A recent trial in the High Court in London has highlighted a few notable truths about doing business in the art world.

The trial centers around a commission allegedly owed to the famous Swiss auctioneer Simon de Pury, who claims to be owed a $10 million commission from the sale of Paul Gauguin’s 1892 oil painting “Nafea Faa Ipoipo (When Will You Marry)?”   There was no written agreement for the alleged commission and the deal took two years to complete.

The painting sold for $210 million in 2014, but was initially reported to have been sold for $300 million.  Had the painting been sold for $300, it would have been the most expensive sale known for a piece of fine art.

Indeed, from these facts alone, we can glean certain truths about art transactions.

First, art transactions are often done under a cloak of privacy, and the information that the public receives about the price of art may be incorrect.  With the disclosures made in the lawsuit, we now know that the sale of the Gauguin would rank third – not first —  in the highest grossing sales of art ever, behind Willem de Kooning’s 1955 painting “Interchanged” with a reported sale price of $300 million in 2016, and Cézanne’s “Card Players” with a reported sale price of $250 million in 2011, according to the New York Times.

Second, many transactions and the lucrative commissions that accompany them are often done on a handshake.  While this may be surprising to those who are unfamiliar with such transactions, the art world continues to operate on an old-fashioned, familiar basis.

Third, art transactions are often complex.  The two year time frame of this transaction reflects what was likely significant due diligence by the parties to the transaction, not surprising when one considers the amount of money at stake.

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.

 

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.

 

In an industry that lacks much in the way of regulation and heavily relies upon privacy, it is no surprise that the sale and transfer of fine art is one of the world’s most popular methods of money laundering. This article takes an in depth look at the world of art and money laundering and is worth a read.

One important question is whether an innocent purchaser or seller of laundered art has any right to receive back the work or the funds used in the sale of the work. Certainly a major concern would be if the art is forfeited by the government.   The artwork is then potentially subject to the criminal proceedings against the accused money launderer and a long delay in recovering either the work or the funds may be inevitable.  

Legal counsel is critical  in this situation in order to properly assert rights in the allegedly laundered funds or artwork as the process is detailed and complex.

The Los Angeles Museum of Contemporary Art is in a slump.  It has reportedly faced an exodus of board members and challenges raising money.

Now, according to this article in the New York Times, after exploring the potential for a merger to help with its finances, the the Museum appears to have decided to try to go it alone, releasing a statement on Tuesday announcing its intention to stay independent.

Apparently this  included a decision to reject a merger offer extended by the Los Angeles County Museum of Art.

Hopefully the museum will find better sailing in the days ahead, particularly as it is the only, or one of the only, major museums in the LA area dedicated to the exhibition of contemporary art.

 

A recent contemporary art auction at Sotheby’s in London brought in more than £74 million, which, according to the Huffington Post, is the auction house’s second-highest total for a February sale of contemporary art in London.

The sale of the auction included works by Andy Warhol, Mark Rothko and Francis Bacon.  According to the article, buyers from 14 countries participated in the auction, which also saw 14 works sell for over £1 million.

The highest amount for the evening’s sale was Francis Bacon’s oil on canvas triptych ‘Three Studies For A Self-Portrait’, which sold for £13,761,250, approximately dead center in the estimate of £10-15 million.

Raphael’s Portrait of a Young Man, looted by the Nazis in 1939 and missing since 1945, has been rediscovered in a bank vault in an undisclosed location.  The painting, which dates to 1513-1514 and is widely considered the most important work still missing since the war, was confiscated from the Czartoryski family collection in Krakow in 1939 for Hitler’s planned Führermuseum in Linz.  It disappeared shortly before the end of the war after it was taken by Hans Frank, Governor-General in occupied Poland, for his own personal use.

On August 1st a spokesman for Poland’s Ministry of Foreign Affairs’ Office for the Restitution of Cultural Goods told the Polish media, “Most importantly, the work was not lost in the turmoil of the war. It has not been burnt or destroyed. It exists. It is safely waiting in a region of the world where the law favors us.”  In a subsequent statement, however, the Foreign Affairs’ Office clarified: “Through a reliable source, we have known for some time that the [portrait] is in a bank vault in a certain country. But we do not know the exact location.”  A statement on the Ministry of Foreign Affairs’ website maintains: “We have no information as to where exactly the image is… however, we can confirm that [the ministry] continues to monitor all signals reaching us about the image’s location.”  Nevertheless, the Ministry of Foreign Affairs is confident the painting will be returned to Poland.

The oil painting was purchased by Poland’s Prince Adam Jerzy Czartoryski in 1789, together with Leonardo da Vinci’s Lady with an Ermine, which was also seized by the Nazis but was discovered by the Allies at the end of the war.  Since the war, the Czartoryski family has made consistent attempts to find Portrait of a Young Man, an effort that was renewed after the Cold War in 1991.

While the subject of the painting has not been identified, many art historians believe the work to be a self-portrait, as the facial features resemble those of Raphael as seen in the fresco The School of Athens, which also contains a self-portrait of the master.

(This entry was drafted with the assistance of Victoria Sears Goldman).

On July 26 federal investigators seized more than $20 million worth of Asian antiquities from Manhattan dealer and gallery owner Subhash Kapoor, who they suspect has been importing looted antiquities from India for several years.  The Manhattan district attorney’s office issued a warrant for Kapoor’s arrest on charges of possessing stolen property. 

 

Among the items seized from Kapoor’s Manhattan storage unit was a Chola bronze valued at nearly $2.5 million, as well as Buddha heads, statues of Hindu deities, and other bronze religious sculptures allegedly looted from temples in India.  Under India’s 1972 Antiquities and Art Treasures Act, no art object over 100 years old may be removed from the country.

 

Kapoor is currently in India, where he is being held on similar charges relating to the trafficking in illicit antiquities. He has been under investigation since at least 2007, when Indian authorities first asked U.S. Customs officials for assistance in tracking shipments to New York.  In some instances, Kapoor allegedly created false provenances for objects to cover up the fact that they had been stolen.

 

As is detailed in a New York Times article, authorities are asking American museums to check their inventories for items that were obtained from Kapoor.  In the case of the Metropolitan Museum of Art, the only listed provenance for such items is the date Kapoor donated them to the museum.

This article was drafted with the assistance of Victoria Sears Goldman.  (http://www.victoriasearsgoldman.com/)

According to the New York Times, Ileana Sonnabend’s heirs and the IRS will go to Court next month to debate the fair market value of an object that cannot be sold.

Canyon by Robert Rauschenberg includes a stuffed bald eagle, which is under federal protection by the 1940 Bald and Golden Eagle Portection Act and the 1918 Migratory Bird Treaty Act; the current owners would be committing a felony by selling it.  For this reason, appraisers have valued the work at zero.

Nevertheless, the IRS’s own Art Advisory Panel has appraised the work at $65 million and is requiring that the owners pay $29.2 million in taxes.  The work was valued by the IRS solely on its artistic value, without considering related restrictions or laws.

[This entry was drafted with the assistance of Nicole Dornbusch].