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Art Law

Recent Developments in Art Litigation and Art Finance

The Knoedler Gallery Litigation – Can Art Buyers Rely on Dealer Representations?

Posted in Art Authentication, Litigation Issues

The once renowned art gallery – the Knoedler Gallery – is embroiled in lengthy litigation out of the district court for the Southern District of New York involving an alleged forgery conspiracy. The Knoedler litigation places a spot light on the issue of caveat emptor/buyer beware and when there can be reasonable reliance on a dealer’s purported expertise and their representations regarding the authentication of a work.

In a recent twist, Ann Freedman, the gallery’s former director/president and defendant in the actions, has reached a settlement agreement with two of the plaintiffs, Domenico De Sole (the Chairman of Sotheby’s) and his wife, Eleanore, who purchased a fake Mark Rothko painting from Knoedler for $8.3 million in 2004. The De Sole action centers on, among other things, to what extent Freedman and others at Knoedler were aware of the suspicious provenance of the work. As a result of the undisclosed settlement agreement, it is expected that the De Sole action against Freedman will be dismissed. It has been reported that Freedman continues to maintain that she was fooled by the forged paintings.

The Knoedler Gallery (formerly known as Knoedler & Company), which operated in Manhattan from 1846 until its closure in 2011, was one of New York City’s most venerable and respected art galleries. A family business, the gallery was purchased by Armand Hammer, the grandfather of Michael Hammer (a defendant noted below) in 1971, and was operated by the Hammer family until it closed. Although a New York institution, Knoedler Gallery LLC, the gallery’s current legal entity, was formed in 2001 as a Delaware limited liability company.

Dating back to multiple complaints filed in 2012, the various actions involve a number of defendants associated with Knoedler, including:

  1. Knoedler Gallery, LLC (“Knoedler”);
  2. 8-31 Holdings, Inc., Knoedler’s sole member;
  3. Michael Hammer, Knoedler’s managing member and sole owner of 8-31 Holdings, Inc.;
  4. Ann Freedman, Knoedler’s former president (and director of gallery’s predecessor prior to 1994);
  5. Jaime Andrade, a former Knoedler employee who introduced Rosales to Knoedler;
  6. Glafira Rosales, art dealer and alleged supplier of forged art (default judgment has been entered in civil action)(Rosales was charged with conspiracy to commit wire fraud, wire fraud, conspiracy to commit money laundering, money laundering, subscribing to false tax returns, and failing to file reports of foreign bank and financial accounts. United States v. Rosales, 13 Cr. 518 (KPF) (S.D.N.Y.); and
  7. Jose Carlos Bergantinos Diaz, supplier of forged art (default judgment has been entered in civil action).

The various actions assert a variety of claims including, inter alia:

  1. Racketeer Influenced and Corrupt Organizations Act (“RICO”);
  2. fraud;
  3. fraudulent concealment;
  4. aiding and abetting fraud;
  5. conspiracy to commit fraud;
  6. breach of warranty;
  7. unilateral and mutual mistake; and
  8. alter ego.

By way of background, Knoedler acquired paintings from Glafira Rosales, a Long Island art dealer who allegedly had a reputation for selling Abstract Expressionist artists including Mark Rothko, Willem de Kooning, and Jackson Pollock.  Over a fifteen year relationship, Rosales provided Knoedler with forged art under the guise that the works were previously “unknown” works by famous artists. However, the art was actually forgeries made in Queens, New York, by Pei-Shen Qian, who has fled to China amidst charges of conspiracy, fraud and making false statements.  Based on misstatements from Rosales, Knoedler allegedly fabricated misleading provenance information on invoices. For example it has been reported that one invoice stated as follows:

Provenance & Exhibition History
Acquired directly from the Artist in the early 1960’s.
Private Collection, Mexico and Switzerland.

Further, in court pleadings it has been noted that one of the invoices even stated that the Rothko is “[t]o be included in the forthcoming catalogue raisonne: Mark Rothko: Works on Paper, by David Anfam, (London: Yale University Press).” However, as it has now been revealed, none of this information was accurate.

In a 2015 memorandum opinion and order [S.D.N.Y. Case No. 1:12-cv-02313-PGG, Docket No. 262; filed 10/09/15], the district court noted that it was an undisputed fact that all of the paintings Rosales brought to Knoedler were forgeries.  Specifically, in a footnote the district court noted that the undisputed facts were derived in part from the parties’ Local Rule 56.1 statements because the opposing party had either not disputed those facts or had not done so with citations to admissible evidence. See Giannullo v. City of New York, 322 F.3d 139, 140 (2d Cir. 2003) (“If the opposing party . . . fails to controvert a fact so set forth in the moving party’s Rule 56.1 statement, that fact will be deemed admitted.”) (citations omitted). The court further noted that where the plaintiffs disagree with defendants’ characterizations of the cited evidence, and have presented an evidentiary basis for doing so, the court relied on the plaintiffs’ characterization of the evidence. See Cifra v. Gen. Elec. Co., 252 F.3d 205, 216 (2d Cir. 2001) (court must draw all rational factual inferences in non-movant’s favor in deciding summary judgment motion).

The plaintiffs maintain that the Knoedler defendants had reason to doubt the authenticity of the Rosales Paintings. Further, the plaintiffs allege that despite knowledge of the fraud, the Knoedler defendants continued to sell the Rosales Paintings to unsuspecting clients until 2008. Each defendant’s state of mind, knowledge, and intent are questions to be determined by a jury.  However, after lengthy testimony on Tuesday regarding the lavish spending of Knoedler owner, Michael Hammer, the trial was paused amid speculation that a potential global settlement may have been reached. The trial has included testimony of a number of renowned art experts and has demonstrated the importance of expert witnesses in art litigation.  It will be interesting to see whether the jury will make its determination or if settlement discussions will halt this process.

Is The Art World In For A Challenging 2016?

Posted in Art Finance

News media reports that 2016 may be a challenging year for the art world.  Christie’s and Sotheby’s, the two largest international auction houses, recently released their 2015 results.  Each auction house reported a decrease in year-over-year sales with 2015 the first year since 2010 in which Christie’s and Sotheby’s were unable to yield an increase.

London-based Christie’s reported auctions and private sales of about $6.8 billion in 2015 (down by about five percent from 2014) while New York-based Sotheby’s reported nearly equivalent sales of about $6.6 billion in 2015 (down by about one percent from 2014).

While the above figures do not signal a “burst bubble”, they do hint that this year is going to be a challenging one for the art world and reflect the volatility going on throughout the world.

In particular, cautious owners have become increasingly hesitant to sell their high-value works in a downturn.  This is evidenced by Christie’s and Sotheby’s upcoming London auctions this month of Impressionist, Modern, and Contemporary Art, which are smaller with lower estimates than same such events at this time last year.

As investment-conscious buyers become anxious about spending significant amounts of money on art works by less established artists, the so-called new category of “20th-century art” now appears to dominate the art market.  Christie’s and Sotheby’s both used this new category to promote their respective February auctions.

It appears that “rediscovered” instead of “discovered” talent in the art world is going to be “a recurring theme of a bearish 2016.”  Only time will tell.

 

 

Gagosian Gallery And Qatar Royal Family’s Agent In Dispute Over Ownership Of Prized Picasso Sculpture

Posted in Art Museums, Litigation Issues

As recently reported by the International New York Times, prominent art dealer Larry Gagosian of the Gagosian Gallery and the royal family of Qatar’s agent, Pelham Europe, Ltd. (run by Guy Bennett), each claim that they purchased Pablo Picasso’s work of a 1931 plaster bust of his French muse/mistress Marie-Thérèse Walter, which is currently featured in the Museum of Modern Art’s (“MoMA”) Picasso Sculpture exhibition running through February 7, 2016.  In each case, Picasso’s daughter Maya Widmaier-Picasso was the seller.

The sculpture is considered a significant work from a highly creative time in Picasso’s life in which the “evolution of a new erotic style of curves and exaggerated forms” were inspired by his muse/mistress Walter.

Earlier this week, the Gagosian Gallery filed a lawsuit in federal court in Manhattan against Pelham Europe, Ltd. claiming that Gagosian purchased the bust in May 2015 for about $106 million from Widmaier-Picasso, and in turn sold it to a non-disclosed New York art collector who is expecting to receive the bust after the close of MoMA’s “Picasso Sculpture” exhibition in early February.

However, in its court documents, Pelham Europe, Ltd. claims that it secured an agreement with Widmaier-Picasso to purchase the bust in November 2014 for about $42 million.

The conflict reveals the

stubbornly elusive nature of an increasingly competitive art market, in which deals are made behind closed doors and ownership can be ambiguous.”

The case is reportedly complicated by the nature of Picasso’s family, which includes a number of family members (i.e., wives, muses, children and grandchildren) who have fought over the famed artist’s valuable works, and on a number of occasions sold off the works, throughout the years.

According to Artnet, Picasso’s total fine art sales in 2015 were over $652 million and surpassed Andy Warhol for the year.

In the recently filed suit, the Gagosian Gallery is requesting a judge to “quiet” any challenges or claims to its title of the bust and declare it the rightful owner.

Experts remark that this dispute between a dealer and a collector “casts a shadow over a prized piece of art history.”

For further background on the dispute, click here.

[The suit is Gagosian Gallery, Inc. v. Pelham Europe, Ltd., Case No. 1:2016cv00214, U.S. District Court, Southern District of New York (Manhattan)].

Degas Exhibition Closing This Weekend At The Toledo Museum Of Art

Posted in Art Museums, Current Art Exhibits

TMA

During my recent visit back home to the Toledo, Ohio area for the holidays, I had an opportunity to take in the “Degas and the Dance” exhibition with my family just in time before it ends on January 10, 2016 at Toledo’s world-class art institution, The Toledo Museum of Art.  If you happen to be in Northwest Ohio (or the Midwest for that matter) and cannot seem to ever see enough of Degas’ works on the subject of dance, I highly recommend this well curated exhibit.

French Impressionist artist Edgar Degas (1834–1917) studied dancers late in his career, yet ballet imagery (in sculpture, paintings, pastels, prints, and photography) comprises more than half of his body of art work.  The exhibition is presented in honor of The Toledo Ballet’s 75th annual performance of “The Nutcracker” and includes a selection of memorabilia and costumes from the ballet.  Visitors are also welcome to learn the art of ballet for themselves in a ballet studio set up in the exhibition space.

For additional information on this immersive exhibition experience, click here.

Best wishes for a Happy New Year 2016 to all of our Art Law blog readers. We thank you for your continued readership of our blog.

Art World Controversy: Authentic Leonardo da Vinci Drawing Or Not?

Posted in Art Authentication, Art Valuation

An intriguing story recently ran in the International New York Times in which it was reported that a drawing known as “La Bella Principessa” owned by Canadian art collector Peter Silverman and purchased for around $20,000 in 2007 may or may not be an authentic long-lost masterpiece by Leonardo da Vinci potentially worth up to $150 million.

The art world controversy surrounding the drawing involves a newly developed twist with Shaun Greenhalgh, the infamous British art forger who is “thought to have created fakes that spanned centuries of art history”, now declaring it to be his work.

Greenhalgh was sentenced to over four and a half years in prison on forgery-related charges back in 2007 and was responsible for a number of “well-documented fakes”, such as a Guaguin sculpture of a faun purchased by the Art Institute of Chicago and an Egyptian alabaster sculpture of a princess purchased by the Bolton Museum.

The story of “La Bella Principessa” and its attribution began in January 1998 when New York art dealer Kate Ganz purchased a “head-and-shoulders study of an aristocratic young woman”, viewed in profile and dressed in the Italian Renaissance style, for nearly $22,000 (with fees) at Christie’s in New York.  The drawing was created in pen, ink, chalk and watercolor on vellum, and was cataloged by Christie’s as “early 19th century, possibly German.”

In January 2007, Ganz sold the drawing described as “based on a number of paintings by Leonardo da Vinci and may have been made by a German artist studying in Italy” to current owner Silverman for the above original purchase price (less a dealer’s discount).

In June 2008, a company in Paris specializing in digital scanning, Lumiere Technology, announced that its analysis of the drawing had determined that the work was by da Vinci.  Thereafter, the work was valued at £100 million by London art dealer Dickinson, who offered the drawing for purchase to select clients.

In October 2009, a Dickinson adviser declared the work an authentic da Vinci in an article published in The Times of London.  In addition, the attribution has been endorsed by at least six da Vinci scholars.

As an authentic da Vinci, the drawing has yet to win over the art world.  Notably, the work has not been exhibited in any major art museum and it was excluded from the landmark exhibition entitled “Leonardo da Vinci:  Painter at the Court of Milan” at the National Gallery in London running from November 2011 to February 2012.

Most recently as of last week, Kasia Pisarek, an independent art historian specializing in attribution, was the latest scholar to make a case that “La Bella Principessa” is not a da Vinci.  In her paper presented at a London conference, Pisarek went through a checklist of apparent “inconsistencies”—i.e., lack of any documentation or copies, presence of just three stitch-holes in the side of the vellum sheet, and anatomically incorrect quality of the drawing itself.  Pisarek concluded that “the present attribution to [da Vinci] must be deemed unreliable.”

As for the current whereabouts of the controversial drawing, it is being held at the Geneva Freeport storage warehouse and is not currently available for purchase, according to Silverman, who mentioned that he had been offered $60 million for the drawing in 2012 but had turned down the offer.  Silverman said that he would like “the drawing to be shown all over the world so that people can decide for themselves.”

Depending on which account one believes, it can be summed up that “La Bella Principessa” is either an authentic da Vinci worth in the multi-millions; a 19th-century Italian Renaissance style drawing worth in the tens of thousands; or a modern era fake worth barely anything.

 

 

 

 

Is There a Link Between Art Sales and Stock Market Performance?

Posted in Art Finance, Art Valuation

Inc. Magazine suggests there is.

Earlier this year, Sotheby’s and Christie’s had record art sales, each selling $1 billion worth of paintings and sculptures over the course of a week.  Now art sales are in decline, as demonstrated by Sotheby’s recent struggle to meet its minimum sales level of $375 million during its old master and modernist auctions.

“While the rarefied art world may seem like it’s worlds away from the concerns of your own company, you probably want to pay attention. Not only may the paintings and sculpture you bought now fetch less money, but your own company’s value may soon slide as well.”

Inc. identifies a “tenuous” link between art sales and stock market performance, and suggests that the “hype cycle” that has increased valuations for everything from technology startups to modernist paintings is coming to an end.

Entrepreneurs are warned that this may be a sign take a more sober approach to their businesses, as the “changing winds of the art market may further signal a retrenchment in the economy.”

“The big lesson is that you shouldn’t let over-inflated valuation expectations interfere with your exit plans, which could include a sale or plans to go public.”

Read the article here.

Theft: 17 Artworks Stolen From Verona Museum

Posted in Art Museums, Art Recovery/Theft

The New York Times recently reported the theft of 17 paintings taken from the Museo di Castelvecchio, a museum located in Verona, Italy that is known not only for its artworks, but also for the historical and architectural value of the building that houses its collection.

Four men forced their way into the museum, disarmed the guard, and removed the 17 paintings that included works by Andrea Mantegna, Peter Paul Rubens, and Jacopo Tintoretto.  The estimated the total value of the stolen artworks is between $10.7 million and $16 million.

Italy’s specialized art theft police force is leading an investigation.  Read more here.

Bruce Mau: Winner of the Design Excellence Award

Posted in Art Museums, Current Art Exhibits

This year, the Philadelphia Museum of Art awarded the Design Excellence Award to Bruce Mau.  According to the Museum, “Mau is internationally recognized for his achievements in design, including visual identities, brand systems, books, packaging, and exhibition graphics.  His most recent work applies design tools and concepts to environmental, social, economic, and political problems.”

According to Newsworks, “Mau has made a successful career not so much designing objects . . . but crafting social reaction.  He is a champion of geodesign, an emerging field wherein designers take on social, political, and urban issues by applying design principles.  Mau has been hired to improve corporate branding, workplace culture, even whole countries.”

Read more about Bruce Mau here.

Mau’s innovative work is featured at the Philadelphia Museum of Art’s Perelman Building through April 3, 2016.  Read more about the exhibit “Work on What You Love: Bruce Mau Rethinking Designhere.

mau_GS9

(Photo credit: Philadelphia Museum of Art)

Paris Museums Reopen To Visitors This Week

Posted in Art Museums

As recently reported by The Art Newspaper, museums in Paris reopened their doors on Monday afternoon following a moment of silence in honor of the victims of the tragic, terrorist attacks last Friday.  The city’s network of 14 municipal museums is set to return to its normal Tuesday to Sunday operating schedule as of today.

The French Ministry of Culture held an emergency meeting with senior culture representatives over the weekend and is assisting institutions to strengthen security measures “on a case-by-case basis”.

We would like to extend our sincere condolences to the families of the victims and the people of France who remain in our thoughts during this difficult time.

Modigliani Painting Sells For $170.4 Million At Christie’s Auction

Posted in Art Valuation

As reported by the International New York Times, a painting of a reclining nude woman entitled “Nu Couché” (1917-18) by early-20th-century Italian artist Amedeo Modigliani sold for $170.4 million with fees this past Monday evening at Christie’s well attended “Artist’s Muse” themed auction in New York.  The buyer is businessman Liu Yiqian, who is among China’s most well-known billionaire art collectors.  The painting sold in nine tense minutes with six people bidding to win the desirable lot.  It was the second most expensive art work ever sold at auction.

Modigliani’s painting was the star lot around Christie’s Monday evening auction, which was designed to attract international buyers of the world’s highest priced art.  Modigliani nudes are regarded as “among the ultimate trophy paintings of the 20th century.”

It was reported that Monday evening’s sale of “Nu Couché” propelled “Modigliani into the $100 Million at Auction Club, whose members include Picasso (three times), Bacon, Giacometti (three times), Warhol and Munch.”

The seller of the Modigliani painting was guaranteed at least a $100 million minimum price.  Monday evening’s sale of 34 lots at Christie’s fetched an impressive $491.4 million.