russia and Germany have argued over what to do with artworks illegally looted during World War II.
March 17, 2008 - Monet, Rodin among masterpieces stolen near Paris, AFP says
BLOOMBERG - Five masked thieves robbed a French art dealer at gunpoint in his home in Le Pecq, west of Paris, France. The thieves took approximately 30 paintings by masters, such as Monet, Cezanne, Corot and Sisley and a sculpture by Rodin. According to police, it is the second time this dealer was robbed.
March 7, 2008 - Museum wants stolen Pissarro returned
ABC NEWS - The Faure Museum in Aix-les-Bains, France has asked a New York woman to return Pissarro’s ”The Fish Market,” which was stolen from its collection in 1981. The current possessor insists that because she bought it in good faith for $8,500 from a US dealer, she should be compensated for returning it.
March 6, 2008 - U.K. art report says 60% of February sale lots missed estimate
BLOOMBERG - ArtTactic, a U.K. research company, reported that 60% of lots from the February 2008 London contemporary art auctions failed to reach their minimum estimates, and ten lots accounted for 70% of total sales at Christie’s and Sotheby’s, which signals a slowing demand in the middle of the market.
March 4, 2008 - 'Peaceable Kingdom' painting by Edward Hicks leaves American Folk Art Museum
ANTIQUES AND THE ARTS - As a result of a lawsuit, Edward Hick’s painting "Peaceable Kingdom" will be sold by Sotheby’s in a private sale to satisfy the folk art collector Ralph Esmerian’s debts. Mr. Esmerian double pledged it as loan collateral to Merrill Lynch and Christie’s and promised to donate it to the American Folk Art Museum.
March 2, 2008 - Inflated art appraisals cost U.S. government untold millions
LOS ANGELES TIMES - IRS audits of museum donations and donors’ tax deductions revealed that the government lost $183 million from inflated appraisals in the last two decades. Experts believe that this represents a fraction of the problem with overvalued appraisals, whose frequency and inflated amounts have grown in recent years.
February 28, 2008 - Untouched by Nazi hands, but still...
THE WALL STREET JOURNAL - Two cases brought by leading museums in New York and Massachusetts may require the federal courts to address whether a "forced sale" involving some type of Nazi coercion is akin to a theft invalidating a current owner's title to their paintings. There is presently no legal definition of a forced sale, and at least two district courts in Ohio and Rhode Island have reached different conclusions about involuntary sales.
February 25, 2008 - Show it or sell it: Museums are urged to put unseen artefacts on the market
THE TIMES - A new policy for England’s museums and galleries will encourage the de-accessioning of artwork. Rather than keep works which are peripheral to a museum’s core collection, The Museums Association says that museums should sell un-exhibited works in their collections. Donors may dislike this policy change because many gifts were made assuming that they would not be sold.
February 23, 2008 - Ruling to come on art collection
THE NEW YORK TIMES - The fate of the Fisk University’s 101 piece art collection will be decided within 30 days. The court recently struck down the University’s $30 million dollar deal with the Crystal Bridges Museum of American Art to sell a 50% stake in the collection as going against the donor Georgia O’Keefe’s wishes. The court must now decide whether the University has forfeited its right to the collection and if so whether to return it to the artist’s estate.
February 22, 2008 - Stolen art turns up in Bristol
EAST BAY RI - Three long lost stolen paintings discovered in the home of a Bristol attorney have sparked a complicated dispute between the attorney, a Barrington art dealer, an insurance company, and the heir to the stolen paintings. The paintings were used as collateral for the attorney’s loan to his art dealer brother, who reportedly was unaware that the pictures were stolen in 1976.
February 11, 2008 - Art worth $163.2M stolen from Zurich museum
USA TODAY - Three masked men stole four oil paintings by Cezanne, Degas, Monet, and Van Gogh worth about $163 million from the E.G. Buehrle Collection in Zurich, Switzerland. There is a $90,000 reward offered for information leading to the return of these works stolen in Europe's second biggest art robbery ever.
February 8, 2008 - A Warhol surfaces and is headed for court
THE NEW YORK TIMES - A SoHo gallery is suing a Brooklyn man, who claims he purchased a Warhol painting at a flea market, to recover the picture, which was stolen from the gallery in 1998. Both parties have claimed title to the Warhol painting and intend to take their dispute to court.
February 7, 2008 - Russians reveal hoard of 46,000 art treasures stolen by Nazis
BLOOMBERG - The Russian government has published on a new website details about 46,000 art works that the Nazis looted from Russian museums during World War II. This information will help scholars, the art market, and law enforcement agencies locate Russia’s missing treasures, which are subject to title disputes.
February 4, 2008 - Tax scheme is blamed for damage to artifacts
THE NEW YORK TIMES - In addition to destroying archeology sites and illegally importing looted artifacts into the United States, the federal investigation of several California museums is focused on potential tax fraud violations. The IRS is investigating whether smugglers and dealers sold artifacts to their clients and then helped them arrange for inflated appraisals and for the items to be donated to museums for inflated tax deductions.
January 29, 2008 - The Russians are right to be nervous
THE TIMES - Russia agreed to participate in an exhibit now on display at the Royal Academy in London because the UK enacted immunity from seizure legislation. But the law may not serve its intended purpose of protecting Russia from claims for property appropriated during the Revolution. English courts are empowered to strike the law if it is deemed incompatible with property rights granted by the Human Rights Act and international law.
January 29, 2008 - Nazi victim's heirs lose patience with Sweden on art
BLOOMBERG - In Sweden’s first restitution case, the heirs of a Jewish businessman are seeking to recover a Nolde painting from Stockholm’s Moderna Museet. In July 2007, the Swedish government told the museum to resolve the claim in accordance with the Washington Conference Principles. To date, the parties have still not reached a settlement.
January 29, 2008 - A history buff uncovers thefts of american history treasures
THE NEW YORK TIMES - Since 2002, a New York state librarian has stolen hundreds of artifacts from the state’s collection and sold them at trade shows and on eBay, which does not guarantee the legality of items advertised or the ability of sellers to sell them.
January 24, 2008 - Fed agents raid California museums for looted artifacts
FOX NEWS - Federal agents raided four California museums searching for looted antiquities that were illegally imported from Southeast Asian and Native American sites. Authorities believe that Robert Olson and the owners of Silk Roads Gallery arranged for the donation of smuggled objects and inflated gift tax deductions for their clients.
January 24, 2008 - MFA sues to bolster claim to disputed 1913 painting
THE BOSTON GLOBE - The Museum of Fine Arts in Boston filed a declaratory judgment asking the court to name it owner of Oskar Kokoschka's 1913 painting "Two Nudes (Lovers)". The museum disputes Claudia Seger-Thomschitz's claim that her uncle, Oskar Reichel, sold the painting under duress in Vienna in 1938.
January 23, 2008 - Art raid swoops on Samsung camp
SHANGHAI DAILY - South Korean officials are investigating whether tens of thousands of paintings stored at Samsung warehouses were purchased using an illegal company slush fund.
January 18, 2008 - Collector returns art Italy says was looted
THE NEW YORK TIMES - After 18 months of heated negotiations, New York philanthropist Shelby White is the first private collector to agree to return to Italy 10 allegedly looted ancient objects, which she purchased in good faith. Italy may still pursue claims for other antiquities in her collection, which were not cataloged for The Metropolitan Museum of Art's 1990 exhibit.
December 19, 2007 - Russia cancels U.K. art show. Cites lack of guarantee
BLOOMBERG - The exhibition, “From Russia”, scheduled to open at London’s Royal Academy of Arts on January 26, 2008, has been cancelled by the Russian government after the British government failed to offer a legal guarantee of immunity from third-party confiscation.
December 7, 2007 - Museums ask New York federal court to reject claim on Picassos
THE NEW YORK SUN - The Museum of Modern Art and the Solomon R. Guggenheim Foundation have both asked a Federal District Court to declare them the owners of two Picasso paintings after lawyers for Julius H. Schoeps requested that the museums return the paintings.
December 6, 2007 - Sotheby's won't sell Salander works
ARTINFO - Sotheby’s, Inc. has filed a notice with the court withdrawing its bid to sell artwork connected to the Salander-O’Reilly Gallery. The withdrawal follows concerns of ownership, voiced by a committee representing the gallery’s unsecured creditors.
November 20, 2007 - Lloyd Webber Foundation wins dismissal of Picasso art lawsuit
BLOOMBERG - A New York Supreme Court Justice ruled that Julius Schoeps cannot sue the Andrew Lloyd Webber Foundation for restitution of a Pablo Picasso painting because Schoeps was not appointed to represent the estate of his great uncle, Berlin banker Paul von Mendelssohn-Bartholdy. Christie's was scheduled to sell the Picasso a year ago when Schoeps sued, claiming that the painting was forcibly sold by his great uncle. Christie’s had valued the painting at $40 million to $60 million at the time it withdrew the painting from auction.
November 19, 2007 - Robert DeNiro says gallery stole father’s paintings
NEW YORK POST - Lawyers for Robert DeNiro are planning to take legal action against Lawrence Salander and Salander-O’Reilly Galleries to recover twelve paintings by Robert DeNiro Sr. These painting were entrusted to Salander-O’Reilly Galleries by Robert DeNiro on consignment. The paintings were allegedly used by Salander-O’Reilly Galleries to settle a $5 million debt with Benucci S.R.L. in June of 2007.
November 6, 2007 - Salander case may change art market
THE NEW YORK SUN - The Salander-O’Reilly case draws mounting attention to the unregulated nature of the art industry and the significant limitations of the Uniform Commercial Code as a way to secure art transactions. Salander-O’Reilly Galleries, LLC, and its owner have filed for bankruptcy protection as a result of creditors having now filed more than fifty-three claims against the gallery and its owner totaling in excess of $43 million.
November 5, 2007 - Salander-O'Reilly Galleries owner files bankruptcy
BLOOMBERG - Lawrence and Julie Salander have filed for personal bankruptcy. Lawrence Salander is an owner of the Salander-O’Reilly Galleries LLC in New York. On November 1, 2007, creditors asked a judge to force the gallery into bankruptcy. Days later, the Salanders’ filed for bankruptcy, claiming over $50 million in personal debt, most of which is owed to other galleries and art institutions. New York prosecutors are also investigating the business operations.
May 19, 2007 - Spielberg faces new battle over Rockwell painting
THE WALL STREET JOURNAL - This past week, art dealers with earlier ties to the work went to court to claim it back. These new developments pit two art dealers -- both of whom claim ownership prior to Mr. Spielberg's acquisition -- against each other. That's throwing the fate of the painting into limbo.