Infamous Piracy: How the Lucrative Market for Forgeries is Transforming the World of Fine Art

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2014-07-30

By Emma Kleiner

Stories of art forgeries capture the public’s imagination in a singular way: fascination centers upon the art itself and the disbelief that collectors, galleries, and professionals could have been misled by a fraud. Today, the expanding and profitable international art market has a correspondingly lucrative market in art forgery. While there have always been ways for forgeries to enter the art market, today’s forgery market is enlarged by the ease of creating fake masterpieces coupled with the multitude of sites where fakes can be sold—at auction, through galleries, or online. The negative publicity generated by any involvement with fine art forgeries is usually enough to steer away potential buyers or admirers; however, in a small set of cases the hoaxes or forgeries themselves become well-known in their own right and take on an infamy of their own. While no centralized national or international system for analyzing how to best regulate the art market exists, the recent strands of art forgery cases around the globe offer policy considerations to help eliminate the market for forgeries.

The art market has rebounded almost to its 2008 pre-crisis level. In 2013, the international art market registered sales of $64.5 billion, which was “close to its highest ever recorded level.” However, buyers are wary of collecting unfamiliar artists, and art purchases have largely focused on household names such as Francis Bacon, Andy Warhol, and Yves Klein. The lucrative art market creates a market ripe for talented forgers, who view art forgery as a very profitable enterprise. Based on a number of recent incidents, it appears that successful art forgeries are easier than ever to execute, with wealthy collectors eager to believe in, and ready to fuel, the high prices commanded by art masterpieces. Just recall the now defunct Knoedler Gallery, which closed in 2011 following the discovery that the gallery had sold $63 million of fakes. Although Ann Freedman, the gallery’s former president, insisted that she had no knowledge that she was selling forged modern classics, there were basic elements that should have alerted her to that fact. In one painting the signature was visibly spelled incorrectly: the painting was signed “Pollok” instead of the correct spelling of “Pollock.” Even so, the painting, which was purchased by the gallery for $230,000, was eventually sold to a Wall Street executive for $2 million.

With the new era of online art retailers, the art forgery market is becoming even more decentralized and easily profitable. In June 2014, John Re, an East Hampton painter, was arrested after netting $1.9 million selling forged Jackson Pollock paintings to private collectors and online through eBay. This forger used shell bidders to drive up prices of the fakes on eBay while assuring bidders that his paintings were “real.” Similarly, British amateur artist Geoffrey Spilman was arrested last year after selling forged modern masterpieces on eBay. Consequently, Spilman was banned for life from eBay. These events highlight the issue that the art market is quickly moving online. Online buyers may present an easier target for forged artwork due to the lack of pre-auction previews, the absence of quality records, and the awareness that auction experts did not vet the pieces. This new area of selling and buying art necessitates strong guidelines for digital art markets.

The abundance of art forgeries sold at auction, online, through galleries, and by private collectors has created a ripple effect in the art market. The repercussions of buying and selling fakes are beginning to be reflected in the management and practices of artists’ reputations and foundations. A recent trend is the increasing reluctance of artist foundations to recognize any new or uncovered artwork as authentic. Artist foundations do not want to become targets for litigation if an authentication dispute flares up between individuals, and thus many foundations no longer offer authenticating services. The Andy Warhol Art Authentication Board, Inc., created in association with the Andy Warhol Foundation for the Visual Arts, was dissolved in 2012. The authentication boards of the Keith Haring Foundation and the estate of Jean-Michel Basquiat were likewise dissolved in 2012. Such disassociation largely shields artist foundations from litigation alleging the foundation authenticated a forgery. However, this insulation not only affects buyers and sellers wishing to determine the authenticity of artwork, it also negatively affects art historical knowledge of these artists. Unauthenticated works cannot be included in official catalogues raisonnés and will remain unknown to future scholars and collectors. Therefore, if artist foundations refuse to analyze problematic artwork, then future scholarship will suffer. This larger impact of the forgery market is critical to appreciating the urgency with which the proliferation of fakes must be curbed. The forged art market affects not only buyers and sellers; it also affects the collective knowledge of future generations.

Usually, the public relations nightmare of being caught in an art forgery scandal is enough to destroy reputations, as demonstrated by the closing of the Knoedler Gallery. However, as mentioned above, the hoaxes themselves sometimes become famous in their own right due to the mastery of the forgery. For example, an exhibition is being planned for fake Amedeo Modigliani statues to be exhibited in Livorno, Italy, the artist’s hometown. Three carved heads were found in July 1984 as part of a hoax orchestrated by local students. Modigliani is famously a popular target for art forgers, and thus this episode become part of the legacy of Modigliani himself and his hometown of Livorno. Commenting on the plan for this exhibition, Livorno Culture Councilor Mario Tredici stated, “For a long time we have wanted to tell a story that was unique in the 20th century and is sure to be a tourist attraction.”

Today, there is no unified national or international approach to curbing the forged art market. The current debate in India, where the art market is currently encountering an unprecedented number of uncovered fakes, might be helpful to informing policy decisions in the United States, where cases concerning art forgeries are fractured across jurisdictions and courts. Art experts in India have called for contradictory safety measures. Some express favor for creating a national authentication body in charge of art sales. However, other scholars have expressed a less common alternative preference for deregulating the currently tightly regulated art market in India. In a recent Op-Ed, Girish Shahane, Artistic Director of the India Art Fair, explains how the tightly controlled national art market in India has stunted the development of the art market and encouraged the proliferation of fakes through the promise of great profit: “Expertise and transparency have been strangled by the Antiquities Act, which makes the owning and selling of antiquities difficult, their export illegal, and restricts trade in the work of a number of modern artists labeled national treasures . . . While there is no silver bullet solution for the problem of forgeries, partial fixes emerge as a natural consequence of trade.” This proposal suggests that greater cooperation and unified trade practices amongst art industry professionals around the globe would create mutual responsibility. The opaqueness of the art market is in part responsible for the circulation of forged artwork, and, instead of effectively shutting down the art market through the creation of regulatory bodies, perhaps it is time for the art world to acknowledge the damaging effects of fakes and open up new pathways to international discussion.

Sources:

 

About the author: Emma Kleiner is a second-year student at Stanford Law School.

Disclaimer: This and all articles are intended as general information, not legal advice, and offer no substitute for seeking representation.

The Copyright Office’s Recent Fee Changes

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By Elena Kravtsoff, Esq.*

For the first time since August 1, 2009, the U.S. Copyright Office instituted a number of fee changes that took effect on May 1, 2014. Prior to instituting the changes, the Copyright Office issued a Notice of Inquiry on January 24, 2012, a Notice of Proposed Rulemaking on December 6, 2012, and reported receiving a total of 138 public comments from a “wide range of stakeholders,” including individual artists and major associations.

In its Final Rule published to the Federal Register, the Copyright Office reported that the majority of the public comments expressed concern about the fee increases that the Copyright Office proposed in the Notice of Proposed Rulemaking. In the Final Rule, the Copyright Office repeatedly emphasized that in adopting the new fee schedule, it was attempting to balance offsetting the costs that it incurs with the public interest of having a robust system containing information about existing copyright.

David Christopher, Chief of Operations at the Copyright Office, indicated in an interview with the author that the Copyright Office saw a decrease of about 3% in the number of applications received in April, May, and June of 2014 versus the same time period in 2013. Christopher said that this decrease is not surprising given that a drop in applications occurs whenever the Copyright Office changes its fee scheme, and that the number of applications will likely normalize in the next three to six months.   Christopher stated that the 3% dip is less of a decrease than was anticipated by the Copyright Office and is significantly less than the 16% decrease that accompanied the 2009 fee changes. Christopher attributed this to the current two tiered registration fee schedule: While the standard electronic registration fee, which largely affects less price sensitive applicants, increased to $55, the fee an application submitted by a single author for a single work not made for hire, which typically affects more price sensitive applicants, remained unchanged at $35.

Some notable fee changes are as follows:

For a standard registration, the Copyright Office increased the online application fee from $35 to $55 and the paper application fee from $65 to $85. The Copyright Office stated that these increases will allow it to recover a larger percentage of its costs. In explaining the higher paper-filing fee, the Copyright Office indicated that applications filed online—which constitute 91% of new copyright claims—are less costly than paper applications and pointed that online applications take from two to five months to process, while paper applications take from five to eleven months.

With regard to the $20 increase to the online application fee, the Copyright Office explained that a $45 filing fee was reduced to $35 following the launch of the eCO system in order to encourage electronic filing, therefore $55 is only a $10 increase over the non-discounted filing fee of $45. While the Copyright Office had initially proposed an increase to $65 in the Notice of Proposed Rulemaking, it reported receiving public comments expressing concern about an increase, and thus decided to set the new fee at $55.

In fact, at least some commentators advocated reducing the $35 fee. Gabriel Michael, who indicated that he is a university instructor, argued that even the $35 fee is too costly and deters many qualified applicants from applying for and receiving copyright protection. A comment submitted by the Graphic Artists Guild echoes Michael’s sentiment by stating that according to a 2012 survey of graphic artists, 74% indicated that the $35 fee was too high and prevented them from registering works they would have liked to register. Many individuals who work in creative industries also submitted comments and pointed out that raising the fee during tough economic times will make it either difficult or impossible for them to register their works.

With regard to the increased paper-filing fee, the Copyright Office noted that the increase to $85 is significantly lower than the $100 fee that was proposed in the Notice of Proposed Rulemaking. The Copyright Office indicated that even though cost increases were necessary in light of budget and cost considerations, given the “significant public interest in registration, including through a paper based process,” the increases should be “more modest” than originally proposed.

For a single registration application filed online by a single author for a single work not made for hire, the Copyright Office left the fee at $35. The Copyright Office noted that while the Notice of Proposed Rulemaking proposed increasing this fee back to $45—the fee was reduced to $35 in 2009 in order to encourage electronic filings—it decided to keep the fee at $35, partly due to a “large number of public comments advocating for a lower fee,” including from individuals from performing and visual arts. The Copyright Office emphasized its commitment to “maintaining an affordable copyright registration system” and pointed out that if individual authors do not register and become a part of the public database, they may be more difficult to find than any other group of copyright owners.

The Copyright Office increased the electronic filing fee for group registration of published photographs or registration of automated databases that predominately consist of photographs and updates from $35 to $55, while leaving the paper filing fee at $65. The Copyright Office explained the increase of the electronic filing fee simply by stating that it was increased to be consistent with the fees for other online applications. While the Copyright Office initially proposed increasing the paper application, it decided against it after receiving comments indicating that “photographers face particular challenges with the registration process due to the large quantities of works they often create in brief periods of time.”

Finally, the Copyright Office decreased the fee for renewal application from $115 to $100 and the fee for renewal addendum from $220 to $100. The Copyright Office explained that these reductions are due to the “unique nature of renewals in the history of copyright law and recent experiences in reviewing renewal documents.” Specifically, while prior law required some copyright claims to be renewed on their 28 year anniversary in order to maintain validity for the rest of their term, the current Copyright Act no longer requires a renewal in order to maintain protection for the duration of the full copyright term. The Copyright Office indicated that apparently as a result of the new law and increased fees, over the past seven years it has been a “dramatic” drop in renewal applications. The Copyright Office recognized that “dwindling… renewal registrations diminish the public record,” which harms its mission to “serve as a robust repository of copyright information,” and lowered the fee in order to encourage renewal claim filing. The Copyright Office lowered the fee for renewal addendums—which document a work’s copyright status—in another attempt to encourage applications and benefit its public record keeping.

Sources:

Copyright Office Fees: Registration, Recordation and Related Services; Special Services; Licensing Division Services; FOIA Services, 79 Fed. Reg. 56, 15910 (March 24, 2014) (amending 37 C.F.R. pts. 201 and 203), available at http://www.copyright.gov/fedreg/2014/79fr15910.pdf.

Gabriel Michael, Comment to Notice of Proposed Rulemaking, Copyright Office Fees, 77 Fed. Reg. 60, 18742 (2012), available at http://www.copyright.gov/docs/newfees/comments/02232012/gabriel-michael.pdf.

Graphic Artists Guild, Comment to Notice of Proposed Rulemaking, Copyright Office Fees, 77 Fed. Reg. 60, 18742 (2012), available at http://www.copyright.gov/docs/newfees/comments/05142012/Graphic_Artists_Guild.pdf.

Comments to Notice of Proposed Rulemaking, Copyright Office Fees, 77 Fed. Reg. 60, 18742 (2012), available at http://www.copyright.gov/docs/newfees/comments/05142012/.

About the Author: Elena Kravtsoff is an attorney based in Washington, DC. She may be reached at elena.kravtsoff@gmail.com.

Disclaimer: This article is intended as general information, not legal advice, and is no substitute for seeking representation.

Why Ronald Lauder Is Right About Nazi-Looted Art in Museums

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*From the Editors: The following article  first appeared on ArtNet. It is a response to two recent articles, an editorial authored by Ronald S. Lauder, a New York businessman and art collector, and a related commentary by Nicholas O’Donnell, Boston-based attorney and editor of Art Law Report. The article is reprinted with the permission of the author, attorney for Leone Meyer.

By Pierre Ciric*

In his article titled “Lauder Editorial on Stolen Art and Museums Fails the Glass House Test,” Nicholas O’Donnell attempts to respond to Ronald S. Lauder’s editorial published in the Wall Street Journal on June 30, 2014, titled “Time to Evict Nazi-Looted Art From Museums.”

O’Donnell attempts to find legal shortcomings in Lauder’s editorial, which simply expresses the need for art museums to act responsibly by returning Nazi-looted artwork instead of raising technical defenses and mere pretexts to deny the rights of the claimants.

In his article, O’Donnell refers to the ongoing case brought by Léone Meyer against the University of Oklahoma, among other defendants, to obtain the restitution of “La bergère rentrant des moutons” (Camille Pissarro, 1886), currently on permanent display at the Fred Jones Jr. Museum of Art in Norman, Oklahoma.

Although O’Donnell—counsel to David Findlay, Jr. Gallery, a defendant no longer involved in the case—recognizes that the recent court decision is limited to whether the Oklahoma defendants could be sued in New York, he repeatedly brings up a 1953 Swiss court decision involving Camille Pissarro’s La Bergère as grounds for why Léone Meyer’s claim should fail, and why Mr. Lauder’s argument is baseless.

O’Donnell’s argument fails the common sense test. First, no one disputes that the Nazis stole La Bergère from Léone Meyer’s family.

Second, the 1953 Swiss court decision was not decided based on a late claim, as O’Donnell argues, but was decided against Léone Meyer’s father because he could not prove the “bad faith” of the art dealer who acquired La Bergère after it crossed the Swiss border from France.

Third, prior Swiss decisions involving looted art have long been held as doubtful or baseless in several U.S. jurisdictions. Even the Swiss government itself recognized in 1998 that the deck was stacked against claimants who wanted to file art restitution claims in Switzerland after World War II. New York courts have found/determined that “Swiss law places significant hurdles to the recovery of stolen art, and almost ‘insurmountable’ obstacles to the recovery of artwork stolen by the Nazis from Jews and others during World War II and the years preceding it.”

Finally, O’Donnell misses the point of Mr. Lauder’s editorial. As French government officials have recently stated in a public forum dedicated to France’s efforts to track and restitute looted art, the time for “clean museums” has come. Hiding behind technicalities and procedural loopholes to delay basic justice, i.e. restitution of looted property, is not morally appropriate, even less so when public institutions are involved.

Ronald Lauder is right. It is time for museums to do the responsible thing. It is time for museums to “clean” their collections of any tainted artwork by returning Nazi-looted artwork.

Sources:

Abut the Author: Pierre Ciric is a New York attorney, the founder of the Ciric Law Firm, PLLC, and a board member of both the French–American Bar Association and the New York Law School Alumni Association.

Attention all Art Buyers – Caveat Emptor and then Emptor some more!

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by Hanoch Sheps, Esq.*

Caveat Emptor (Latin for “let the buyer beware”) could quite possibly be the understatement of the century, at least it appears to be one of the glaring messages delivered at the NYU Art Crime and Cultural Heritage: Fakes, Forgeries, and Looted and Stolen Art Conference (the “Conference”). Three days’ worth of panels and discussions devoted to topics ranging from art crime to cultural heritage and authenticity have proved that even the most innocuous canvas or a Faberge egg might conceal a dark truth. As the seedy underbelly of one of the most unregulated markets in the world continues to swell, at no fault of their own, nevertheless, all buyers seem to focus on are the headline-making sales of contemporary art.

Although three days somehow barely scrapes the surface, the NYU Conference exposed cautionary tales and lessons learned on some of the more recurring themes and pitfalls of the art market.

Authenticity

Our readers will know by now that forgers are becoming more brazen in both their forgeries and outright candidness about their criminal proclivities. Most notably, the infamous forger Wolfgang Beltracchi spoke openly on 60 Minutes in February about how he can walk into famous museums around the world and point out his own forgeries. Moreover, Beltracchi went so far as to show 60 Minutes’ Bob Simon how easily and quickly he can forge a Max Ernst, the German surrealist of the early twentieth century. Then there are “former” forgers like Ken Perenyi who recently penned a book entitled “Caveat Emptor: The Secret Life of an American Art Forger.” Pegasus, 2013. In his book, Perenyi claims that he now makes replicas in the style of famous artists, rather than marketing them as “originals” made by those artists. (For more on distinguishing between replicas and fakes, consider reading A Plethora of Fakes and a Series of Thoughts: Where Has All The Real “Art” Gone?, December 2013). Do we take the former forger’s word that he is no longer forging? Or do buyers acknowledge that in an unregulated market saturated with forgeries, one treads into the minefield at their own risk? Issues concerning authenticity may actually speak to the larger challenge of “reputation building” where galleries, auction houses, and the artists themselves highly depend on word of mouth (and are intentionally opaque where records of transactions are concerned). One of the presenters at the NYU Conference, Scott Hodes, Senior Counsel at Bryan Cave LLP, noted that success in perpetrating a fraud is often a function of a greater reputation. One need only look at the ongoing Knoedler case to see that a gallery’s reputation makes it a target for forgers, and increases the likelihood of forgeries landing in the buyer’s hands.

Ideas for buyers to consider* (see disclaimer below):

Know your dealerFind out whether the artwork on consignment or owned by the dealer. Makes sure the dealer is not making multiple consignments of the same piece. Review your consignment agreement, make efforts to remove arbitration clauses from your consignment agreement. Doing so will change how a buyer can respond if a work is revealed as a forgery.

Liens (s) See how many liens others have filed against the dealer (few can mean the dealer owns many of their works outright, many can mean most of the works are on consignment). (For more on this topic see Herrick, Feinstein LLP’s, Time to Take the Risk Out of Consignments).

The reputation of galleries and auction houses is not the only factor that may “invite” criminal objectives, merely the name of the artist can be enough of a pull for buyers—and in some cases even world-renowned experts. There will never be a shortage of cautionary tales when exploring the niches of art markets, but some stood out in this Conference. Influence and reputation draws imitators and forgers to the fore like moths to a flame, but only few names have the clout of Faberge in the world of fine and decorative arts. Dr. Geza von Habsburg, a Faberge expert, recounted how in the span of a few years he had received numerous requests from different parties to examine what ultimately turned out to be the same collection of paltry fakes. Historians would have us believe that even renowned gallerist Armand Hammer himself increased the number of Faberge objects when he found out the whereabouts of their goldsmiths’ branding tools. If true, it only goes to show that the opportunity to sell Faberge was too good to pass up even for people with stellar reputations. Would the lesson there be to encourage authorities to seize and destroy fakes, as some European agencies eagerly consider as a solution to the proliferation of fakes? (For more on the topic see Burning Fake Chagall’s, Market Integrity versus Ownership Rights – A Zero Sum Game). Be it a dealer, or innocent buyer, it seems that if they cannot sell the fakes to a reputable purchaser, they find another upon whom to pass off the tainted goods. And thus, fakes simply continue circulating in the market. One of the reasons that the Faberge forgeries continue to circulate in the market, is that their owners are in denial of their authenticity. A more intriguing story of the pervasiveness and appeal of forgeries presented at the Conference was by Salomon Grimberg, author of Frida Kahlo Catalogue Raisonné. As a Kahlo aficionado, what made his story unique was that even when faced with a work he knew to be fake, he could not resist the temptation to own something that he could pretend was a half-decent Kahlo – if only for a moment. Other less knowledgeable buyers can easily fall prey if they do not seek out objectivity of an expert.

Food for thoughtbuyers should seek out objective opinions and in some cases second, third opinions (all the while hoping to find that rare “consensus,” if such a degree of certainty exists).

—Due Diligence—

Coming in only second to “caveat emptor” as the critical takeaway from the NYU Conference is “do your due diligence.” To some it is a hackneyed phrase, unfortunately, for others it falls on deaf ears. It truly cannot be emphasized enough that proper due diligence is the key to any successful art market transaction. Buyers simply cannot afford the risk of neglecting proper background research. In such a litigious market, the motto should be “pursue information now or pursue your money in court later.” Knowing the time consuming nature and expense of litigation makes it obvious to pursue information where possible. Whatever the issue – authenticity, provenance, looting or otherwise – a rigorous review prior to purchase will go a long way.

Provenance—

It would be a mistake to think that the last battle of World War II ended with the war, because it is simply not true. A war of a different sort rages on in courts and in the homes of those from whom property was stolen. At times looted art continues to circulate because of purely falsified provenance documents prior to sale. At others circulation results from willing parties who ignore clear “gaps” around the 1930-45 period. Cases of fine and decorative art take center stage as sagas like Cornelius Gurlitt’s continue, although now even he is no longer around to fight. Chris Marinello of Art Recovery International spoke with Marianne Rosenberg, attorney and granddaughter of the legendary gallerist Paul Rosenberg. In their conversation, they made clear that there were quite a few battles left to fight. The recovery of the Rosenberg collection that was looted during WWII is just one of many collections that sustained major loses on the part of the Nazi’s and other occupying forces. As recently as a few weeks ago, the Gurlitt Task Force acknowledged that Gurlitt possessed Henri Matisse’s “Seated Woman” which was looted from the Rosenberg collection. The Rosenberg’s are unique and benefit from extensive and scrupulous records that Mr. Rosenberg maintained as part of his regular practice, but are also a credit to his foresight in an increasingly difficult situation for French Jewry. Even with such records, restitution can be a nigh impossible endeavor that can take decades. (See Gurlitt Task Force Makes First Determination that Matisse “Seated Woman” Was Stolen From Rosenbergs; Questions Remain About What Happens Next, The Art Law Report, June 12, 2014). WWII is only one common source of provenance issues, but it highlights a poignant point that buyers must take particular caution when reviewing an artwork’s provenance – they present issues that are here to stay, and care not for notions of sentiment and perceived fairness.

Lesson to learn there are ample resources, like Art Recovery International, Interpol, the International Foundation for Art Research (IFAR) that buyers can use to identify or report stolen and questionable works.

Looting—

Panels on this topic identified the reality that in times of unrest, looting becomes rampant. Only this week it was reported that fighters from the Islamic State of Iraq and Syria (ISIS) have begun collecting “taxes” from parties seeking to smuggle Syrian and Iraqi antiquities (all parts of ancient Mesopotamia) to further finance their insurgency. Not only is the region in a state of upheaval, but those causing the chaos actively encourage looting, a truly deadly combination – especially in a “pay the tax or die” situation. [The Sunday Times]. Simply put, following the unrest, damage and destruction of cultural heritage sites is not far behind. Perhaps the biggest problem beyond actual theft is the destruction of the historical context of those items. When thieves remove objects from a site and lie about their origin, humanity loses valuable ethnological and archaeological information making it impossible to recover vital information, including with whom it was buried, with what else, strata to identify age – the list only grows from there. To compound the loss of cultural heritage is the illicit importation and exportation of cultural objects through the falsification of customs forms and outright smuggling. Objects then enter the porous market where unsuspecting buyers fall prey. Fortunately for art buyers, art market professionals come together to provide programs like the NYU Conference, which feature and highlight important issues in the field. It goes without saying that the most watchful eye, the most scrupulous attorney, nor the best insurance investigator will catch everything. Nevertheless, if we can glean a parting lesson from the NYU Conference, it is that buyers worldwide may need to be as passionate about doing their background work as they are about the art itself.

*About the Author: Hanoch Sheps, Esq., is an attorney in New York. He may be reached at Hanoch.sheps2@gmail.com.

Disclaimer: This and all articles are intended as general information, not legal advice, and offer no substitute for seeking representation

One Matisse, Two Matisse: The Steal that it is this Summer

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By Irina Tarsis*

Matisse died in 1954; he was 84. The following quote is attributed to Matisse, and as he dreamt of being palatable to a diverse audience, he succeeded in winning over the hearts of many.

What I dream of is an art of balance, of purity and serenity, devoid of troubling or depressing subject-matter, an art which could be for every mental worker, for the businessman as well as the man of letters, for example, a soothing, calming influence on the mind, something like a good armchair which provides relaxation from physical fatigue.

First trained in law and later a student of art, already during his lifetime Matisse proved to be popular in different circles and demographics. His works were sold by Paul Rosenberg and Daniel-Henry Kahnweile, famous Parisian dealers. He enjoyed patronage of the who’s who among the major art collectors of the twentieth century, including Alfred Barnes and Sergei Shchukin. Indeed, he was a prolific artist with a long career, and thus those who wished to have a Matisse — private collectors, institutions, auction houses, hoarders, thief’s and forgers — could enjoy fruits of the new master’s imagination and labor.

I.

Screen Shot 2014-07-08 at 4.53.58 PMOver the last couple of years, Venezuela has been in the news mostly due to political unrest, economic crisis and violence against street protestors. Serving as some positive news for a change, earlier this month numerous media sources  heralded the return of the 1925 Henri Matisse painting “Odalisque in Red Pants” to Venezuela. The painting, first acquired from a New York gallery in 1981 by the Caracas Museum of Contemporary Art in Caracas, disappeared from the museum sometime around 2002. Its loss was discovered only after the original “Odalisque in Red Pants” was offered for sale in Florida, meaning that the one on display in Caracas was a skillful forgery. (The story of the Caracas Matisse has been documented by Marianela Balbi). In 2012, the United States government seized the original painting in a sting operation in Miami. Almost two years later to the day, on 7 July 2014, the painting was finally returned to Venezuela.

According to some news sources, the authenticity of the piece was verified by “officials from the ministries of Foreign Affairs and Culture, the District Attorney, the Institute of Cultural Heritage, National Museums Foundation and the Body of Scientific, Penal and Criminal Investigations.”

II.

Screen Shot 2014-07-10 at 4.27.13 PM
C. Gurlitt/Matisse’s “Seated Woman”

Also in 2012, Bavarian authorities seized an extensive collection of works of art on paper and oil paintings from a private residence in Munich. One of these works that became a poster child for the Schwabing Art Fund, aka the Gurlitt Trove, was Matisse’s 1921 portrait of a seated woman “Femme Assise/Sitzende Frau.” The discovery of the Fund/Trove containing works by famous artists, as well as the glacial pace of investigating the origins of these artworks following the discovery captured the imagination of provenance researchers, art lawyers, potential heirs and others.

We have reported already that the Task Force appointed to investigate the trove has little time to work through hundreds of oils and works of art on paper. However, they already concluded that “Femme Assise” was looted during World War II.

In a Press Release from 11 June 2014, the Head of the Task Force, Dr. Ingeborg Berggreen-Merkel, indicated that while the Task Force could not establish exactly under what circumstances and when the painting came into Gurlitt’s possession. Nevertheless, it was illegally taken from the collection of a Jewish French art dealer Paul Rosenberg. The decision as to whether the painting will be returned to the Rosenberg’s heirs or not by Gurlitt’s appointed heir “unrestricted and unfettered,” the Bern Art Museum in Switzerland has not been announced yet.

III.

In conclusion: before more stolen, forged or other Matisse paintings come to light, mix yourself a Matisse cocktail, courtesy of Drinks Mixer:

  • 2.5 oz Stoli Ohranj vodka
  • some orange juice
  • some Chambord raspberry liqueur
  • 1 twist lime peel

Sources:

About the Author: Irina Tarsis, Esq., specializes in art law, provenance research and cultural heritage law. She may be reached at itsartlaw@gmail.com.

Disclaimer: This article is intended as general information, not legal advice, and is no substitute for seeking representation.

 

Case Review: Frank Kolodny v. James Meyer, Fred Dorfman, and Dorfman Projects LLC (May 2014)

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By Jill A. Ellman*

2014-07-07A complaint filed in the Southern District of New York by Frank Kolodny on May 8, 2014, contains allegations for violations of the Racketeer Influenced and Corrupt Organizations Act (“RICO”) and fraud in connection with the sale of artwork stolen from the studio of artist Jasper Johns, a major twentieth-century painter and sculptor.  As alleged in the complaint, the works were sold by Fred Dorfman and Dorfman Projects LLC; Kolodny purchased one of these sculpture in 2009.

In the past three decades, Johns has achieved great standing in the art marketplace. His work has been sold to private collectors and institutions in the high millions, with private sales valued at over 100 million USD.
The plaintiff, Frank Kolodny brought the lawsuit against defendants James Meyer, the former studio assistant of Jasper Johns, as well as Fred Dorfman, a well-known specialist in twentieth century art, and his gallery, Dorfman Projects LLC (collectively, the “Dorfman Defendants”).  Kolodny claims that the defendants falsely represented to prospective buyers, including Kolodny himself, that Meyer received twenty-two individual pieces created by Jasper Johns as a gift and produced accompanying fraudulent documents.

The complaint alleges that Meyer and the Dorfman Defendants engaged in an enterprise affecting interstate and foreign commerce, thus violating  RICO.  Specifically, from September 2006 to February 2012, the plaintiff contends that the defendants participated in a pattern of racketeering with the common goal to profit from the stolen artwork and used similar methods in order to perpetrate their fraud upon prospective buyers.  If successful with his RICO claim, Kolodny may be awarded  triple damages in the form of civil penalties.

In addition to the RICO and conspiracy to commit RICO violations and common law fraud, Kolodny also asserts causes of action for aiding and abetting fraud (against the Dorfman Defendants),  and breach of warranty concerning title and provenance of the artwork sold by the Dorfman Defendants to Kolodny under N.Y. U.C.C. § 2-313(1) and §13.01 of the New York Arts and Cultural Affairs Law. Kolodny seeks compensatory damages, punitive damages and attorneys’ fees.  By way of background, the complaint describes that from 1985 to 2012, Johns employed Meyer as his assistant to support him in creating his art and aiding Johns with record keeping in his studio.  Meyer had complete access to inventory numbers for each of Johns’ completed works.  In 2012, Johns learned that Meyer was stealing from him and selling incomplete artworks without authorization. (See “James Mayer Arrested and Indicted in Jasper Johns Art Theft.”)  The Dorfman gallery sold the stolen works for $6.5 million, and Meyer collected a commission of $3.4 million.  Meyer was later indicted on criminal charges, including the interstate transportation of stolen goods and wire fraud.  The Dorfman Defendants were not named in the criminal action.  The indictment against Meyer was unsealed to the public in August 2013.

Kolodny asserts that the Dorfman Defendants could not have possibly believed Johns generously gifted artwork valued at $6.5 million.  Thus, he contends that the Dorfman Defendants ignored significant red flags in agreeing to sell Meyer consignments: not only did the artwork lack an exhibition history, but Meyer insisted that the sale of any artwork remain confidential and prohibited the buyer from selling, loaning or exhibiting the artwork for an eight-year period.  Instead of conducting proper due diligence regarding the provenance of the stolen artwork, Kolodny asserts that the Dorfman Defendants  understood the risk they faced and demanded an exorbitant commission in the form of 50% of the sale proceeds, exceeding the standard amount of commission paid to dealers for consigning artwork from private collections.  Moreover, the Dorfman Defendants purportedly assisted in perpetrating the fraud by fabricating documents attesting that the stolen artwork was indeed gifted to Meyer.

Apparently in April 2009, the Dorfman Defendants contacted art dealer Francis M. Naumann to discuss an available Jasper Johns drawing. Naumann on behalf of his client, Kolodny, decided to purchase the drawing for the value of $400,000 after being reassured by the Dorfman Defendants that very few similar works existed and would appear on the market. When Kolodny purchased the drawing, he agreed to keep it in his collection, neither selling nor loaning it for an eight-year period, because Meyer, as an employee of Johns, represented that Johns would be offended if he learned that his employee sold his “gift.”
According to Kolodny, in connection with the sale, the Dorfman Defendants and Meyer sent Kolodny an affidavit attesting to the authenticity of the artwork.  The affidavit also represented that Meyer owned the drawing and had the authority to sell it.  In addition, the Dorfman Defendants represented that the drawing would appear in an upcoming Jasper Johns catalogue raisonné, attesting to the drawing’s authenticity.  As requested by Kolodny, thedefendants forwarded an image purporting to be a page from Johns’ studio ledger indicating that the drawing was in Johns’ archive.  Because the drawing was stolen and will not appear in an upcoming Jasper Johns catalogue raisonné as represented, Kolodny claims that his drawing is unsaleable and valueless.

Kolodny is an unfortunate, potential example of a bona fide purchaser who believes that he has taken the extra-precautionary steps and exercised due diligence in securing an artwork, but who may have been duped in the process regardless of any appropriate safeguards that he took.  By bringing a RICO claim, Kolodny hopes to materially increase his potential damage award.  This case may be compared to lawsuits brought by plaintiffs who were allegedly defrauded in connection with the sale of works sold by the Knoedler Gallery and its agents.  See, e.g.,  De Sole v. Knoedler Gallery, LLC  et al., Case No. 12 cv 2313 (S.D.N.Y. Sept. 30, 2013).  Unlike here, the De Sole plaintiffs were sold a fake, unauthentic work (the De Sole plaintiffs believed they were purchasing a work created by the artist Rothko).  Similar to this case, the De Sole plaintiffs also brought claims under RICO and common law fraud, which were upheld by the Southern District in September 2013.  In particular, the Southern District found that the plaintiffs’ RICO and fraud claims to sell fake artworks were adequately pleaded because the plaintiffs showed evidence that the Knoedler defendants were aware of the misrepresentations regarding the provenance and authenticity of the purchased artworks.

Kolodny’s RICO and fraud claims may likewise survive a motion to dismiss if the Southern District finds that his allegations establish that the Dorfman Defendants engaged in a scheme to defraud potential buyers.  For example, the fact that the Dorfman Defendants went out of their way to represent that the Johns work would appear in an upcoming catalogue raisonné, sought affidavits attesting to the fact that Meyer owned and had the right to sell the work, and produced a page from Johns’ studio ledger indicating that the drawing was in Johns’ archive, may all be indicators that the Dorfman Defendants were aware of their misrepresentations to establish a sufficiently pleaded RICO or fraud claim, rather than mere negligence.

Kolodny is represented by Judd B. Grossman, Esq. of Grossman LLP.  Adam D. Mitzner, Esq. of Pavia & Harcourt LLP has made an appearance on behalf of the Dorfman Defendants.

Sources:

About the Author: Jill A. Ellman, Esq. is an associate at Tressler LLP focusing in the area of professional liability insurance coverage.  She maintains an active interest in art law.

Disclaimer: This article is intended as general information, not legal advice, and is no substitute for seeking representation.

Case Review: Schoeps v. Free State of Bavaria (June. 2014)

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By Chris Michaels*

P. Picasso, "Madam Soler" (1903)
P. Picasso, “Madam Soler” (1903)

 

On 27 June 2014, Judge Jed. S. Rakoff of the Southern District of New York issued an order finding that the court did not have subject matter jurisdiction to decide on the merits a Nazi-era looted art case. This case was brought by the heirs of the late Jewish banker, Paul von Mendelssohn-Bartholdy, against the Free State of Bavaria for a Picasso painting titled, Madame Soler.

The plaintiffs in this case, Julius H. Schoeps, Britt-Marie Enhoerning, and Florence von Kesselstatt, argued that Mendelssohn-Bartholdy was forced to part with his artwork in 1934 after two years of Nazi persecution. He transferred possession of Madame Soler to art dealer Justin K. Thannhauser, who remained in possession of the painting for the next 30 years. In 1964, Thannhauser, who at that time had relocated to New York City, met with Halldor Soehner, a Senior Curator of the State Paintings Collections Munich, an entity operating under the Bavarian State Ministry for Education and Cultural Affairs (the “Ministry”). Soehner’s New York trip was pre-approved by the Ministry.

Upon Soehner’s return to Germany in June of 1964, Soehner and Thannhauser began planning their next meeting, which was to take place in Europe. Soehner then sought approval from the Ministry for the meeting with Thannhauser, which occurred in France in August of 1964. The Bavarian Ministry approved Soehner’s trip to France to conduct negotiations and in an August 1964 letter to Soehner, Thannhauser confirmed the purchase of Madame Soler by the Bavarian State Paintings Collections. The purchase was publicized in the museum publications as well as local news outlets. The purchase price of the painting was 1,775,000 Swiss Francs. Additionally, the Letter Agreement between the two was signed in Europe, which the court surmised was an attempt by Thannhauser to avoid U.S. taxes, and the painting was located in Switzerland at the time of the sale. Further, a Lichtenstein entity “EBA, Vaduz,” which was controlled by Thannhauser, transferred the painting to the Bavarian State Paintings Collections and received payment on behalf of Thannhauser.

The issue decided by the instant order was whether jurisdiction over the Free State of Bavaria was appropriate under the Foreign Sovereign Immunities Act (“FSIA”).  Under the Act, jurisdiction over a foreign state is allowed in three circumstances:

  1. where a plaintiff’s claim is “based upon” “a commercial activity carried on in the United States by the foreign state”;
  2. where a plaintiff’s claim is “based upon” “an act performed in the United States in connection with a commercial activity of the foreign state elsewhere”; or
  3. where “an act outside the territory of the United States in connection with a commercial activity of the foreign state elsewhere causes a direct effect in the United States.”

Here, the Court ruled that the FSIA could be circumvented because the exceptions to allow jurisdiction over a foreign sovereign and its entity did not apply under any of the above circumstances where no agreement between Soehner and Thannhauser for sale of the painting was reached in New York and where Soehner did not take any concrete action toward the purchase of the painting until his return to Germany. With respect to the first prong of jurisdiction under the FSIA, the Court found that the merits of this suit, should they be reached, were not “based upon” Bavaria’s acquisition of the painting, “let alone activity in the United States.” The Court points out that the essence of Plaintiff’s complaint is that the title to the painting never rightfully passed to Thannhauser because the painting was consigned by Mendelssohn-Bartholdy as a forced transaction.

Thus, the Court ruled, the merits of the case would necessarily focus on the circumstances of the forced sale. The Court went on to note that Bavaria would not even be the defendant in the case “but for the fact that Bavaria purchased the painting from Thannhauser in 1964.” The Court held, among other things, that this “but for” reasoning was insufficient to satisfy the FSIA’s “based upon” requirement.

With respect to the second prong, the Court held that it is “generally understood to apply to non-commercial acts in the United States that related to commercial acts abroad.” This prong was deemed inapplicable by the Court, however, because the Plaintiffs’ failed to argue that any non-commercial acts by Bavaria formed the basis of the suit.

Finally, under the third prong, the court noted that two requirements must be satisfied to confer jurisdiction: 1) “there must be an act outside the United States in connection with a commercial activity of [Bavaria] that cause[d] a direct effect in the United States and (2) [plaintiffs’] suit must be based upon that act.” The Court held that the elements of this prong were not satisfied where plaintiffs’ only arguments were that Bavaria’s purchase of the painting would have a negative impact on the New York art market and that Bavaria’s activities furthered a conspiracy to evade United States taxes. The Court, therefore, dismissed the lawsuit for lack of jurisdiction.

Plaintiffs were represented by Thomas J. Hamilton and John J. Byrne, Jr. of Byrne, Goldenberg, and Hamilton, PLLC of Washington D.C., and Defendant was represented by Andreas A. Frischknecht, James M. Hosking, and Andrew L. Poplinger of Chaffetz Lindsey, LLP of New York.

Sources:

  • Opinion and Order, Schoeps v. Free State of Bavaria, Case No. 13 Civ. 2048 (JSR) (S.D.N.Y June 27, 2014).
  • The Foreign Sovereign Immunities Act, 28 U.S.C. § 1605(a)(2).

About the Author: Chris Michaels is a litigation attorney in the Philadelphia office of the Atlanta, GA-based law firm, Cruser & Mitchell, LLP, where he actively pursues his interest in the field of art law. He may be reached at (518) 421-7238, chriswmichaels@gmail.com, or on Twitter @CMichaels88.

Disclaimer: This article is intended as general information, not legal advice, and is no substitute for seeking representation.