Broad or narrow: Taxman reviews “Private” Museums

By David Honig, Esq.*

screen-shot-2016-11-23-at-1-48-18-pmLast year, on November 20, 2015, Senator Orrin Hatch (R-Utah) launched a review of eleven US private museums in response to a recent New York Times Article that exposes a possibility for abuse of 501(c)(3) nonprofit status. Every “domestic or foreign organization described in section 501(c)(3)” is considered a private foundation, unless it fits into one of four scenarios, dealing with where the organizations “support” is derived, set out in § 509(a).  Senator Hatch’s investigation did not include all nongovernment owned museums as the term “private museum” suggests – after all many of the most renowned museums in the United States, such as the Metropolitan Museum of Art in New York and the National Gallery of Art in Chicago are private museums even if they are not thought of as such. Instead, Senator Hatch looked into a subset of museums that only have one donor and are designated private foundation under 26 U.S.C. § 509.

The investigation, which concluded in May of 2016, sought to determine whether, and how much, these museums benefit the public. This inquiry was ignited by the fear that these private foundation museums are offering minimal benefit to the public while affording the donors substantial benefits including tax deductions. For example, the New York Times article mentions that at least two of these museums, Glenstone in Potomac, MD and the Brant Foundation Art Study Center in Greenwich, CT, require reservations and “[are] open only a few days a week to small groups.” The reason this matters is the tax advantages afforded to charities with 501(c)(3) nonprofit status are granted because of the public benefit these organizations provide. Logic suggests, if these museums are not providing a public benefit they should not be given preferential treatment. The real issue is not whether these museums provide a public benefit but whether the benefit provided can justify the private reward. In other words, should individuals capable of purchasing multi-million dollar artworks be afforded a discount on creating and maintaining private viewing salons?  Before determining whether these museums provide enough or any public benefit some background should be given, first on the museums themselves then on the tax benefits associated with this setup.

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The Private Museums

The United States has a long history of encouraging private enterprise. This can be seen in airlines, railroads, institutions of higher education and charitable organizations. The investment of private capital helps alleviate some of the financial strain felt by the state, while encouraging private organizations or individuals to provide public services. Seeking to reward private investment for the public good, “Congress sought to provide tax benefits to charitable organizations, to encourage the development of private institutions that serve a useful public purpose or supplement or take the place of public institutions of the same kind.”

One way Congress provided tax benefits to charitable organizations was by creating 26 U.S.C. § 501. Section 501(a) grants tax exempt status to certain organizations. Relevant here are corporations “organized and operated exclusively for … charitable … or educational purposes … ”. Seeking to take advantage of this section of the internal revenue code collectors have created organizations and donated artworks to them in order to establish museums for their private collections.

The Tax Scheme

One benefit of creating a nonprofit organization and donating artworks to it is clear – if the museum charges an entry fee the revenues can be used to maintain the artworks and space without the donor having to pay taxes. By relinquishing ownership of these works the donor no longer bears sole responsibility for upkeep. Since 9 of the 11 museums surveyed by Senator Hatch do not charge an admission fee, most of the founding donors have to donate more funds to insure the works and premises do not deteriorate. On its face, the free admission scheme is detrimental to the founding donor. In addition to paying for the upkeep, although possibly at a subsidized rate, the founding donor must also relinquish control of the works to the nonprofit corporation for the corporation to be eligible for the tax benefits under the internal revenue code.

Taking these issues in turn, the first, having to pay for upkeep, could actually be a benefit. The internal revenue code, specifically section 170, allows a donor to deduct a “contribution or gift” made to, among other organizations, corporations that qualify for 501(c)(3) tax exempt status. This means that besides possibly paying a reduced rate for the upkeep and maintenance of her art and a facility to house said art, the founding donor can deduct the amount donated to the museum to cover these costs.

In addition to allowing deductions for contributions section 170 also allows a donor to deduct gifts made to authorized organizations. By converting a collection that was privately owned by an individual into one that is held by a museum for the “public’s benefit” the founding donor can use money that would have been personally spent for upkeep of the art to reduce her taxes. By combining tax exempt status granted by 501 with the deductions afforded for charitable contributions in section 170 a founding donor is duly rewarded. Note: the internal revenue code places a limit, usually 50% of gross income, on the amount of deductions a person can take each year for charitable donations.

Tax deductions are not the only reason for a founding donor to entertain creating this type of organization. Once the works are donated the museum owns them and a donor no longer has no control, or so it would seem. If the donor serves on the board of directors, acts as president or serves in some other executive position the donor could execute control over the works of art. In fact, this is exactly what “many” of the founding donors are doing. An example of this is the Broad in downtown Los Angeles, whose founders Eli and Edythe Broad serve on the Board of Governors.

A donor that serves on the board or as an executive will be involved in not only how the artwork is managed but more importantly the operations of the museum. This includes determining hours of operations, admission price, what works should be bought and sold, displayed, put into storage or on loan. It is easy to see why Senator Hatch was worried about abuse of these tax exemptions since donors are able to reap huge tax benefits while seemingly giving up little in their enjoyment and control of art. In fact, some of the museums surveyed said that they are located on land owned by or partially by the founding donor. In other instances, museums are located on land adjacent to the donor’s residence. In order for this scheme to make sense and continue the public must get some benefit.

Public Benefits

“[C]harities [are] to be given preferential treatment because they provide a benefit to society.” It follows, that if there is no benefit to the public then the charity should not be given preferential treatment and a donor should not be allowed to receive tax deductions for donations to that charity. But the issue here is not one of existence of benefit it is one of degree of quality and quantity of benefit. The question ultimately boils down to whether or not these museums provide enough public benefit to be given preferential treatment and how is that determination made. In other words, what is the required level of public benefit that an organization must produce in order to receive preferential tax treatment under section 501 and how is it determined?

Unfortunately, it is hard to determine whether action actually benefits the public and the Internal Revenue Service (“IRS”) guidelines are not very helpful on this front. Besides being open to the public for viewing and informing the public of access, it really is not clear what is required of an organization to achieve tax exempt status.

There are clear benefits to founders of private museums but the question remains are those benefits enough. For instance, of the 11 museums that received a letter from Senator Hatch 10 of them responded that they engage in or have engaged in loan programs. This means that a work of art that would normally be displayed in someone’s home or sit in storage was put on display for a large number of people to see. The creation of more museums allows works to be displayed that otherwise would sit in a basement or storage facility and never be seen by the public.  

Not only does the creation of more museums allow for more work to be shown it allows different work to be shown and curated in different ways. Private museums allow the whims of one person to dictate how and what art is acquired and later displayed. This type of museum does not have to focus on what it thinks would be the most educational exhibit for its visitors as traditional public museums do. Instead the exhibits can focus on art or whatever emotion or reaction a curator wants to provoke. This too is “educational” in its own right even though it is not designed with that purpose in mind.

Maybe the best example of this would be Eli and Edythe Broad’s Broad Museum in Los Angeles, California. The Broad is the poster child for what these types of private museums can be. It is open most days of the week and draws large crowds of young people. In addition to its visitors having a lower average age than the national average of museum goers, 32 compared to 45.8, as of March 2016 70% of the Broad’s visitors were younger than 34 years old.

The Broad represents what these museums can be, but just because others do not do as much as the Broad does not mean they do not do enough to benefit the public. The limited hours and days of operation and reservations requirements can be justified: the founder wanted to create unique and more intimate experiences for visitors. Should it matter that this type of public benefit is intangible?

Ignore for a second the obvious benefit of public access to these artworks. Also ignore the limited circumstances some of the museum allow the public access to these works – a reason for reduced access might be that these museums are new and the operating expenses associated with keeping more traditional matters currently do not make sense because of number of guest expected. How is it determined whether the public receives enough or any benefit at all? Maybe the benefit is not clear or scientific, maybe it is indirect, or maybe it will take years to manifest but once it does it will be incalculable. The fact is public benefit can be difficult to pinpoint.

This difficulty is reminiscent of a Copyright issue raised over 100 years ago. When approached with the question of whether an advertisement could be protected under copyright law in Bleistein v. Donaldson Lithographing Co., Justice Holmes pointed out that judges should not determine the worth of “pictorial illustrations”. His reasoning, which boils down to the tastes of any portion of the public should not be looked down upon. Following that logic, maybe Congress, the IRS or a court adjudicating the issue of public benefit should determine that if any portion of the public benefits from an organization that organization should be allowed to keep its tax exempt status.

 *  *  *

Note: This Article is being reprinted with the permission from Entertainment, Arts and Sports Law Journal, Fall 2016, vol. 27, no. 3, published by the New York State Bar Association, One Elk Street, Albany, New York, 12207

*About the Author: David Honig is a member of the Brooklyn Law School Class of 2015. While attending law school he was a member of the Brooklyn Law Incubator & Policy (BLIP) Clinic. He is admitted to New York and New Jersey state bars. From 2015 to 2016 he served as a postgraduate fellow at the Center for Art Law. David is currently pursuing an LL.M. in taxation from NYU Law.

Building an Anthology from Ephemera: The Legal Issues of Constructing a Political Art Archive

By Scotti Hill*

INTRODUCTION

Predating the advent of words, images have long served as an elemental tool of communication, working to describe and persuade. As the modern era’s complex political systems galvanized and alienated large masses of the globe’s population, the combination of image and text has forged a new path for the rapid dissemination of ideas. In response, political protest manifested into artistic expression, a form preferable to violence.

Attempts to preserve artifacts from political protests have been undertaken with renewed urgency. From the fight for democracy in East Asia to socio-economic and racial activism in the United States, urban areas are drowning in visual and textual evidence of dissatisfaction, reminders of the angst of political alienation. Over the past several years, political events and tragedies have also mobilized archivists hoping to preserve the emotional and historical potency of movements’ artistic output.

Spontaneous graffiti, posters and artifacts have accompanied large systematic protests, such as Occupy Wall Street and Black Lives Matter, raising concerns about the effectiveness of unauthorized artmaking. In Paris and New York, items gathered in the aftermath of terrorist attacks were collected with a sense of emotive resolution. The ephemera of political activism for these protests-posters, makeshift sculptures, graffiti, installations-have been cautiously assembled in archives. Building upon a recent New York Times commentary that investigates the increasing frequency of artifacts archives across the globe, this article explores the legal issues accompanying the preservation of political art, including how copyright, trademark, nuisance, First Amendment and vandalism claims can complicate the already murky notions of artistic authorship in political protest art.

Copyright: Is Political Protest Art Protected?

Copyright defines the possession of an exclusive legal right to literary, artistic or musical material. Normally, the creator retains copyright despite a change in ownership of the physical object. The government retains the copyright to public artworks it commissions, although under the Visual Artists Rights Act (VARA), artists can still enjoy certain protections for state owned works, including preventing the work’s destruction or removal from the site in which it is placed. As the first federal legislation of its kind, VARA effectively grants artists a moral right to protect their creations. VARA does, however establish criteria for what creations are protected, including original and exclusive works crafted from media such as paintings, photographs, sculptures and drawings.

The U.S copyright law is designed to protect intellectual property from being improperly appropriated, exploited and disseminated by third parties. U.S. copyright law’s fair use exception allows for reproduction in cases of educational commentary, criticism, reporting or teaching. In determining fair use, the individual or organization seeking to reproduce the image must articulate the underlying philosophical purpose accompanying the image and take care to not impede the original work’s potential marketability.

Generally, copyright protection for an artistic creation is broad, covering any work of original authorship crafted in a tangible medium that “possesses at least some minimal degree of creativity.” Do temporary or impermanent creations, like those used in political protests, retain the same protection?

Creators of political protest art frequently operate under the guise of anonymity, working to shape or build upon a dialogue. Such items are rarely crafted as art items, let alone designed to be exhibited after the event they are intended to address, shore up or put down. Instead of being cherished in a pristine exhibition space, works are created to be portable and destructible so that they may serve as instruments of a movement, rather than merely symbols of it. Such items include posters that loudly parade the epitaphs of the movement, sculptures symbolizing political ideals, and flyers and pamphlets that participants hand out to eager members of the public.  Most importantly, these items are intended to be shared, to elicit a desired reaction in furtherance of the larger philosophy for which they serve. The disposability of such items negates the care and attention paid to traditional artworks, decreasing the incentive to protect item through legal means. With the foregoing logic in mind, it’s seemingly unlikely that creators of political protest art can assert robust copyright protection for works not intended to survive beyond a certain event. As it stands, the record is silent on the issue of artists seeking copyright protection for works used in political protests, yet the advent of protest artifact archives may bring this once ancillary issue front and center.

Ferguson, Street Art and the Politics of Anti-Institutional Artmaking

The 2014 death of Michael Brown rendered Ferguson, Missouri a hotbed of political and social unrest. In turn, artists and intellectuals resisted a media firestorm that presented the city’s extreme political unrest in a monolithic fashion. In his communal art project, Push Forward, artist Damon Davis pasted images of raised hands in various locations throughout Ferguson. With the permission of local business owners, whose establishments had been boarded up and closed to the community, these stirring images served as visual symbols of collective solidarity. Davis’ works, and many others like it, signal an increasing acceptance of graffiti as art, with more business owners allowing their structures to serve as mediums or ‘canvases’ of expression.

In the 21st century, street artists have seized a growing spirit of dissatisfaction with cultural institutions-namely museums and galleries for which pioneering Land Artist Robert Smithson deemed “mausoleums of culture.” Now, art forms such as graffiti bring art directly to the people, and while the last decade has ushered in an unprecedented degree of cultural acceptance to the medium that was once dismissed as vandalism, this arena is still abound with legal issues such as nuisance. 

As a common law tort, nuisance claims can be either public or private, and, arise from unauthorized and inappropriate uses of one’s property. Often, nuisance claims aim to reverse the tortfeasor’s action, which has affected the property’s value or the owner’s reasonable use of land. The illegal placement of graffiti has served as a logical iteration of nuisance, with the art form existing as a literal defacement of property-regardless of aesthetic value or societal appreciation.

Still other forms of political artmaking evoke public nuisance claims, raising concerns about the viability of art rooted in illegality. VARA’s protection of public artworks is contingent on whether or not the work is of “recognized stature.”  In affirming a legal standard for unsolicited street artworks, English v. BFC&R E. 11th St LLC held that VARA fails to protect illegally placed graffiti. While not all graffiti is protest art, its ongoing popularity attests to the viability of public avenues of expression. Like many of history’s most daring and thought-provoking artworks, graffiti often dares to confront directly that which would have otherwise remained hidden.

Cataloguing Chaos: Preserving the Evidence of Terrorist Attacks in Paris, New York, and the Occupy Wall Street Movement

In the wake of major terrorist attacks in New York on September 11, 2001 and Paris on November 13, 2015, archivists began the arduous process of cataloguing thousands of items compiled in makeshift memorials throughout the cities. In such events, archivists often struggle with determining the best procedure for both collecting the items and curating overwhelming collection.

In Paris, archivists prioritize letters and drawings above other artifacts, as these items seem to harness most eloquently the human dimension of tragedy. Archivists aim to preserve these artifacts’ emotional potency, what sociologists and intellectuals consider the most telling of the collective experience spurned by the event. The donative nature of these items negates legal concerns regarding ownership, however, preservation-determining the appropriate size of a state archive or who makes these determinations remains.

In contrast to the portable ephemera in Paris, New York’s post-9/11 archivist practices were decidedly more ambitious, relying on both small tokens of grief and large sections of destroyed structures. After the city’s terrorist attack, distorted masses of the World Trade Center were quickly isolated and stored with the intent to preserve. Their sublime presence in the 9/11 museum is emblematic of a cultural reluctance to let go, as if the fragments themselves carry with them a magnetic power to retell the trauma of that day’s human loss.

In addition to terrorist attacks, socio-political insurgencies in the West have catalyzed ambitious archives and databases. From the outset, attempts to document and preserve the Occupy Wall Street Movement were undertaken by sociologists, students and organizers. Archivists have to date thousands of items-posters, signs, photographs and messages-stored in physical and digital venues. The process has engendered a fascinating degree of debate from academics and movement insiders, many of whom question the legitimacy of archives’ underlying narratives.

Starting in 2011, students at New York University’s Moving Image Archive and Preservation Program (MIAP) began collecting items presenting the media coverage of the movement. With the help of MIAP director Howard Besser, the students dubbed themselves “Activist Archivists,” uniting under the principal goal of preserving “the spirit, decentralization, self-organization, playfulness, and whimsy of this protest movement [which would otherwise] be lost to history if the media that documented this did not survive.” The archive’s role as counter of ‘real’ history presents an empowering incentive for the process of collecting, and may well persuade other movements to make similar strides in the future.

Je Suis Charlie

According to the U.S. patent and trademark office, two applications were filed for “Je Suis Charlie,” Paris’ iconic rallying cry following the 2015 Charlie Hebdo attack. Recently, the Washington Post proffered a commentary on the increasing frequency by which private individuals and businesses have applied for Trademarks in the wake of public tragedies.

As discussed in Dennis C. Abram’s article “Je Suis Public Domain,” opportunists see great economic potential in creative output, such as slogans that encapsulate the essence of collective spirit following great tragedy. Such attempts are rarely, if ever, legally recognized. U.S. law dictates that a trademark must have some connection to a good or service that is being promoted and visually identified so as to distinguish it from other similar products. 

First Amendment and Vandalism: The Case of the Illuminator Art Collective

While material items such as posters, sculptures and pamphlets evoke the classic definition of a political artifact, performance remains an apt medium for the dissemination of socio-political critiques. Inherently uncommodifiable, performance art often prioritizes the immediate interaction of participants involved in political protests over secondary documentation in the form of photographs or videos. Groups like the Guerilla Girls, the famed feminists whose performances spurned valuable dialogue regarding institutional racism and sexism within the art world, have put art activism on the map in recent decades.

Similarly, the New York City-based Illuminator Art Collective (IAC) stages political protests at famous sites such as the Metropolitan Museum of Art and the United Nations Building, where these iconic structures become the conceptual canvas upon which political critiques are projected. Using a specially designed van that holds a projector on its roof, the group projects messages and symbols meant to provoke dialogue and reveal the secrets these institutions are inclined to keep hidden. The group’s tactics reveal a curious relationship between art activism and the First Amendment, as well as how the seemingly universal definition of vandalism must be altered to adapt to new technologies and artistic visions.

The group’s work highlights this fascinating intersection between art activism and law. On September 9, 2014, three members of the group, Kyle Depew, Grayson Earle and Yates McKee, were arrested for unlawful posting of advertisements, when they projected images on the façade of the Metropolitan Museum of Art. The images were critical of billionaire businessman David Koch, who had recently donated $65 million dollars to the museum in exchange for the museum’s public plaza being renamed after him. IAC’s projections were critical of Koch’s environmental stances, namely his denial of climate change. While parked on a public street, the van was approached by a NYPD deputy, who later seized the group’s projector equipment and arrested the three on the charge of unlawful posting of advertisements. Before these charges were formally dropped by a criminal court, the city of New York issued criminal summonses for three members. NYPL §145.30 “forbids unauthorized individuals from posting, painting or otherwise affixing to the property of another person any advertisement, poster, notice or other matter designed to benefit a person other than the owner of the property.” The law appears to be an adequate measure in protecting businesses from becoming hosts to unwanted advertisements from third parties. In instances of political protest however, does the projection of commentary on the exterior public space fit this definition? While the city of New York seemed to think so, the charges were ultimately struck down in criminal court, with IAC’s lawyer Sam Cohen rightly pointing out that a streaming projection fails to fit the standard definition of “affixing. ”

It follows that if IAC’s political projections fail to meet the definition of unlawful posting of advertisements; they similarly fail to match the legal requirements of vandalism. Vandalism is defined as the deliberate defacing or destruction of property. While it is clear that plastering a non-affixable projection to the façade of a building fails to constitute destruction, does it deface? Defacing implies the marking of a surface-though not in a severe a fashion as destruction. Therefore, IAC’s unique brand of projector activism exists as a clever exercise of first amendment free speech.

CONCLUSION

As curators and archivists undertake the arduous process of compiling artifacts for physical and digital preservation, many questions remain about the legality and posterity of protest art. What is the optimal manner by which to preserve political or artistic ephemera? Who is best situated to protect artists’ rights to create and capitalize on their own art? What do keepers of protest art see when they preserve or trade in this kind of creative output? While political upheaval and tragedy prompt inflections from diverse global communities, museum archivists and administrators as well as art dealers and collectors look to preserve the artifacts for entirely different reasons. Due to the changing and often unsettled landscape of political protest art, artists and collectors alike may find themselves in need of legal advice to obtain information about available protections and defenses.

Note: This article is reprinted with permission from Entertainment, Arts and Sports Law Journal, Summer 2016, Vol. 27, No. 2, published by the New York State Bar Association, One Elk Street, Albany, New York 12207.

About the Author: Scotti Hill is a J.D. Candidate, 2018 from the S.J. Quinney College of Law at the University of Utah. She served as a summer 2016 intern for the Center for Art Law, and she can be reached at scottiaustinhill@gmail.com.

Spotlight: The Max Stern Art Restitution Project

By Ryan Igel*

screen-shot-2016-09-15-at-5-25-14-pmThe Max Stern Art Restitution Project (the “Project”),  established in 2002, is tasked with locating the paintings Jewish art dealer Max Stern (April 18, 1904 – May 30, 1987) was forced to sell during the Second World War, and return them to his heirs. The Project was established at the direction of the heirs of the Max Stern Estate. As Stern did not have children, his heirs consist of Concordia University in Montreal, McGill University also in Montreal, and Hebrew University in Jerusalem. The Project also serves an important educational and moral function, and seeks to educate both the general public and those in the art industry about art theft and the importance of provenance research in ensuring that artworks are returned to their rightful owners.  

The Project is housed at the Concordia University in Montreal, Quebec. The location of Montreal is significant, as this is where Max Stern settled once in Canada, and where he opened his Canadian gallery, the Dominion Gallery. Dr. Clarence Epstein, a Courtauld-trained art historian with experience in managing artists’ estates, was chosen by the heirs of Max Stern to be the Director of the project, and still holds this role. The project began with seed funding from the heirs of Max Stern, but is now largely self-funded through the sale of selected paintings.

The need for the Project stemmed from the cultural program aimed at confiscating and forcing the sale of art initiated by the Nazi Regime during the Second World War. The unprecedented art theft and destruction that occurred in Europe between 1933 and 1945 was a major part of the Nazi’s systematic efforts to establish a “new world order”. Works that were considered to be “degenerate” because they did not perpetuate Nazi ideals were confiscated from museums, galleries, and even from the homes of individuals. Moreover, because the Nazis believed that certain individuals, particularly those of the Jewish faith, should not participate in the creation and perpetuation of German culture, many Jewish art dealers were forced to sell or forfeit their artworks well below market prices. Many of these confiscated artworks were destroyed or purchased by German art dealers and private collectors while a number of them were sold internationally to finance the Nazi war effort.

Max Stern was one such person. Stern survived the war in Canada, but in the early years of World War Two, he lived in Düsseldorf, Germany, where he owned an art gallery and auction house that was established by his father, Julius Stern. On August 29, 1935, Max Stern received a letter from the Reich Chamber of Fine Arts – an organization tasked with ensuring that artistic endeavors within the Third Reich reflected Nazi ideals – informing him that he could no longer carry on the business of buying or selling art in Germany. Stern was given a deadline of December 15, 1937 by which to sell the 228 paintings that were in his possession. These paintings were later sold at auction at the Lempertz auction house. The extent of Stern’s involvement in the sale of his paintings is unclear as the Lempertz Auction houses records were destroyed when Cologne was bombed during the Second Word War. However, the fact that the catalogue used by the Lempertz auction house resembled those used by Galerie Stern, suggests that Stern was involved in the sale of his paintings.

After the war, individuals who were either forced to sell their art or whose art was confiscated, sought to have their property returned. Post-War restitution commissions were established by the governments of various countries to hear claims for these works, but the commissions were not always sympathetic to claims asserted by victims of the Nazis. This left a significant number of artworks in the possession of governments, state-owned museums, dealers and private collectors.

Like many, Stern began working on retrieving his paintings. On December 27, 1947, Stern filed a claim with the Central Office for Property Control to have 20 of the paintings he was forced to sell returned to him. Stern also placed advertisements in a German art magazine, Die Weltkunst, to publicize his efforts within the arts community. Through these efforts, Stern was able to recover a small number of his paintings. The Project was created to facilitate the return of the majority of paintings that were not recovered during his lifetime.

Restitution efforts call for different skills and much international cooperation between art historians, attorneys, researchers, political figures and scholars. The contentious nature of claims for restitution, and the lack of a consistent legal framework for dealing with these disputes makes relying solely on legal reasoning and other typical adversarial techniques less effective. Furthermore, the lack of proof of prior ownership makes international cooperation essential, as it is only with this cooperation that evidence of true ownership can be pieced together once again. Instances of international or trans-organizational cooperation are noteworthy.

While the Project employs both full time and part time staff, it also relies on assistance from other players in the restitution field, such as Holocaust Claims Processing Office (“HCPO”), which acts as an advocate for victims of the holocaust and seeks the return of their stolen assets. The HCPO plays a key role in the restitution process, and assists the Project by conducting provenance research, by acting as an advocate on its behalf, and by facilitating communication between the parties.

Dr. Epstein’s team also works with the National Archives in Ottawa, Canada, and lead investigator Willi Korte, a lawyer based in Washington, D.C., who is the co-founder of the Holocaust Art Restitution Project (link www.plunderedart.com). Both the team at Concordia University and the National Archives assist Dr. Epstein in the search for works that belonged to Max Stern. Lead Investigator, Willi Korte, who has worked on recovering each of the paintings recovered so far, assists with determining the provenance of paintings so that records of ownership can be established and later used in the restitution process. This task takes him all over the world.

The Project approaches the repatriation of Stern’s works through both legal and non-legal channels. However, Dr. Epstein emphasizes that the repatriation of most works is not actually achieved through legal avenues. This is because many countries do not consider forced sales to be theft and also because most countries do not have a specific legal mechanism to assist with these types of claims. Instead, moral arguments are used privately in what Dr. Epstein refers to as “a process of reconciliation” between the parties. The Project also presents more practical arguments such as pointing to the fact that a painting with tarnished provenance is not marketable. The success that has been achieved by using diplomacy and moral arguments demonstrate that shame on one hand and praise on the other are better suited to achieving the Project’s goals.

The reconciliation process utilized by the project is illustrated by the repatriation of Wilhelm Von Schadow’s Self Portrait of the Artist. This painting was discovered when a researcher from the National Archives in Ottawa, Canada found it in a catalogue for a 1967 Düsseldorf Museum Kunstplast exhibition. The catalogue for this exhibition listed the paintings location to be the Stadtmuseum. The Project contacted the museum directly, and the parties discussed the idea of returning the painting to the heirs of Max Stern. In the course of these discussions, both moral and legal arguments were presented and the museum ultimately agreed that the painting should be returned to Max Stern’s estate. However, instead of returning the painting physically, the parties agreed that the painting would remain in the Stadtmuseum Düsseldorf on the condition that the painting was acknowledged as being on loan from Stern’s estate. The parties also agreed that while on display, the painting would be used to remind those who visit the gallery of the painting’s history. As part of the educational component of the agreement, the parties agreed that the painting would be involved in two exhibitions: one on the life of Jewish people in Düsseldorf, and one specifically on Max Stern and his art collection. The museum also agreed to take on the role of providing education on provenance research.

Although reconciliation is preferred to the uncertainty and cost of litigation, the Project achieved a major legal breakthrough in the United States in the case of Vineberg v Bissonette. Vineberg v Bissonnette, 529 F.Supp.2d 300 (D.R.I 2007). Vineberg involved a claim by the Max Stern estate for the return of The Girl From Sabine Mountains by Franz-Xaver Winterhalter. At the time, the painting was owned by Maria-Louise Bissonette, the step-daughter of Dr. Karl Wilhelm, who had purchased the painting from the Lempertz Auction House in 1937. In this case, Chief District Judge Mary Lisi recognized that the forced sales of artworks under those circumstances were equivalent to theft, and ordered Bissonnette to return the painting to the Stern estate. Although the establishment of this legal principle is significant, Dr. Epstein cautions that the judgment is limited to the United States and does not assist with the repatriation of works that are in other countries such as Germany, where most looted paintings are still located.

To date, the Max Stern Art Restitution Project has recovered twelve of Max Stern’s paintings and continues to locate and negotiate the repatriation of his remaining collection . Stern’s works have been found in auction houses, a German casino, and in private collections. Some of these recovered works are now on loan to museums and foundations. Some examples being Aimee, a Young Egyptian by Emile Vernet-Lecomte which is on loan to the Montreal Museum of Fine Arts and  Portrait of Jan Van Everdyck by Nicolas Neufchatel which is on permanent loan to the Jakober Foundation. Other paintings, as previously mentioned, have been sold to finance the Project. Through the sponsorship of conferences and other educational events such as The Israel Museum Conference “Justice Matters: Restituting Holocaust-Era Art Artifacts” (2008), the Project has not only contributed significantly to ensuring that efforts to repatriate works of art stolen by the Nazis during the Second World War remain relevant, but has also become an important source of information and guidance for individuals and similar organizations that also seek the return of these precious works.

Sources:

*About the Author: Ryan Igel is a second year student at the University of Ottawa Faculty of Law, with an interest in the intersection of art and law. Ryan is particular interested in the restitution of artworks looted during the Second World War. He can be reached at rigel064@uottawa.ca.

The author would like to thank Dr. Clarence Epstein, Director of the Max Stern Art Restitution Project, for his time during telephone interviews.

Disclaimer: This article is for educational purposes only and is not meant to provide legal advice. Readers should not construe or rely on any comment or statement in this article as legal advice. Instead, readers should seek an attorney with any legal questions.

Whose Rights? Anish Kapoor’s “Dirty Corner” Exposes A Battle Between Artists’ Moral Rights and The Rights of the Public

By Adrienne Couraud*

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Anish Kapoor’s Dirty Corner, before and after vandalism.

In 2008, President of the L’Établissement public du château, du musée, et du domaine  national de Versailles, Jean-Jacques Aillagon debuted a series of solo art shows and temporary art installations at the house and gardens of the Chateau de Versailles. Beginning with the summer solo retrospective of American artist Jeff Koons, the program has grown both substantively, including past artists such as Takashi Murakami (Summer 2010), Joana Vasconcelos (Summer 2012), and currently, Olafur Eliasson (Summer 2016), as well as procedurally, expanding from a seasonal to a year long program. In 2015, the contemporary art program of Versailles offered artist Anish Kapoor a solo show to integrate his sculptures within the spatial challenges the house and Versailles gardens present. As President of the Palace of Versailles Catherine Pégard states, “[Versailles] is not a museum or a gallery or an exhibition space.”

In his own words, Indian-born but British-raised artist Anish Kapoor describes his raw-material born sculptures as “talking” about himself. Kapoor’s sculptures emulate a “void” straddling the duality of  “something, even though it is really nothing.” Kapoor originally described his 2015 “Dirty Corner” installation destined for Versailles , a steel-and-rock sculpture over sixty meters long and ten meters high, as “the vagina of the queen who is taking power,” but later retracted his statements to focus on his message: “to create a dialogue between these great gardens and the sculptures”.

After the sculpture was installed it was subject to repeated vandalism attacks and Kapoor declined to remove it “to bear witness to hatred”. Following the complaint about the Kapoor’s “Corner” launched by a right-winged politician and Councilor of Versailles Fabien Bouglé, an administrative French court ordered the covering of anti-Semitic graffiti on artist Anish Kapoor’s installation, Dirty Corner, at the Palace of Versailles [“Versailles”] in September 2015. Mr. Bouglé filed a complaint with a French public prosecutor against Mr. Kapoor and Catherine Pégard, President of Versailles, for “inciting racial hatred, public insults, and complicity in these crimes,” after Kapoor decided to leave the vandalism as a public testament, “belonging to anti-Semitism that we’d rather forget.”

The Dirty Corner Court Case

Prior to the court decision, Versailles announced plans to alter Kapoor’s installation by covering the vandalism with a shiny gold foil against the faded brass structure, leaving the defacement as an obvious disruption of the work – a process that was expedited following the court decision. Despite artist’s meeting with French President François Hollande, who declared the defacements “hateful and anti-Semitic,” Kapoor explained to the French newspaper Le Figaro, “I had already questioned the wisdom of cleaning [the installation] after the first vandalism.” The French Minister of Culture, Fleur Pellerin, stated she respects Kapoor’s decision but found the public debates thus spurred “extremely interesting and raise the question of creative freedom.”

The Tribunal Administratif de Versailles released a statement about the decision deeming the vandalism a “serious and clearly illegal breach of fundamental liberty.” Though the court acknowledged the moral rights of artists, “this freedom has to be reconciled with respect for other fundamental liberties,” alluding to the requisite for public peace. The public nature of Kapoor’s installation required that the court ensure protection to “everyone from attacks on their human dignity.”

Kapoor reacted to the court’s decision in a phone interview from Moscow at the opening of his exhibition at the Jewish Museum and Tolerance Center, declaring the court’s decision a “perverse reversal” of his accord. “Without proper public debate and proper public exposure for culture,” Kapoor proclaimed, “we are in a fascist state.” Kapoor’s installation was vandalized once prior to the court decision and, thereafter, three additional times, to which Kapoor maintained, “I don’t want to see it on the work; I find it vile.” In his steadfast battle against racial hatred, however, Kapor has “refused to remove it and pretend it didn’t happen,” raising important questions concerning the boundaries of  aesthetic taste and artistic value.

What Are Moral Rights?

“Droit moral”, or moral rights, stem from the Kantian and Hegelian concept of transferring an artist’s personality into a work and refers to the right of an artist to control his work. Moral rights protect the personal value, rather than the monetary value, of a work. Under American Law, inalienable moral rights are have more limited jurisdictional protections than in other jurisdictions, as they are protected under judicial interpretation of copyright and trademark law, coupled with 17 U.S.C. §106A, or the Visual Artists Rights Act of 1990 (VARA), which protect moral rights for the life of the artist.

Prior to VARA, U.S. legislative history reveals the American endeavor to define moral rights as “derivative works”, or artistic works based on the work of another artist, demonstrated within the Copyright Act and the Lanham Act, which defines trademarks and unfair competition. After VARA was passed, in the United States moral rights automatically vest within an artist but are limited to a “work of visual art,” granting two particular rights: the right of attribution and the right of integrity. The right of attribution allows an artist to associate or disassociate his name from his work of visual art. The right of integrity prevents both the intentional modification of his work of visual art if the modification is likely to harm the artist’s reputation and the destruction of any work of visual art protected by a recognized stature.

Under European Law, however, copyright law typically protects inalienable moral rights perpetually. Under French law particularly, copyright law protects four moral rights: the droit de divulgation; or the right of disclosure, the droit de repentir ou de retrait, or the right to affirm or disaffirm works previously publicized works; the droit de paternite, or the right of attribution; and the droit au respect de l’oeuvre, or the right of integrity. French courts have refined the right of integrity to allow owners of physical works the right of reasonable use and the right of reasonable adaptation without gross distortion.  For example, French moral rights do not expire, regardless of the number of created copies of a work, while American moral rights more rigidly limit works based on the number of copies created.

The Dirty Corner’s Effect on Moral Rights

The French court decision affecting Kapoor’s Dirty Corner appears to place two additional refinements on moral rights in France because of the work’s public location. First, the public installation of Kapoor’s work subjected it to a public order. Second, the public installation of Kapoor’s work subjected the public to “protections of human dignity.” Though the court recognized Kapoor’s moral rights, the moral rights could not outweigh “other fundamental liberties” of the public, alluding to the requisite for public peace over artistic scandal.

“It’s a terrible, sad thing,” Kapoor announced in his reaction to the court decision. “France is weird, I don’t understand it,” Kapoor added. “It doesn’t take in the full context. We’re going to take the case to appeal and we’ll see what happens.” Kapoor continued, “[w]e have to experiment in public, it’s our role as artists, that’s how society grows. If we stop that, we might as well live in a fascist state.” For now, however, Kapoor will have to channel his determination to test the creative and cultural limits of France outside of the Palace of Versailles.

Sources:

*About the Author: Adrienne Couraud (J.D. Candidate 2017) is a student at Brooklyn Law School. She may be reached at adrienne.couraud@brooklaw.edu.

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

HEAR and the Guelph Treasure Recovery Efforts: Restitution in Review

By Nina Mesfin*

On June 7, 2016, the Senate Judiciary Committee heard a bipartisan-backed piece of legislation called the Holocaust Expropriated Art Recovery (HEAR) Act, S. 2763, 114th Cong. (2016). As recently reported by Center for Art Law and elsewhere, the HEAR Act aims to allow “civil claims or causes of action to recover artwork or other cultural property unlawfully lost because of the persecution during the Nazi era, or for damages for the taking or detaining of such artwork or cultural property.” In other words, the HEAR Act proposes a federal statute of limitations on restitution claims as opposed to statutes of limitation that vary by state in order to “lift unfair restrictions from heirs’ claims.” In addition to garnering support from both the Republican and Democratic parties, the HEAR Act also offers advocates outside of the political realm.

Screen Shot 2016-08-09 at 11.21.25 AMFollowing the bill’s introduction, on June 7th actress Helen Mirren testified before the Senate on behalf of the bill. Mirren’s support, in part, stems from her recent portrayal of Maria Altmann in the film Woman in Gold (released in 2015). Altmann was a Jewish woman who successfully reclaimed five Nazi-looted works by Gustav Klimt from the Austrian government in the landmark case Republic of Austria v. Altmann (03-13) 541 U.S. 677 (2004) 327 F.3d 1246, affirmed. The Altmann case set a legal precedent in which the Foreign Sovereign Immunities Act (FSIA) was applied retroactively, allowing a sovereign body to be tried in a U.S. court.

The timing of Woman in Gold, which has drawn public attention to Altmann’s success, coupled with recent congressional efforts to facilitate the restitution of Nazi-looted works, may impact the outcome of other restitution claims. One of these cases involves the Welfenschatz or Guelph Treasure– a collection of medieval art currently in the Kunstgewerbe Museum in Berlin—with an estimated value of $250 million dollars. On February 23, 2015, the heirs of the art dealers who sold the Guelph Treasure to Germany filed a civil action in a U.S. district court against Germany and the Prussian Cultural Heritage Foundation. The case of the Guelph Treasure will test further the limits of both the U.S. government’s dedication to Holocaust-era restitution claims and ability to broker restitution deals.

What is the Guelph Treasure?

The Guelph Treasure, consisting of 82 gold, silver and gem encrusted liturgical objects from the Church of St. Blaine in Brunswick, Germany, and according to art historian Christina Nielsen, it is considered to be “the greatest group of medieval objects ever offered for sale.” The objects range in date from the 8th to the 15th century and the majority are works of German craftsmanship while other notable pieces are Italian and Byzantine in origin. One of the most extraordinary characteristics of this collection is its indisputable authenticity; records indicate that prior to its auction, the Treasure has been in continuous care of the same noble German family for more than 800 years.

Subsequent Sales of the Treasure

Duke Ernst August was the last of his German ancestors to possess the Guelph Treasure. Due to economic hardship in 1928, the Duke was forced to put a price on what was considered a collection of “incalculable intrinsic value” because of “its antiquity and art-historical importance”(Nielsen, 442). To the dismay of many German citizens and the State itself, the Duke sold the Treasure to a consortium of Jewish art dealers in 1930: Julius F. Goldschmidt of Frankfurt, Berlin, and New York and Z.M. Hackenbroch and J. Rosenbaum of Frankfurt. Although the Duke intended for the collection to stay together, the consortium of art dealers, having failed to resell the collection in its entirety, began to sell off pieces of the Treasure.

After meticulously cataloging the collection, the dealers began selling, or rather attempting to sell, portions of the Guelph Treasure in Germany. As Germany frowned upon the sale of what it considered to be cultural patrimony, the new owners, a consortium of Jewish art dealers, then tried to sell the collection in the United States. The Guelph Treasure was first exhibited in New York in 1929, and by 1934, the consortium sold 40 of the Treasure’s 82 pieces to several museums in the United States, including the Cleveland Museum of Art (Nielsen 443). In 1935, the remaining 42 pieces of the Treasure were sold to the State of Prussia for 4.25 million Reich marks, or $1.7 million. High-ranking Nazi official Hermann Göring oversaw the acquisition and later gifted it to Adolf Hitler. It is the legality of the second sale in 1935 that the heirs of the consortium are disputing.

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Before their U.S.-based lawsuit, the heirs of art dealers J. and S. Goldschmidt, I. Rosenbaum and Z.M. Hackenbroch appeared before the German Government Advisory, also called the Limbach Commission. The Commission is a joint initiative of the Federal Commissioner for Cultural and Media Affairs and the Länder and the National Association of Local Authorities; it invites claims concerning Nazi-looted property that public institutions in Germany currently possess. The Commission serves as a mediator between these public institutions and former owners as well as their heirs, hearing cases and offering resolution recommendations. The New York Times reported that the heirs’ lawyers cited the “climate of fear and uncertainty for the [dealers’] futures in which Jews in Germany found themselves in 1935,” arguing that these dire circumstances suggest that any “purchase by the state from Jewish businessmen must be considered as having taken place under duress.” The lawyers representing the heirs attempted to prove that the sale was, in fact, forced by explaining that the dealers sold the pieces for $4.3 million less than they had paid for it five years earlier. The panel attributed the ten percent market price decease to the economic downtown wrought by the Great Depression.

After contemplating this argument, in March of 2014 the Commission’s panel recommended that the 42 “jewel-encrusted, intricately wrought silver and gold crucifixes, altars and other relics of the Guelph Treasure should remain in the possession of the state-run foundation.” Bloomberg News noted that the Commission went on to state that “[f]ar from selling under duress, the consortium had been attempting to unload the Guelph Treasure for years,” pointing to the correspondence among consortium members celebrating the sale.” The Commission also noted that the Guelph Treasure is an exception to the Washington Conference Principles on Nazi-Confiscated Art, which all German museums have agreed to uphold. The Principles are a set of guidelines that maintain that “any art object sold by Jews for less than its fair value during this period (Jan. 30, 1933, through 1945) is a candidate for restitution,” a period that includes the Guelph Treasure.”

This ruling, in favor of the Kunstgewerbe Museum is one of many made by the Commission that has been met with criticism. As art journalist Catherine Hickley reports, the Limbach Commission has recently “come under fire for a lack of transparency, the length of time it takes, failure to appoint a Jewish member and the low number of cases it has mediated.” The Commission has only mediated thirteen cases since its founding in 2003, whereas its Dutch counterpart has issued more than 140 since 2002.** In July of 2016, Germany’s culture minister, Monika Gütters, actually announced plans to reform the Limbach Commission.

The Civil Lawsuit over the Treasure

Screen Shot 2016-08-09 at 11.32.39 AMAlmost a year after the Commission made its non legally binding recommendation, the heirs to the Guelph Treasure, filed a civil lawsuit in U.S. District Court for the District of Columbia. Philipp et al. v. Federal Republic of Germany et al., 15-cv-00266 (D. D.C.). According to a Washington Jewish Week article, the seventy-one page complaint alleges that the consortium sold the 42 pieces to the State of Prussia “via a manipulated sham transaction spearheaded by Dresden Bank, which was acting on behalf and by order of the two most notorious Nazi leaders and war criminals,” Göring and Hitler. The complaint further notes that the heirs used the fact that the alleged forced sale was made for less than 35 percent of its actual value and that the payment “was then subjected to flight taxes that were demanded so the Jewish dealers could flee Germany,” as evidence backing their claim. One of the dealers, Hackenbrock,was able to leave Germany in 1935, although died shortly thereafter in London in 1937. Details concerning the other two dealers, Rosenbaum and Goldschmidt, are unknown.

In order to justify filing this suit in a U.S. court, attorneys for the claimants invoked the Foreign Sovereign Immunities Act, which “provides jurisdiction over foreign states that conduct business in the U.S. via exhibitions and other museum-related activity.” According to O’Donnell, one of the attorneys representing the claimants, FSIA’s applicability to this case is straightforward, as “Jewish victims of persecution like the Plaintiffs’ ancestors are victims of takings in property in violation of international law.” He further explains, “[a]s a result, and because the Defendants are engaged in commercial activity in the United States, this case presents precisely the category of claims over which § 1605(a)(3) of the FSIA, the expropriation exception, creates jurisdiction.”

In March 2016, Germany and the Prussian Heritage Cultural Foundation responded by filing an eighty-five page motion to dismiss the case, contesting the jurisdiction of the U.S. courts. Within the motion, the defendants contend “that the persecution and expropriation of property from its Jewish residents were a sufficiently internal affair so as not to be a violation of international law.” O’Donnell has described this motion as “revisionist” and “troubling.” Most recently, on May 11, 2016, claimants filed an opposition to the motion to dismiss. The latest filing in the case was in June a reply to opposition to motion re motion to Dismiss the Plaintiffs’ First Amended Complaint. Now we are waiting for the court to review the filings.

Conclusion

The pending case involving ownership of the Guelph Treasure has brought two interesting issues into focus. The first is whether the blanket application of forced sales to an entire time period, in this case the years immediately preceding and spanning WWII, is legitimate, not taking into account the market or the profession of the seller, i.e. an art dealer who is almost always in the process of making a deal. The Guelph Treasure also tests the authority of advisory commissions with no binding power, as rulings made by the Limbach Commission are unenforceable. On the other hand, there are several other European arbitrating bodies whose opinions are binding, such as the Austrian Restitution Binding Commission and the Dutch Advisory Committee on the Assessment of Restitution Applications for Items of Cultural Value and the Second World War. As Hickley points out in her article “German minister promises to reform Limbach Commission after mounting criticism,” unlike the Limbach Commission, the Austrian and Dutch advisory committees do not require both parties to agree in order to mediate disputes.

In challenging the Limbach Commission’s clout, the case of the Guelph Treasure may bring a foreign body into conflict with the crux of the U.S. court system. It will be interesting to see if and how the U.S. judicial system, in its dealings with the Guelph Treasure, will impact the authority enjoyed by European advisory board’s ruling on contested art. As Elazar Barkan explains in The Guilt of Nations: Restitution and Negotiating Historical Injustices, restitution as a means of acknowledging gross historical injustices is a relatively novel phenomenon. Nowadays, it “is a large part of the growing attention being paid to human rights.” The question becomes: in which instances is restitution warranted and in which does it potentially exploit society’s overeagerness to atone for past atrocities? Furthermore, at what point, if at all, is it appropriate for a third party state to hear these claims and issue rulings? While the United States at times offers a venue to bring restitution claims, the outcome and the cost of these claims is unpredictable.

Select Sources:

**There are currently five restitution commissions: United Kingdom, Austria, France, Germany, and the Netherlands. In 2007, the United States government considered establishing its own restitution advisory commission, to no avail.

About the Author: Nina Mesfin is a Summer 2016 legal intern at Center for Art Law. She is a rising junior at Yale University majoring in Ethnicity, Race and Migration and concentrating in Art, Literature and Narratives of Race and Ethnicity. Nina is also a scholar in the Yale Multidisciplinary Academic Program in Human Rights.

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

5 Charged with Selling Non-Genuine Native Goods: A Violation of the Indian Arts and Crafts Act

*By Lillia McEnaney

Center for Art Law previously reported In Brief that, in March 2016, the U.S. Attorney’s Office in the District of Alaska charged a handful of individuals with violating the 1990 Indian Arts and Crafts Act (IACA). Following is an in depth background of the case and a discussion of relevant statutes

The Indian Arts and Crafts Act

Screen Shot 2016-08-05 at 4.07.08 PM.pngPassed in 1990, the Indian Arts and Crafts Act is a federal truth-in-advertising law that prohibits the sale of goods that incorrectly claim to be Native produced. In the United States, there are 1.9 individual Native people who are members of the 567 state and/or federally recognized tribes. If an artist or an art dealer fraudulently claims that any of their wares were produced by an individual or group of Native Americans, they are in direct violation of IACA.

The current law is based off a 1935 Act of the same name that aimed to “promote the development of Indian arts and crafts.” This original legislation also created the Indian Arts and Crafts Board (IACB). The IACB’s purpose is to enforce IACA and ensure the “genuineness and quality” of Native works on the art market. Today, the IACB has the power to refer complaints to the FBI or to the Secretary of the Interior for investigation. After reviewing the investigatory report issued by either the FBI or the Secretary of the Interior, the IACB may recommend to the Attorney General that charges be filed against individuals who violate the IACA. Additionally, the IACB can create and register trademarks that are authentically Native American or Alaskan. In 2000, Congress amended the IACA to improve its enforcement procedures.

If found guilty, an individual who violates the IACA may face up to a $250,000 fine or imprisonment for no more than five years. If found guilty of more than one charge, that person may be fined up to $1,000,000 and imprisoned for up to 15 years.

Past IACA Cases & Criticism

A 2011 Government Accountability Report showed that the IACB received approximately 650 violation complaints between 2006 and 2010. The report indicated that 150 of these complaints suggested substantial IACA violations and 117 cases needed additional investigation. After receiving a complaint, the IACB can either pass the information to the FBI, to the Secretary of the Interior, or recommend to the Attorney General that charges be filed. Despite the fact that a violation of Indian Arts and Crafts Act is a federal matter, none of these cases have ever filed in federal court.

In total, only five people in five separate cases have been found guilty of violating the IACA between 1990, the year  Congress passed the IACA, and 2010. Two of these cases were dismissed and violators in the remaining three were sentenced to either probation or up to 13 months’ jail time.

Few Indian Arts and Crafts cases result in prosecution because the IACB focuses on preventative education rather than practical enforcement of the law. Reportedly, one of the Board’s most common methods of investigation is to send a form letter to suspected offenders. The letter detailed the guidelines put forth by IACA and described the penalties of violation. 

Additionally, the U.S. Government Accountability Office (GAO) suggested that reliable and objective data on the size of the market for Indian arts and crafts is sparse. Limited market data makes it even more difficult to propose a plan to stop this practice  because it is not always easy to tell the difference between a fake and an authentic piece, even for experts. Wayne Bobrick of Wright’s Indian Art in Santa Fe has said that “[t]here are some things that are obvious, but if they do it well enough, anyone can be fooled.” Additionally, though it is most common for non-Natives to claim to be Native, it is also common for some Native Americans to buy imported goods and pass them off as their own, authentic work, according to Tony Eriacho, a Native artist and activist. Taking these factors into account, the GAO also determined that conducting a more thorough and complex study would be costly and would most likely produce similarly biased results.

One substantial criticism of the IACA is that the Act does not protect artists that do not belong to federally recognized tribes. Currently, there are approximately 250 tribes in the United States that are not recognized by the Bureau of Indian Affairs or by their respective state’s government. Artists that belong to any of these communities are not protected by the Indian Arts and Craft Act, and are not even able to market their arts and crafts as “Indian-made.” This has massive implications, as many non-federally recognized Natives are no longer able to sell their authentic wares in fear of criminal prosecution. Lack of representation here is, of course, just one of many legal disadvantages that unrecognized tribes currently face.

Case Study: Five Charged with Selling Non-Genuine Native Goods

In May 2014, a team comprised of the Department of Justice, the IACB, and the Alaska Attorney General’s Office Consumer Protection Unit began an investigation of four Alaskan business owners under the accusation of violating the Indian Arts and Crafts Act. The investigation was prompted by complaints filed by summer tourists in Alaska. The tourists were allegedly told that various bone carvings that were for sale were made by Alaskan Native peoples. This inspection, spearheaded by the DOJ, is the result of an investigation conducted by the United States Fish and Wildlife Service (USFWS) that previously found these businessmen guilty of misrepresenting their goods. An undercover USFWS agent paid $1,985 for the non-genuine pieces at the store.

The people charged include “Vinod ‘Vinny’ L. Sippy, 38, d.b.a. Diamond Island, Icy Strait, and Gemstone Heaven; Juneau resident and business operator Norma M. Carandang, 60, d.b.a. Northstar Gift Shop; Puerto Rican resident and Ketchikan business owner Gabriel T. Karim, 33, d.b.a. Alaskan Heritage; Skagway resident and business owner Rosemary V. Libert, 56, d.b.a. Lynch and Kennedy Dry Goods, Inc.; and Libert’s seasonal employee, a resident of Huntington Beach, California, Judy M. Gengler, 65.” They are charged with, according to the DOJ, “the illegal misrepresentation of bone art carvings as made by Alaska Natives or Indians, when in fact they were made by local non-native carvers.”

When brought before the court, Sippy pleaded guilty, while Carandang pleaded not guilty. Because Sippy pleaded guilty, the arraignment also served as his sentencing. He “agreed to pay a $3,500 fine, make a $3,500 donation to the IACB, distribute a public apology letter and he will serve five years of probation.”

At the time of writing, the case was pending in the U.S. District Court for the District in Alaska.

UPDATE: On September 2, 2016, Ms. Libert was found not guilty of misrepresenting Native produced art in federal court on Friday. See Libert Letter to the Editor of the Skagway News.

Conclusion

In the 21th century, enforcement of IACA and regulating markets is becoming more difficult due to the growing online economy. E-commerce websites such as Etsy and eBay have “rapidly outpaced the law.” Though IACA protective mechanisms are strong, its Board may need  to reimagine the way in which the law is enforced in today’s digital economy.

The enforcement of IACA relies heavily on the public. When purchasing Native goods, purchasers should make sure to ask their art dealer for the artist’s information and for a written certificate for authenticity. If this cannot be provided, purchasers should consider giving this information to the IACB through a formal or informal complaint. Consumer information plays a vital role in the enforcement of the IACA and in maintaining a fair market for Native communities.

Sources:

*About the Author: Lillia McEnaney is an undergraduate at Hamilton College where she is studying Archaeology and Religious Studies and was recently appointed a Casstevens Research Scholar. Lillia is a research assistant in Hamilton’s Religious Studies Department, the Blog Intern for the Council for Museum Anthropology, the Webmaster for Art/Place Gallery, a 2016 Summer Intern for the Smithsonian’s National Museum of the American Indian, and an intern for the nonprofit organization SAFE/Saving Antiquities for Everyone. Lillia may be reached at: lmcenane@hamilton.edu.

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

The Latest in Nazi-Era Restitution Efforts

By Bianca Acquaviva*

Over seventy years after the end of World War II and there is still much work to be done in the restitution of Holocaust-era looted art works. Even since 1998, the signing and adoption of the Washington Principles, many of the signatories are still doing very little in terms of finding “fair and just” solutions. See our Review of “Fair and Just?” The following is a summary of the recent flurry of activity both in the US and abroad in the realm of Nazi-era looted art disputes.

IN THE UNITED STATES…

California, USA

The long awaited trial in the case of Von Saher v. Norton Simon Museum of Art at Pasadena et al is now set for September 20, 2016. The case was filed by Marei Von Saher, a Connecticut resident, seeking the return of two paintings by Lucas Cranach the Elder that were seized from her family by the Nazis in 1940. Adam and Eve, which compose a diptych, were created in 1530 and were most recently appraised in 2006 for $24 million together. Norton Simon Museum of Art (“the museum”), represented by the firm Munger Tolles & Olsen, has vehemently opposed the claim brought by the legal team of Herrick, Feinstein. The efforts have continued for over a decade and have included countless appeals, motions, and filings.

Before the war, the paintings were owned by Jacques Goudstikker, a Dutch-Jewish art dealer. They were stolen by Nazi henchman Hermann Goering in a forced sale after Goudstikker fled the Netherlands and died on board a ship sailing for the US. Following World War II, the paintings passed through two sets of hands before the museum obtained the paintings. Confusion as to the rightful ownership of the diptych was created by George Stroganoff-Scherbatoff, who alleged in 1961 that the Soviet government had seized Adam and Eve from his family in the 1920s. Indeed, the paintings were auctioned with permission from the Soviet authorities, and Goudstikker was the highest bidder at the 1931 auction. After the war, the paintings were discovered by the Allied forces and transferred to the Dutch authorities to find the rightful owners, who transferred these paintings to Stroganoff-Scherbatoff. In 1971, Stroganoff-Scherbatoff sold the paintings to Norton Simon, founder of the Norton Simon Museum of Art. The museum argues that returning the artworks to private hands when there are legal grounds for it keeping them is contrary to its desire to keep works of art available for public view. However, supporters of restitution efforts argue that the Museum should not be allowed to keep works that were stolen from a family seeking to reclaim them.

It is unlikely that the case will settle before the opening statements, which will allow jurors to hear the astonishing details of the paintings’ journey after the war. When U.S. forces discovered Goering’s collection of stolen art, they sent the works back to the countries the works originated from, and those countries decided how to settle claims to the works. Thus, after the war, two paintings were returned to the Netherlands. Ms. Von Saher claims that when her mother-in-law, Jacques Goustikker’s wife Desi, went to claim the paintings, the Netherlands effectively slammed the legal door in her face, but she never gave up the right to bring a claim against authorities for the painting. In its defense, the museum counters that Desi Goudstikker had a chance to lay claim to the paintings with the Dutch government and failed to do so. Needless to say, the case has been further complicated by the Stroganoff’s claim and recently passed California legislation. The trial has been much-anticipated, akin to the litigation surrounding Egon Schiele’s Portrait of Wally against the Austrian Leopold Museum that was settled in 2010. Observers are eager to witness how the public and private interests are balanced and what the fair and just solutions are in this case.

In California, the statute of limitations for the recovery of stolen property is three years. However, aware of the unique circumstances surrounding many claims arising from looting during the Holocaust, the California legislature passed California Code of Civil Procedure §354.3 in August 2002. The law eliminated the statute of limitations for claims to recover Holocaust-era artwork as long as the action was commenced on or before December 31, 2010. The district court found the statute to be unconstitutional on the basis of field preemption, finding it in conflict with federal foreign affairs powers. The Ninth Circuit Court of Appeals affirmed this decision. Six weeks later, the California legislature amended California Code of Civil Procedure §338(c) to extend the statute of limitations from three to six years for claims concerning the recovery of fine art from a museum, gallery, auctioneer or dealer. The law was made explicitly retroactive and the statute of limitations did not commence until actual discovery of both the identity and location of the work.

 

Oklahoma, USA

 

On February 23rd, the University of Oklahoma agreed to return a painting by Camille Pissarro to French Holocaust survivor Léon Meyer, whose father owned the painting when it was stolen in 1941 during the Nazi occupation of Paris. The painting, La Bergère Rentrant des Moutons/Shepherdess Bringing in Sheep, was created in 1886 and was estimated to be worth $1.5 million in 2008. In 2000, the University received the painting as a donation from the Weitzenhoffer family, who purchased it from a New York gallery in 1956.

The case was originally filed in the Southern District of New York in 2013 and then transferred to Oklahoma in 2015. The grassroots and legislative efforts to convince the University to conduct a thorough investigation into the true ownership of the work, ultimately lead to the parties negotiating a settlement. “Léone Meyer has agreed that, rather than getting the painting back for her own living room, to continue the public display of the painting for the public,” Meyer’s attorney, Pierre Ciric, said.

Under the terms of the settlement, the painting will still be accessible in Oklahoma and available for education purposes until it is transferred to France. In a few months, the painting will be moved to France, where it will remain in a museum for five years. After that period ends, the Pissarro will rotate in three year intervals between the University’s art museum in Oklahoma and a yet-to-be-determined museum in France. A label stating the painting’s history, its seizure by the Nazis, and its restitution will accompany the work.

The university never denied that the painting was looted by the Nazis. Instead, it resisted its return based on procedural rules and the statute of limitations. They argued that the donor had purchased the work in good faith, and that Ms. Meyer brought her case in New York instead of Oklahoma to avoid a more stringent statute of limitations. This settlement ends a three-year dispute between the parties.

IN THE INTERNATIONAL SPHERE…

Germany: Gurlitt Saga (See our previous coverage)

In January, the Gurlitt task force appointed by Ms. Grütters released the results of their two-year, almost $2 million investigation. They found the rightful owners of just five of the 1500 works in the Gurlitt collection, a conclusion that disappointed many. Of the works in the collection, about 30 to 50 are “of superior quality.” While Ms. Grütters has admitted her own disappointment, she seems to be taking the slow and steady approach, so as to ensure that the provenance of the works is correct and avoid “a second seizure” of the art, which would result if the works are improperly awarded. The collection is to be exhibited in Germany later this year.

In late February, Germany announced that it will pay for at least another year of research and hire additional people to assist in establishing the provenance of works in the Gurlitt collection. The German culture minister, Monika Grütters, reaffirmed Germany’s pledge to return any looted art to its rightful owners or their descendants and set the provenance research budget at 6 million euros, which is approximately $6.5 million.

Additionally, Ms. Grütters stated that she was discussing a law that would encourage individuals to return looted art with the German justice minister. She has also been encouraged by the German Jewish community to appoint a Jewish individual to the Limbach Commission, but stated that she would not do so because that individual “would be the only voice who would be prejudiced.” After receiving backlash and criticism for this comment, Grutters announced that 90 year old Michael Blumenthal, former director of the Jewish Museum in Berlin and United States Secretary of the Treasury, would be nominated to the Limbach Commission. Currently, the Limbach Commission is the only board that mediates restitution cases, and something else must be done seeing as how the board has been rife with controversy.

 

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Juan Gris, Violon en encrier (1913). Source: AlfredFlechtheim.com

Mediation with the Limbach Commission:

 

The heirs of persecuted Jewish art dealer Alfred Flechtheim have officially withdrawn from the state-run non-binding mediation process concerning Violon en encrier (1913) by Juan Gris, currently housed in the Stiftung Kunstsammlung Nordrhein Westfalen (Art Collections Foundation of Northern Rhineland/Westphalia) in Düsseldorf. The painting was sold in 1934 in London, and Flechtheim’s heirs have argued that this sale was the result of his persecution, which began even before the Nazis took power. The museum bought the work on the international market in 1964.

Flechtheim’s great-nephew, Dr. Michael Hulton of San Francisco, requested that his attorneys suspend the Limbach Commission due to concerns about the fairness of the proceedings and requested that the Commission not make any recommendations about the painting until these concerns are addressed. Dr. Hulton and the Düsseldorf museum agreed in 2014 to submit the matter to the Advisory Commission. This is not the first time that the German Advisory Commission considered a work originating from Flechtheim. In 2013, the Advisory Commission considered Portrait of Tilla Durieux, a painting by Oskar Kokoschka which was housed in the Museum Ludwig in Köln. The Advisory Commission affirmed the Nazi-persecuted loss of the painting absent any evidence to dispute that Alfred Flechtheim abandoned the painting because of his persecution. This put the burden on the museum to provide evidence as to the legitimacy of the museum’s possession of the painting.

Three years later, this is apparently no longer the case. In the Gris matter, only half of the panel was in attendance at the first hearing. After the hearing, Dr. Hulton’s attorneys told the Advisory Commission that they would be submitting a letter to the entire panel on the evidentiary matters discussed at the hearing. The letter was submitted three days later, but when they followed up with the Advisory Commission, they were told that the letter was not circulated to the panel and the panel was already deliberating its recommendation. Upon officially withdrawing from the process, Dr. Hulton released a statement detailing the procedural irregularities. In addition to the panel not receiving Dr. Hulton’s letter, half of the commission’s members, including its chairperson, not being present, a member left mid-hearing. As a result, Dr. Hulton halted the mediation process.

This comes soon after the 2015 filing of a civil action, Philipp et al v. Federal Republic of Germany et al,  against Germany and the Stiftung Preussischer Kulturbesitz (the SPK, which is responsible the administration of the Berlin museums, among other things) in U.S. District Court in Washington, D.C. after the Limbach Commission refused to recommend restitution of the Guelph Treasure to Alan Philipp and Gerald Stiebel. Mr. Philipp and Mr. Stiebel are blood relatives and successors of a group of Jewish art dealers who were threatened and forced to sell the Guelph Treasure for a fraction of its value in 1935. The plaintiffs seek the immediate return of the Guelph Treasure to their possession.

The Advisory Commission has received immense criticism, which will only continue unless they reform their procedures. On March 9, 2016, a group of lawyers from the United States and Europe sent an open letter to members of the German government asking for a reform of the Limbach Commission and advocating an international binding arbitration, stating, “[i]n its current form, the ‘Limbach Commission’ … is not a suitable forum to meet the demands of the victims. The lack of fairness, transparency and justice is evident.”

Switzerland:

There has been an increase in pressure on Swiss museums to recognize that works of art sold by Jewish refugees to help them escape from the Nazis were forced sales and should be returned to their heirs. Ronald Lauder, the president of the World Jewish Congress, has released a plan for the Swiss government to deal with claims resulting from forced sales, which, he advocates, should be treated the same as claims for looted art. Lauder is also calling for the establishment of a Swiss commission that can review art claims, as no such body exists. The Swiss have been generally unwilling to recognize fluchtgut cases––those arising from forced sales.

Last year, Isabelle Chassot, the Swiss culture minister, recognized that Switzerland is the only country that draws a distinction between fluchtgut cases and art that was lost due to Nazi persecution, and called for the latter term to be applied. However, the Swiss art community has strongly opposed this proposition. They argue that sales of art by Jewish refugees are different from those in Germany and Austria because Switzerland was a free country and sellers had full access to the proceeds. Good faith, Lauder states, does not make art clean, and Switzerland is behind the rest of the world in terms of provenance research. Switzerland has announced that 2 million Swiss francs will be available for provenance research, but Lauder believes the Swiss must also develop “a decent database and an independent commission which supervises this thing.” Switzerland is just beginning to take steps in the right direction.

Incidentally, the aforementioned Gurlitt collection has been accepted by a museum in Switzerland, the Kunstmuseum Bern.

Latvia:

Looting and cultural losses that occurred before and during World War II on the eastern front have been increasingly difficult to ascertain and remedy the further east the claims extend. Therefore the recent decision by the Latvian parliament to address the legacy of the Holocaust is very important. On February 25, 2016, Saeima, the parliament of Latvia, passed legislation to restitute five formerly Jewish-owned properties to the Council of Jewish Communities of Latvia. The legislation, which was supported by the World Jewish Restitution Organization and the U.S. government through Special Envoy for Holocaust Issues Nicholas Dean, will now go to the Latvian president for his signature. The five properties, owned by the Jewish community until World War II, are: a former Jewish school in Riga, a former Jewish religious school also in Riga, a former Jewish nursing home in Riga, and two former synagogues in Jurmala and Kandava. Though the restitution of these five properties is certainly a fantastic accomplishment, there are about 270 former Jewish communal properties that have yet to be returned to the Latvian Jewish community.

Property owned by private interests and individuals are not addressed by the new legislation. Elie Valk, chairman of the Association of Latvian and Estonian Jews in Israel, stated that the restitution of additional properties would “help the Latvian Jewish community sustain and revitalize itself as well as provide urgently needed assistance to Holocaust survivors from Latvia.”

Poland: 

Please see Center for Art Law recently published summary of restitution efforts in Poland, which can be found here.

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As with most government efforts, funding is the perennial problem. The research and recovery of art works is sometimes prohibitively expensive, as some of the items that may have been identified as looted are worth a fraction of the costs that would be necessary to facilitate their return. Individuals, museums, governments, and nongovernment agencies must take a more active role in solving these problems. As we have seen throughout the Gurlitt investigation, which took two years and nearly $2 million, millions upon millions of dollars can be spent without very many results. Recently, more emphasis has been put on provenance through initiatives such as the Smithsonian Provenance Research Institute and the creation of the German Lost Art Foundation (Deutshes Zentrum Kulturgutverluste). It is the collective responsibility of the public to ensure that pressure is put on museums and governments so that the stolen property of Holocaust victims may be rightfully restored to their families.

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* About the Author: Bianca Acquaviva is a legal intern with Center for Art Law and a second year law student at the Benjamin N. Cardozo School of Law, where she serves as a staff editor on Cardozo’s Arts and Entertainment Law Journal. She may be reached via e-mail at acquaviv@law.cardozo.yu.edu.

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

WYWH: You’ve Been Served – “Gerhard Richter Painting” and German Cultural Heritage Protection Law

By Elizabeth Weber, Esq.*

Screen shot 2015-04-17 at 2.41.44 PMOn February 3, 2016, the “You’ve Been Served” dinner and a movie event was hosted by the Brooklyn Law School Art Law Association. Attendees included attorneys, artists, art dealers, and students. The film screened, Gerhard Richter Painting, is a documentary that provides a glimpse, deliberately and slowly, into the life and artistic processes of visionary German artist Gerhard Richter. In the film, director Corina Belz highlights Richter’s creative process and allows viewers to watch Richter work on art in real-time. Interspersed in the film are clips from Richter’s youth, in which he discusses his views on art and life, which may or may not have changed for the artist over the course of his long and prolific life. The film attempts to provide viewers an intimate view of Richter’s past and his present: his escape from Eastern Germany at the age of 28, his trove of family photos that have an ambivalent effect on the artist, who wonders, “Who is this woman?” as he points to an image of his mother and wonders “Should I throw all of these away?” when trying to organize the photo trove in chronological order. In the film, Richter observed how American audiences tend to be more direct in commenting on his work, with one observer calling his gray series the English term for “scheisse.”

Following the screening of the  film, a partner in Sullivan & Worcester’s Litigation Department in Boston, Nicholas O’Donnell, led a discussion about German cultural heritage law. Mr. O’Donnell, who is the editor of the firm’s Art Law Report blog and an attorney working on a number of art law matters involving Germany – including the Restitution claim for the Guelph Treasure – discussed the hotly contested 2015-2016 German Cultural Heritage Protection Law. The first draft of this legislation proposed that all objects of national importance older than 50 years and valued at €150,000 or more must be granted an export license by the German government to leave German soil. A subsequent draft revision amended the value threshold, raising it from €150,000 to €300,000 and increasing the object’s age from 50 to 70 years. Additionally, the revision states that works of living artists may qualify as objects of national importance only with the artist’s permission. Having written about the proposed revisions already, O’Donnell described the law as archaic in a time when the art market is expanding beyond geographical national borders and becoming part of the larger global economy.

The legislation sparked outrage throughout the art world. Some artists, like Richter, and other art market experts condemned the act, with some experts portending the destruction of the German art market should the act come to pass. Mr. O’Donnell noted that other artists, including Georg Baselitz, went so far as to withdraw loaned works from German museums in protest of the law.

It was noted that other EU countries have export limitations on cultural valuables, including France and Italy, among others, and that Germany may be using these countries’ laws and overarching EU law as justification for its Cultural Heritage Protection Law. Indeed, the European Economic Community, one of the three founding pillars of the European Union, issued a regulation in 1993 that set uniform export controls for EU member countries. This regulation, titled “On the Export of Cultural Goods,” stated that “[t]he export of cultural goods outside the customs territory of the Community shall be subject to the presentation of an export license.” Accordingly, Germany’s Cultural Heritage Protection Law narrowed the geographic scope of the EU regulation by decreasing the acceptable export zone from the entire EU to Germany only.

A press release issued by the German Press and Information Office of the Federal Government acknowledged the EEC regulation, stating that “[s]ince 1993, EU law has required permits to export relevant cultural property outside the EU, for example to major art markets in Switzerland and the U.S.” The press release further indicates that “the German law sets more generous terms” than the aforementioned EU law.

Additionally, German authorities have characterized the law as an attempt to keep illegally-imported artifacts, especially those sold by ISIS to finance terrorist regimes, from being imported into and subsequently purchased and sold on German soil. Professor Monika Grütters, Germany’s Minister of State for Culture, stated that “[i]n view of the barbaric destruction of cultural heritage in the Middle East and many other areas of crisis and civil war, this move was long overdue, demanded by ethics and morals and by our identity as a nation of culture.”

During the Q&A session with Mr. O’Donnell, the discussion included possible loopholes within the  law, what permits for below market pricing and selling goods on the illicit black market. In addition, O’Donnell commented on the ramifications of the law vis-a-vis restitution claims that are currently pending against German institutions and individuals. Namely, would the law disallow the export of objects that qualify as “national treasure” after a restitution claimant succeeds in proving that property was looted from the family during the Nazi-era? It’s possible – if the draft German Cultural Heritage Protection Law passes this year, all works produced before 1946 (70 years before 2016) would be categorized as artifacts possibly restricted from export .

Cultural heritage issues are not exclusive to antiquities and remain a pervasive issue for contemporary artists. Different interests come into play between the governments seeking to protect and preserve their cultural identity and those who disseminate art to the international community. Although it is vitally important to protect cultural objects, governments must weigh the benefits derived from restricting the export of cultural patrimony against the curtailment of artists’ and art dealers’ rights. Namely, governments should take into account the far-reaching effects of cultural patrimony laws before restricting the flow of goods into the market to avoid the negative backlash that naturally follows such regulations.


Center for Art Law would like to thank Tess Bonoli and all the members of the Brooklyn Law School Art Law Association for their generosity and enthusiasm for the program. Many thanks to all who attended this event, with special thanks to Nicholas O’Donnell for his illuminating discussion of German cultural heritage issues.

About the Author: Elizabeth Weber is a lawyer living in Brooklyn, NY.  She graduated from the University of Florida Levin College of Law, where she received her certificate in Intellectual Property Law and served as an active member of the Art Law Society and the Journal of Technology Law and Policy. She is the Spring 2016 Postgraduate Fellow with Center for Art Law.

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Disclaimer: Reading “Wish You Were Here” a/k/a “WYWH” articles is no substitute to attending art law events, trials and programs. This and all http://www.itsartlaw.com articles are for educational purposes only. Readers should not construe or rely on any comment or statement in this article as legal advice. In case of legal questions, readers should seek a consultation with an attorney.

Is it a Crime? The Empty Defendant’s Chair at the Knoedler Civil Trial

By Jessica Preis*

On February 10, 2016, the highly watched case, De Sole v. Knoedler Gallery, LLC, settled out of court. The events leading to the settlement date back either to 2004 when Eleanore and Domenico De Sole purchased a forged painting attributed to Mark Rothko from Knoedler Gallery (the “Gallery”), or to 1990s when Glafira Rosales, a Long Island-based art dealer walked into the Knoedler Gallery with a story that she knew a son of a collector who had some paintings he wanted to sell. At the time, Ann Freedman was the long-standing President of Knoedler Gallery; she has been quoted as “believing in” Rosales’ paintings. Freedman and Knoedler proceeded to sell dozens of paintings either consigned by or sold by Rosales. After the story broke that these works were fake and the gallery closed, the De Soles and other buyers sought restitution for the the fakes they purchased for millions of dollars. Additionally, the U.S. Attorney began a criminal investigation to punish the wrongdoers. One particular claim that could be raised in both the civil and criminal contexts is fraud.

Background of Law:

Fraud is defined and handled differently in civil and criminal cases. In the civil context, fraud is defined more broadly and is oftentimes based in tort and contract law. The Restatement of Restitution delineates that fraud entails misrepresentation, concealment, or nondisclosure by individuals intending to cause others to make a mistake. Thereby, the defrauders induce their victims to refrain from or enter into particular transactions. In the civil realm, the plaintiff has the burden to prove by clear and convincing evidence that the defendant committed fraud. Penalties include restitution by paying back the victims and payment of fines.

In criminal law, there is no universally established statute addressing or defining  fraud. However there is consensus by scholars and lawyers  that criminal fraud involves an element of deceit. According to United States District Judge Edward J. Devitt, fraud is “the intentional or deliberate misrepresentation of the truth for the purpose of inducing another, in reliance on it, to part with a thing of value or to surrender a legal right.” Therefore, fraud is deceit which can be committed by words, conduct, or an omission such as silence, with the intention of someone else acting upon it and incurring an injury. In order to obtain a guilty verdict, the government has the burden to prove someone committed fraud “beyond a reasonable doubt” in the criminal context. Individuals who are convicted of committing criminal fraud face penalties such as imprisonment, probation, fines, and restitution.

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What did the artist see? Elizabeth Williams (above) drew court sketches at both criminal and civil trials involving Rosales, Knoedler Gallery, Ann Freedman and others. Show with William’s works, entitled “Knoedler Trial Courtroom Illustrations” is currently on display.

History of Litigation:

Defendants in the civil cases have included, with some variation, the Gallery, Ann Freedman, and Rosales. During the De Sole trial, however, only attorneys for the Gallery and its former Director were present. Auspiciously, Glafira Rosales, the other major player in the legal fiasco, was absent from the recent De Sole civil proceeding. The Gallery was originally subpoenaed by the Grand Jury on September 14, 2009. Thereafter, it paid the firm Herrick Feinstein $700,000 to assist with the subpoena. The De Soles argued that Freedman must have known Rosales was selling the Gallery fakes because she was selling the paintings far below market value.

Some may wonder why Ann Freedman was the only named individual defendant in the De Sole case (in other instances civil plaintiffs have also named art advisors among the culpable parties). Especially since on September 16, 2013, Rosales pled guilty in a Manhattan federal court to conspiracy to sell fake works of art, conspiracy to commit money laundering, and various other fraud and tax-related crimes arising out of the forgery scheme. After all, Rosales’s ultimate targets paid over $80 million for the artwork she delivered to Knoedler for sale. The case against her was named USA v. Rosales. According to the New York Times, Rosales cooperated with federal prosecutors, probably in hopes that she would receive a reduced prison sentence by assisting in additional arrests. Preet Bharara, United States Attorney for the Southern District of New York, reported that Rosales agreed to forfeit $33.2 million and her home in Sands Point, New York to pay restitution to the victims of her crimes. Interestingly, it seems Rosales changed residence. In 2005 she  lived at 10 Station Road, Great Neck, New York. In 2008, she was listed as residing at 21 Elm Court, Sandy Point, New York.  

There are some practical reasons not to name Rosales as a defendant: it is unlikely that she would have maintained sufficient funds to pay the De Soles back. The De Soles likely brought the lawsuit against Knoedler Gallery because they wanted monetary compensation for the forged Rothko that cost them nearly $8.5 million. According to an assistant U.S. Attorney, Rosales was sued civilly along with Freedman and Knoedler, however her case did not progress because she was arrested on May 21, 2013. She asserted her Fifth Amendment right not to incriminate herself. After pleading guilty and paying nearly $4 million to the government, there would be no sense to admit to the crime. Additionally, the money paid out would ultimately be given to the injured plaintiffs.

Sentencing in criminal proceedings:

There is a question as to why Rosales has not actually been sentenced despite pleading guilty in the criminal proceedings. Generally, in a plea bargain, the prosecutors in the case negotiate charges and possible sentencing with the defendant. The government may make certain concessions to induce the defendant to agree to a specific lesser guilty charge in place of a lengthy and expensive trial where the defendant could ultimately be charged with a more severe crime. In this case, Art Newspaper reported that Rosales cooperated with the U.S Attorney’s office to help build cases against others, as mentioned before, which may include Ann Freedman. In 2013, the government requested a stay in the civil litigation due to the ongoing criminal investigations against Rosales. Specifically, the government was concerned that the civil suit would undermine the criminal investigation.

Speculations:

The federal prosecutors may have made a deal with Rosales so that she could help strengthen the case against the worst perpetrators in the crime scheme, who in their mind would most likely be Ann Freedman and Knoedler Gallery as an entity. In such a scenario, Rosales would have made a deal to testify against individuals like Freedman.

Inquiring minds may want to know as to whether the government may have a criminal case against Freedman and Knoedler Gallery. If so, why has the government not filed those suits and is there a statute of limitations to do so? Typically, the statute of limitations begins to toll once the particular crime is completed.  According to federal law, depending on the specific type of fraud committed (i.e. tax offenses or major frauds against the United States), the statute of limitations vary anywhere between three and seven years. The U.S. Attorney may not have charged Freedman in a criminal case during the civil litigation for cautious and strategic reasons. It is possible that the U.S. Attorney wanted to wait out the civil proceedings in order to strengthen the criminal case against Freedman. Before the civil litigation, the prosecutors’ investigators may not have had knowledge of or access to all the same witnesses. Without such witnesses, the federal prosecutor’s case may be seriously weakened due to a lack of probable cause. Now, there is a full record that will ultimately help the U.S. Attorney with its potential case. Moreover, if the civil case failed, it would be very unlikely for a criminal case to succeed with the higher burden of proof, guilt beyond a reasonable doubt.

Recently there has been some progress in the criminal arena that will making this continuing forgery saga even more interesting. On February 16, 2016, Spain’s National Court came to a ruling that Jesus Angel Bergantinos Diaz, a businessman involved in the commissioning of the forged art can be extradited to the United States to face criminal charges in New York federal court. This process will be time consuming because Diaz will most likely appeal the extradition.

Other individuals charged include Diaz’s brother, Jose Bergantinos Diaz, and Pei Shen Qian, the Chinese artist responsible for creating all the forgeries. Pei Shen Qian, like both Diaz brothers fled the United States. In his case, he travelled back home to China.

The civil proceedings relating to the Gallery forgery scandal have proven very momentous and dynamic. It begs the question whether there will be similar litigation in the criminal realm against individuals like Rosales. We must wait and see!

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*About the Author: Jessica Preis is a 3L at Benjamin N. Cardozo School of Law and is working with Center for Art Law through Cardozo School of Law Art Law Field Clinic. She was a staffer on the Arts and Entertainment Law Journal and is fascinated by Art Law and Criminal Law.

Case Review: Rauschenberg Estate Saga of Trust and Fees Explained, Again

 

By Samantha Elie*

As the Center for Art Law already reported in Rauschenberg Estate Saga of Trust and Fees Explained, the three trustees of a revocable trust that named the Rauschenberg Foundation as the sole remainder beneficiary became entangled in litigation with the Foundation. Following a Petition by the Foundation to determine trustee’s fees on June 21, 2011, litigation arose when the trustees claimed that they were entitled to a mere $60 million in fees, in clear opposition with the Foundation’s belief that they were only entitled to a total of $375,000. On January 6, 2016, Florida’s Second District Court of Appeals unanimously upheld Circuit Judge Jay Rosman’s decision to award $24,600,000 to be split evenly among the three trustees.

Prior to his death, iconic artist and philanthropist Robert Rauschenberg (1925-2008) established a revocable trust whose sole remainder beneficiary was the Robert Rauschenberg Foundation. The Foundation is an organization he had established to further his philanthropic and educational initiatives, and to support artists and art related issues. The trustees were three of Rauschenberg’s long time friends and business associates: Darryl Pottorf, the artist’s business partner and companion of over twenty-five years; Bennet Gruntman, his accountant for over eighteen years; and Bill Goldston, a trusted associate. During their four years as trustees, the value of the assets in the trust, comprised mainly of high-value works of art created by Rauschenberg, increased from $605 million to over $2 billion. This increase was due at least partially, to the trustees’ “strategic plan to withdraw Rauschenberg’s art from the market, in order to prevent a decline in value from speculators or collectors flooding the market with his art,” a fate that other famous artists’ estates, such as Andy Warhol’s estate, were not as lucky to avoid. In Re Estate of Rauschenberg, Circuit Court of Florida, 20th Judicial Circuit (Lee County), File No. 08-CP-2479 (Aug. 15, 2014). The trustees maintained a hands-on approach to the job throughout their tenure, and the trial court noted that “Rauschenberg’s artistry was recognized in the marketplace, and some of that recognition is attributable to the Trustee’s management of his ‘brand,’” though the artist’s talent and favorable market conditions at the time after his death should also be mentioned. Id.

The written instrument outlining the parameters of the Trust did not contain a provision addressing the methodology to be used in determining trustee’s fees, and the difference between what the parties thought the fees should be, or $59.625 Million, would prove impossible to settle. So the parties looked to the Florida statute addressing trustee fees. Unfortunately, the statute provides only that the award be “reasonable under the circumstances” without providing any criteria, methodology, or further explanation. § 736.0708(1), Fla. Stat. (2007).

At trial, both sides brought in experts and utilized case law to explain their differing world views. The Foundation focused on the amount of time that the trustees worked and sought to set a reasonable hourly rate. The Foundation thus calculated trustee fees using the “lodestar” method, set forth in Florida Patient’s Compensation Fund v. Rowe, 472 So. 2d 1145 (Fla. 1985), by multiplying the number of hours reasonably expended by a reasonable hourly rate. This method is typically used to determine attorney’s fees but was expanded to determine reasonable fees for guardians or personal representatives in In re Estate of Platt, 596 So. 2d 328 (Fla. 1991). The Foundation sought to expand the doctrine and apply this method to trustee fees.

The trustees, on the other hand, focused on the work rendered and value created for the trust. They argued that the court should use the criteria set forth in West Coast Hospital Ass’n v. Florida Nat’l Bank of Jacksonville, 100 So. 2d 807 (Fla. 1958), a case in which trustee fees were actually being contested. The eleven factors to be considered are:

  1. The amount of capital and income received and disbursed by the trustee;
  2. The wages or salary customarily granted to agents or servants for performing like work in the community;
  3. The success or failure of the administration of the trustee;
  4. Any unusual skill or experience which the trustee in question may have brought to his work;
  5. The fidelity or disloyalty displayed by the trustee;
  6. The amount of risk and responsibility assumed;
  7. The time consumed in carrying out the trust;
  8. The custom in the community as to allowances to trustees by settlors or courts and as to charges exacted by trust companies and banks;
  9. The character of the work done in the course of administration, whether routine or involving skill and judgment;
  10. Any estimate which the trustee has given of the value of his own services; and
  11. Payments made by the cestuis to the trustee and intended to be applied toward his compensation.

After hearing from 21 witnesses and seeing over 300 exhibits, the Circuit Court found “that there is no precedent for use of the lodestar analysis to determine a reasonable fee for trustees, and further [found] that the use of the lodestar analysis would be unreasonable under the particular facts and circumstances of this case.” In Re The Estate of Rauschenberg. While the trial court applied the West factors recommended by the trustees, it found that they were still asking for more than was appropriate. Using the same factors as the trustees, the court awarded trustee’s fees in the amount of $24,600,000, approximately half of $55,000,000 requested at trial. (For an analysis on how the court weighed the factors and came to this conclusion, please see Rauschenberg Estate Saga of Trust and Fees Explained). Despite the trial court reducing the award and splitting the difference, the Foundation appealed, believing that the judgment frustrated the testator’s intent and hoping to persuade the Court of Appeals that the lodestar method was really the correct way to calculate trustee fees.

On appeal, Circuit Court Judge Silberman, writing for a unanimous court, upheld the trial court’s decision and wrote “only to explain why the trial court correctly refused to calculate fees using the lodestar method.” The opinion focused on the history of applying the lodestar method, emphasizing that it was to proper in determining attorney fees, but there were no cases on point in which the lodestar method was used to determine trustee fees. Since the Florida Statute discussing trustee fees, Fla. Stat. § 736.0708(1) (2007), merely explains that trustees should receive reasonable compensation, the Court of Appeals looked to the statute’s legislative history. The decision relied heavily on the Senate Staff Analyses in support of the bill, which explained “[o]n the factors to be taken into account in determining a reasonable compensation, see West Coast Hospital Association v. Florida Nat’l Bank of Jacksonville.” Therefore, while attorneys will continue to be paid following an hourly rate, trustees fees must be calculated based on the particular trust over which they have control and how well they’ve maintained the trust assets.

The three trustees were represented by Michael Gay, Partner at Foley & Lardner LLP in Orlando Florida, and the Robert Rauschenberg Foundation was represented by Robert W. Goldman, attorney at Goldman Felcoski & Stone P.A. law firm.

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About the Author: Samantha Elie (JD Candidate 2017) is a legal intern with Center for Art Law and a student at the Benjamin N. Cardozo School of Law. She may be reached at selie@law.cardozo.yu.edu.

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