Last month, Sotheby’s sold the art collection of former jeweler to the stars, art collector and former chairman of the Folk Art Museum in New York City, Ralph O. Esmerian. Fetching $13M USD, the sale has been reported to be the highest for any American folk art collection. As reported in a previous blog post, Esmerian is currently serving a six-year prison term for wire fraud, bankruptcy fraud and other charges relating to the bankruptcy filing of the Manhattan based luxury jewelry retailer, Fred Leighton Holding Inc. In connection with the bankruptcy proceeding, the auction net proceeds (approximately $10.5M USD) will be used to pay Esmerian’s many creditors.
This case demonstrates the need to conduct due diligence in every transaction!
When contemplating an extension of credit, lenders must determine whether the potential borrower has clear title to the work by first researching provenance and checking the Art Loss Register. The lender must also conduct a search under the Uniform Commercial Code (UCC) in the state in which the potential borrower resides (or if the borrower is an entity in the state of organization/incorporation) to determine whether another party has a prior perfected lien on the work.
Further, lenders cannot rely on the potential borrower to provide accurate information regarding their financial state. The lender must consider the potential borrowers financial wherewithal as a whole – i.e., the borrower’s cash flow or ability to pay back the loan because the goal is not to liquidate the asset but rather use it as collateral for the loan. Once credit is extended, lenders should take immediate steps to file a UCC Financing Statement (UCC-1), which identifies the specific work(s) of art. The UCC-1 puts all on notice that the lender possesses a secured interest in the work. As we have seen in previous cases such as the Renoir’s “Paysage bords de Seine” (On the Shore of the Seine) that was recently returned to the Baltimore Museum of Art, buyers of art should conduct the same due diligence as a lender when contemplating a purchaser of art.
With the much anticipated recent release of Skate’s Annual Art Investment Report for 2013 – Part 1, Skate’s Art Market Research analyzes the art market’s top segment through its proprietary rating, referred to as Skate’s Top 5000, which includes the 5,000 most valuable artworks sold at public auctions throughout the world over the past nearly thirty years. Through its analysis of the results from premium art auction sales, Skate’s emphasizes the most significant trends in the commercial art world and addresses various key art market areas in the current report, including as follows: (1) the global state of the premium art market; (2) art trading results for 2013; and (3) the most notable achievements by individual artists at auction.
Skate’s also has the ability through a unique tool to track repeat sales of artworks appearing at auction more than once. This makes it possible for Skate’s to measure the financial performance of these artworks to determine the most liquid artists as well as the best and worst investment performers on the art market.
In the opening of the current report, Skate’s succinctly notes in pertinent part: “2013 will be remembered and cherished by global art market observers as a year that repeatedly proved that there are no boundaries when it comes to the value of art. Auctions continued to test the market and push bidders, with higher estimates resulting in even higher sales prices. The past year became a turning point for many artists’ markets with new records being set. This was particularly the case with contemporary art.”
A notable mention regarding artist performance in the premium segment in 2013 is Pablo Picasso, who is supported by “unwavering demand and a constant supply of works for public auctions,” and “continues to increase his share in Skate’s Top 5000, which leaves virtually no chance for another artist to exceed his current USD 3.5 billion in total market capitalization (based on the cumulative value of works selling above the rating’s threshold price of USD 2.6 million).”
Now that is some noteworthy and impressive artist performance last year. Let’s see if this trend continues in 2014.
The well-known art collector and financier Asher Edelman has instituted a lawsuit in Manhattan claiming that his firm, ArtAssure, was fleeced of over $200 million arising out of an allegedlly fraudulent art transaction.
ArtAssure claims that it was fraudulently induced by the Swiss firm Artmentum to believe that Japan’s Hiroshima Art Museum was trying to sell approximately $400 million in art by masters such as Picasso, Renoir, Monet, van Gogh and Matisse. The complaint alleges the art was not for sale, and that the claims that the Hiroshima museum works and the Japanese government owned the majority interest in Hiroshima Bank were false.
An interesting legal issue will involve the damages, and whether ArtAssure is entitled to damages if the sale was never consummated. However, one should not underestimate Mr. Edelman who, among other things, is known for teaching a course called “Corporate Raiding – The Art of War” at Columbia using Sun Tzu’s The Art of War as his textbook.
The Detroit Institute of Arts (DIA) has pledged to contribute $100 million towards a fund established by private foundations and the state of Michigan for the safeguarding of the DIA’s art collection and city pension funds. The goal of the fund is to reach a settlement with pensioners and avoid protracted litigation. As a key part of the proposed settlement, the DIA would acquire full title to the art and the building. However, even if pensioners agree to accept the proposed settlement in the amount of $820 million, the bankruptcy court must allow the pensioners to be paid ahead of other unsecured creditors.
George Clooney’s new movie, The Monuments Men, starring Clooney, Matt Damon, and Cate Blanchett, celebrates the legacy of the men and women tasked with recovering and safeguarding Europe’s greatest cultural and artistic treasures during World War II.
The movie, scheduled to debut February 7, 2014, is based on Robert Edsel’s 2009 book, The Monuments Men: Allied Heroes, Nazi Thieves and the Greatest Treasure Hunt in History. In conjunction with his writing, Edsel established The Monuments Men Foundation, which seeks to complete the Monuments men and women’s mission to locate all stolen and lost treasures from war torn Europe during WWII and its aftermath. In particular, the foundation seeks to encourage art connoisseurs and institutions to heed the American Association of Museum’s guidelines with respect to Nazi era provenance.
As a theme throughout the book and movie adaptation (of which Edsell is an active producer), Edsel poses the question – is art worth a life? As a parent, I can say “no” without hesitation because I would not want my sons or daughter to sacrifice their safety for an object no matter what the circumstances. But as a novice art historian, I am certainly grateful to the Monuments men and women who worked so feverishly to safeguard our historic treasures and to preserve them for generations to come. We are all fortunate to get the opportunity to enjoy the works of art that have been preserved. Only by preservation, and the juxtaposition of the old and the new, can one fully appreciate the impact these cultural treasures have had on the evolution of fine art and sculpture today.
As a follow-up to my previous post, based on the overwhelming evidence submitted by the Baltimore Museum of Art (“BMA”) regarding the 1951 theft of a small Renoir, the U.S. District Court for the Eastern District of Virginia concluded that the Impressionist gem painted on a napkin had to be returned to the BMA as the painting’s rightful owners. The Court opinion turned on whether there was sufficient evidence that the small painting had in fact been stolen from BMA because, as the Court noted, “even a bona fide purchaser for value cannot acquire title to stolen goods.” This case highlights that provenance is key! Assuming that the report that Ms. Fuqua purchased the painting at a flea market for $7 is true and accurate, then Ms. Fuqua must be thankful that she only spent a couple of bucks on the item rather than the tens of thousands it is reportedly worth. All buyers of fine are advised to gather as much documentary evidence from the seller at the time of purchase and to keep receipts and any other documentation to show when, where and how the item was acquired in case a dispute over title arises.
Artnet recently compiled a well curated list of “New York City’s Top 5 Immersive Shows of 2013.” Immersive exhibits in New York were especially popular this past year with such exhibits appearing everywhere from galleries and museums to the streets. This article presents a fascinating summary of immersive artwork from this past year. I am looking forward to experiencing some of this immersive art for myself in 2014.
Michael Ovitz, well-known as a former Disney executive and co-founder of Creative Artists Agency, as well as a prominent art collector, has sued a Los Angeles gallery. In the lawsuit, Ovitz claims that the gallery sold two pieces of art Ovitz consigned to it but did not pay Ovitz the proceeds in an amount of approximately $1 million.
Ovitz alleges that Perry Rubenstein Gallery improperly sold two of his works by contemporary American painter and photographer Richard Prince. In particular, Ovitz alleges that the gallery represented to him that it sold the 2006 Prince work “Untitled (de Kooning)” in May but withheld proceeds of the supposed sale, and also the gallery sold Prince’s 1992 work “Nobody’s Home” for less than an agreed upon amount and has not given Ovitz the proceeds from the sale.
The lawsuit claims the gallery’s conduct is “self-dealing that can only be described as Byzantine.”
Interesting look here at the other side of the art fraud world. Forged works often make their way to the market, fooling even the most sophisticated investors and purchaser, but often the HOW the forged work becomes created is not examined.
In the article, Pei-Shen Qian, a Chinese national living in the U.S. discusses creating dozens or more forged works. Qian made artworks that were dead ringers for Pollocks and Rothkos, but claims that he did not know he part of a massive fraud.
There are now numerous lawsuits pending over the works including filings against the gallery that sold the works as well as its former president. According to the article, the plaintiffs include Domenico De Sole, chairman of Tom Ford International; Nicholas Taubman, the former chief executive officer of Advance Auto Parts; and a trust for the Hilti family, of the Liechtenstein-based machinery and toolmaker Hilti.
This is testament to the level of deceit that can accompany the purchase and sale of fine art, and, yes, the “talent” of the forger.
As recently reported in this article, earlier this week at Christie’s Postwar and Contemporary Art sale in New York, a 1969 painting by Francis Bacon entitled “Three Studies of Lucian Freud” fetched $142.4 million. This week’s sale of the Bacon painting sets a new world record for most expensive artwork ever sold at auction. Edvard Munch’s “The Scream” set a prior world record when it was sold for nearly $120 million at Sotheby’s in 2012.