Folding the White Cube: What Is Transforming the Gallery Scene in NYC?

by Alexandra Terrell*

Screen Shot 2017-07-19 at 4.29.31 PMSpeaking at a Stropheus Art Law event entitled “Letting Go of Brick and Mortar: The Future of the Gallery” in September 2016, Josh Baer noted that the notorious art scene in the Big Apple has always changed cyclically. He questioned, “How many [galleries] are going to be flourishing 5, 10, 20 years from now? I’m going to say not many. And it’s always been that way.” Several quintessential New York City galleries affirm Baer’s prediction. On Stellar Rays, Andrea Rosen Gallery, and Mike Weiss Gallery, amongst others, have recently closed their doors for good. Small and midsize galleries, which often play a pivotal role in helping promote emerging artists (JTT with Damon Zucconi and Sargent’s Daughters with Cy Gavin are two examples), have a hard time surviving New York City’s ever-changing and always-demanding “make it or else” zeitgeist, much like the artists they represent. With an influx of artist-types comes gentrification, followed by higher property taxes, and when the lease expires, a higher rental rate to renew. When these increases in overhead become unsustainable, galleries often move to more affordable areas, starting the cycle all over again. Today, some might call the process hypergentrification because it seems to have heightened and accelerated, with property taxes and rental rates skyrocketing to stratospheric levels and landlords unwilling to negotiate longer-term leases.

The Internet plays an important role in the changing art market, as do art fairs—galleries are no longer the sole source of viewership for an artist. Artists often display their work directly to an audience online, eliciting sales and promoting their work without the help of a gallery. As Michael Foley of Foley Gallery aptly puts it, “The things that gallerists have embraced over the years as additional tools may ultimately be our undoing.”  At the same time, however, the gallery offers a viewing experience that the dimensionless white space of the Internet cannot. It’s impossible to smell the paint or perceive a piece’s physical presence through the interface of a computer screen. To reconcile the innovations of the Internet age and costly real estate with the necessity of what Josh Baer describes as a “chemical view of art”, new models of gallerist-artist-client relationships have arisen, expanding the ways in which art is presented to the public. However, with diversified roles and the use of non-traditional spaces, gallerists take on new legal responsibilities.

The Essence of the Problem

Gallerists in New York City list many reasons for abandoning their brick-and-mortar spaces—the rise of art fairs, the burgeoning online art market, the desire to retreat from the grind of the art-industrial complex, and the changing nature of the art itself. Some even blame closed-minded clientele. Collectors have shifted their focus to “market-tested trophy works”, often buying such works online without viewing them in person. Because these works tend to be the domain of blue-chip galleries with multiple locations, they are the ones benefitting disproportionately from the online market while small and midsize galleries suffer.

In a recent article in the New York Times, Robin Pogrebin notes a widening economic divide between small galleries and large ones. She attributes this phenomenon to the exorbitant cost of real estate as well as the proliferation of expensive art fairs. Participating in certain art fairs can cost a gallery hundreds of thousands of dollars, virtually shutting out any gallery pulling in less than seven figures annually. Economic factors are not the only barrier to showing at major art fairs. Many are quite selective when choosing exhibitors, opting for galleries that represent well-recognized artists over those that promote emerging ones. According to The European Fine Art Foundation’s 2017 Economic Report, art fairs account to up to 41% of sales across the industry. Not only do small and midsize galleries not benefit from those sales, they have also witnessed a noticeable decline in foot traffic, diminishing their overall sales and forcing them to rely more heavily on their most loyal clients. While there is no obvious response to the economic impact of art fairs and the Internet on small and midsize galleries, it is easier to pin down a solution to rising real estate costs.

In March 2016, the Center for Art Law hosted a panel at Minus Space highlighting the central role the real estate market plays in the arts. Adam Sheffer, the president of the Art Dealers Association of America, relates that “you can never underestimate the significance of the relationship between the real estate and art markets.” Over the course of the post-war period, gallery hotspots shifted around the city, from the Upper East Side to Midtown to Soho to Chelsea to Williamsburg.  Because of the rent increases in Chelsea and the Meatpacking District, galleries there began searching for alternatives. As early as 2001, galleries started making the move from Chelsea to the Lower East Side and Chinatown, where the majority of locations are smaller and are often run by independent landlords. Pierogi Gallery, run by Joe Amrhein and Susan Swenson, made the leap from Williamsburg to the Lower East Side to escape rents that are just as high as those in Chelsea. Prices in the Lower East Side range from $100-$145 per square foot, but because of the smaller spaces available, the overall costs are less. For larger spaces on the Bowery, rents can go up to $200 per square foot, likely because of the willingness of more profitable tenants—hotels and restaurants, for example—to take on such high rates in the area.

In the mid-2000s, rent in Chelsea fell between $90-$100 per square foot. Compare that to today, when rent on the “best blocks” can be $120-$145 per square foot. With spaces ranging in size from 1500 – 5000 square feet, only well-established blue-chip galleries have any hope of sustaining further increases.  Few spaces can still be found for below $100 per square foot.  One prevailing condition guarantees a bit of stability for galleries in Chelsea—retailers have been hesitant to move in. As a result, the rental rates are also highly dependent on what galleries are willing to pay. If no gallery can pay the rate, the space sits empty. With the Hudson Yards development being erected just above Chelsea, the situation may change.  However, the upside is that with these upscale residences moving in, more affluent clientele move in as well.

Rent is expected to continue to increase even in lower-priced regions—the Lower East Side, Williamsburg, and Bushwick—so galleries remain in search of less charted areas. For some, that means Harlem, for others, it means Queens. A few have gone even further outside traditional realms, changing course and representing artists in the absence of a brick-and-mortar space.

The Source of High Rental Rates

How is it that rent can continue to increase? The answer is pretty simple: there is no commercial rent control law in New York. New York City had one from 1945 to 1963, but when it expired, there was little impetus to renew it because, as James Parrott, the deputy director and chief economist of the Fiscal Policy Institute, explains, “the real estate community has always been aggressive in campaign contributions… and, by doing so, they’ve successfully prevented anything that would restrict them.”

Where rent control is nonexistent, a gallery’s saving grace can be the terms of its lease agreement.  Commercial lease agreements are often the result of an extensive negotiation process. Critical terms can make or break the leasing business. These terms include the length of the lease, the rent and any allowable increases, whether insurance, property taxes and maintenance costs are included in the rental rate or paid separately, and how disputes are to be settled.

There are two major types of commercial lease: a gross commercial lease and a commercial net lease. In a gross commercial lease, the tenant pays the landlord a fixed monthly fee. It is the landlord’s responsibility to cover all operating expenses of the building, including liability insurance and property taxes. This type of lease may initially be more expensive than a net lease, but it can protect the tenant should operating costs increase in the future. In a commercial net lease, the tenant is responsible for paying some of the operating costs of the building. These most commonly include property taxes, insurance, and maintenance, usually all based on the proportion of rentable space the tenant is leasing. When all three expenses are included, the lease is called a “triple net lease”. Negotiating these terms can be complex.

The ideal situation is one in which the tenant does not face unexpected costs in the middle of a lease. It is not uncommon for landlords to include a “Compliance with Laws” clause in the lease agreement. This clause can place responsibility on the tenant to ensure the building is up to code in compliance with the law, exposing the tenant to the expenses of unanticipated renovations and upgrades.  A tenant-friendly clause should require that the landlord warrant that the building is in compliance at the time the tenant takes possession. This limits the tenant’s responsibility for any non-compliance that existed before occupancy. If the tenant is moving into a space that was previously occupied by a similar business, the agreement should require the landlord to warrant that the space is code-compliant for the intended business activities. If the tenant agrees to take on additional compliance responsibilities, they should be very clearly specified within the lease.

Depending on which type of lease is secured, property tax increases are another variable that can desiccate a gallery’s finances. The Official Website of the City of New York provides information about how annual property tax rates are calculated. The Department of Finance determines the market value of the property, which differs depending on the class of property in question. In New York City, there are four property classes. All commercial and industrial properties, including office and retail buildings are included in Class 4. For Class 4 properties, the Department of Finance bases its market value calculation on income earning potential and expenses as well as some statistical modeling. This figure is multiplied by 45% to determine the assessed value of the property. The assessed value is then multiplied by the property tax rate—in the case of Class 4 properties, the tax rate is 10.6%. Within this calculation, the property’s market value is the biggest unknown, and it is the culprit for the escalating property taxes. Betty Cuningham, who moved her gallery to the Lower East Side in 2014, recounts, “Chelsea was getting way too expensive; our real estate taxes alone had gone from $1,500 the second year to $42,000 the last year.” With this wild card in the mix, the need for a fair lease agreement, one that might mitigate the damage of an unexpected tax increase, becomes exceedingly apparent.

The landlord, who typically has more experience in negotiations and holds greater bargaining power over the process, often drafts the final lease agreement. Under such circumstances, it is not difficult for a landlord to draft an agreement that favors his or her interests. Given the complexities involved in negotiating a commercial lease and the clear inequality of bargaining power between small business owners and real estate monoliths, a solution is required. It need not be novel. In fact, it may already exist.

Legislative Change: The Small Business Jobs Survival Act

Rewind back to the mid-1980s when City Council Member Ruth Messinger proposed the Small Business Jobs Survival Act (“SBJSA”). The SBJSA and its New York State counterpart, the Small Business Survival Act (“SBSA”), aim to rebalance the bargaining power through two major provisions. The first is that, barring certain exceptional circumstances enumerated in the SBJSA, the tenant has a right to demand a 10-year lease renewal. This counteracts the tendency for landlords to offer only shorter-term leases to capitalize on their ability to hike the rent once a lease expires. Additionally, if the tenant considers the terms of a lease renewal unacceptable, the SBJSA prescribes a very detailed arbitration process. Even at the end of that process, should the tenant remain unhappy with the agreed-upon rent, he or she can elect to pay the previous rental rate plus 10% without penalty.

The SBJSA has been discussed in City Council intermittently for the past 30 years. In recent years, the exponential rate of rent inflation and the resulting number of small business closures have brought the SBJSA back into focus. Though it would take some major lobbying to enact it, the SBJSA remains a viable solution to the devastating effects of skyrocketing real estate prices. Increased vacancies have so affected the streetscape that a website called Vacant New York has been established to document them. The dire situation has pushed City Council to discuss not only the SBJSA, but also the possibility of exempting small businesses from Commercial Rent Tax or introducing tax incentives for landlords to maintain their current rental rates. While organizations like Two Trees offer subsidies to cultural spaces to offset operational costs, there are not nearly enough available to aid every gallery in need. Instead of waiting for additional funding or legislative change, gallerists have gotten creative, crafting inventive solutions to overcome their financial plight and stay loyal to their artists and clients.

Creative Solutions and Their Legal Implications

Galleries are traditionally thought to be pristine white cubical spaces, static and permanent, changing only due to the art they exhibit. Owing primarily to the tough economic climate of New York’s real estate market, gallerists have had to be increasingly flexible, dynamic, and sometimes even nomadic. While some have chosen to relocate to evade financial straits, it seems even that is not a viable long-term solution. Many gallerists have accordingly chosen more radical revisions of their business model.

With established patronage and strong artist loyalty, some gallerists choose to move away from the City altogether and seek out cheaper locales from which to conduct their business. This has worked for Bill Brady, who owned ATM Gallery on 27th Street in NYC before moving to Kansas City to open up Bill Brady Gallery.  Then there are Monya Rowe who moved her gallery to St. Augustine, Florida and Jeff Bailey who moved to Hudson, New York. All three maintain a strong presence in the art market despite their more remote headquarters.

An increasingly popular solution to unsustainable real estate prices has been to adopt a pop-up model. In an interview with Stropheus Art Law, Sasha Wolf describes that she decided to vacate her brick-and-mortar space for a multitude of reasons. The most compelling reason for her, however, was increased freedom—both personal and economic. She retreated from public view, pulling the artists she represents with her. Her clients had few qualms about the increased privacy, but her artists rely on their works being shown to the public. To resolve this, Sasha organizes pop-up exhibitions. For her, this model offers her the opportunity to work at her own pace, maintain variety in her daily routine, and spend more time away from New York to meet with clients and artists. For her clients, it offers a greater sense of exclusivity and a more intimate transactional experience. For her artists, it allows them to have a say in choosing the space in which they show their work and maintains their public presence. In the same interview, David Dixon describes that there is certainly some appeal to showing in varied spaces. Artists can play a more curatorial role in finding a space specifically suited to their work or one that casts it in a new light. Without the pressure to keep pace with surrounding galleries, there seem to be fewer entrenched rules for a pop-up exhibition, which can be as short as a day or as long as a few weeks.

Another form of gallery ownership is the seasonal gallery, which offers a consistent physical space with temporal flexibility. One example is Topless at 91-02 Rockaway Beach Boulevard. Jenni Crain and Brent Birnbaum, co-founders and co-directors, revive the space each summer to stage four three-week shows from mid-June to late August. Running pop-up and seasonal spaces rather than year-round brick-and-mortar locations can free up a gallerist’s time and resources so that they can travel to art fairs without significant overhead.

For some gallery owners, staying afloat means diversifying the business and scaling up. This can be through the addition of a coffee shop or bookstore, or by transforming part of the space into a bar or dance venue by night. In the late 1980s, Gavin Brown had the idea to open up the bar Passerby adjacent to his West 15th Street gallery space, Gavin Brown’s enterprise. With a dance floor designed and installed by artist Piotr Uklanski, the venue attracted an eclectic mix of the subcultural elite. Even with his imaginative business model and memorable exhibitions, however, in 2014, Gavin Brown was forced to relocate when a developer bought his headquarters. In 2016, he opened a new space in a 19th-century building in Harlem after a complex renovation process.  The Knockdown Center took a different approach to diversification. It has a bar, yes, but the owners, artists Michael Merck and Tyler Myers, went one step further. They rent out parts of the 60,000 square foot refurbished brick factory for events—anything  from weddings to beer festivals.

Other galleries thrive by moving off the beaten path not only in terms of location, but also in the nature the space itself. Hood Gallery is a converted shipping container in Bushwick. Founded by Tom Koehler in 2013, the space is dry-walled and has electricity, but no heat. The unique space acts as a medium, often inspiring the final form of an artist’s exhibition. It is a space that provokes experimentation. Add to that its lack of an official website and its hidden locale, it is unsurprising that it has fashioned a scene unto itself.

Still other gallerists have put a more personal spin on the shifting landscape, bringing the gallery closer to home—or rather, into the home. Sister in Bushwick was founded by artist-curators Jenny Lee and Zuriel Waters in 2015. It is a micro-exhibition space, only 30 inches wide, situated in the front window of their apartment. When Sister has an opening, viewers wander through the apartment to socialize, but to see the art, they must go outside and look into the front window. This window setup allows the founders to show work 24/7 without any real intrusion upon their daily lives. Eddysroom, also somewhere in Brooklyn—its   address is not even listed online—is semi-private. It is accessible by appointment only, and news of opening receptions is communicated directly from the gallerist, Mr. Eddy, to prospective attendees with a request to refrain from passing the address and phone number to others. Founded by three artists, 106 Green inhabits the living room of 104 (no, not 106) Green Avenue in Greenpoint, Brooklyn and is open only on Sundays.  Artist Michael Fleming founded MOUNTAIN in 2016 and runs it out of his Bushwick apartment at 284 Siegel Street. He opens his doors for events, receptions, and by appointment. Most of these home-based artist-run galleries are not money-making ventures. Rather than profit, the goal is to interact with other artists and to foster community. It is to provide artists who have little intention of entering the mainstream with a place to show their work and generate discourse around it.

Though a seemingly straightforward response to the unaffordable commercial space, the in-home gallery comes with its own legal implications. New York City’s Zoning Resolution regulates the in-home business, or what it calls a “home occupation”. According to the by-laws, a home-based business can occupy up to 25% of the home’s space and may only sell goods produced on site. Certain types of enterprises are prohibited, though a gallery is not one of them. The problem, then, is that for most galleries, the works they sell are not created on site. As well, some galleries open up their entire home for exhibitions, showing pieces all throughout the space, not in just 25% of it. The semi-private nature of many in-home galleries makes them unlikely to attract special attention from neighbors, but there is the possibility that a complaint could throw a wrench into the operation. The Official Website of the City of New York has a complaint portal that links directly to a submission form specifically for illegal use of a residence as a business. With this in mind, the reasons to keep in-home galleries more clandestine may extend beyond simply maintaining domestic privacy.

In the midst of all this, a gallerist must consider where his or her legal responsibilities lie. With new roles come new responsibilities. In September 2016, Richard Lehun of Stropheus Art Law, speaking on the same panel as Josh Baer,  offered an overview of the hybrid gallerist’s legal obligations. A gallerist’s primary responsibility is to the artist. When gallerists free themselves from their physical space, though they may assume the role of an art advisor or dealer in the process, their responsibility to their artists remains intact. An art advisor must be loyal exclusively to the buyer, whereas an art dealer in the secondary market owes their loyalty to the seller. When a gallerist becomes all three, they could potentially face a conflict of interest that may be irresolvable.

        When a gallerist forms a relationship with an artist, he or she has special fiduciary duties to the artist. These include managing the consigned artworks, the funds held in trust, and the funds derived from the representation relationship. Where a gallerist also acts as an art advisor, which is generally the case in the contemporary art market, his or her duties multiply, and so does potential liability. Mr. Lehun details these areas of potential liability in his presentation, which can be viewed here.

 

Conclusion:

Perhaps, through it all, the shifting scene is what is best for artists. It has compelled gallerists and artist-curators alike to invent new spaces, folding the white cube of the traditional gallery and providing artists with more opportunity for curatorial experimentation. For some small and midsize gallerists, the harsh economic climate signaled their end, while for others, it harnessed their entrepreneurial spirit, driving them into unknown territory. Michele Robecchi, an editor at Phaidon, offers his take on the situation, “If you let your business be ruled by apocalyptic predictions, you’re inevitably doomed to fail.” Financial relief may come in the form of legislative change, though it is unclear when that might occur. Despite all the challenges it has faced, it seems unlikely that the brick-and-mortar gallery is going to become completely extinct anytime soon. Ultimately, these new models act to counterbalance an increasingly commercial and homogeneous art market, reserving wall space for a diverse community of emerging artists. Gallerists have found several workable models to maintain the gallery’s physical presence, and they will continue to find more to survive the times.

 

Works Cited:

About the Author: Alexandra Terrell, the May 2017 Center for Art Law intern, is a rising second-year J.D. Candidate at the Schulich School of Law at Dalhousie University in Halifax, Nova Scotia. With a B.A. in Visual Art from Yale University, she plans to pursue a legal career within the art world. She can be reached at alexandra.terrell@dal.ca.

 

Bring Me the Head of King David: Questions of Attribution and the Responsibility of Museums

By Center for Art Law Team*

Art forgery has long been a siren of the art world. Dark yet beguiling, it ranges from misidentification of orphaned works to forgers deliberately passing off fakes on the market. Some forgeries gain notoriety because they contain all the elements of  catch-me-if-you-can intrigue: outsmarting experts, creating intricate webs of deception, evading discovery, collecting a hefty prize. Other forgeries endure in perpetual obscurity, only caught years or decades after the fact (if at all). This spring the Center for Art Law hosted an evening on the topic, screening Orson Welles’ F for Fake and featuring Aaron Crowell’s remarks about root causes for transactions involving fakes. Though forgery implicates all spheres of the art economy, its effect on reputations and credibility is particularly noteworthy in the context of museums’ roles in the public and educational sectors.

As part of a series of seminars given at the Metropolitan Museum of Art in 1967, director Thomas P. F. Hoving stated that taking fakes and their detection seriously is a key part of the Museum’s educational obligations. But he also quoted art historian Max Friedländer’s qualifying statement that, while it is an error to collect a fake, it is as much “a sin to stamp a genuine piece with the seal of falsehood”. In his 1996 book on art forgery, False Impressions, Hoving also suggested that the entire art market was 40 percent forgeries. More recently, the art critic Michael Glover estimates that at least 20 percent of paintings held by major museums will be attributed to a different painter by the end of the 21st century. It is unsurprising, then, that at times misattribution in museums would be inevitable. The key questions are: how should museums treat the subject of attribution and respond to allegations of forgery? What responsibilities do curators have to the members of the public? And what actions can museums take to prevent or uncover forgeries in their collections?

What are Museums’ Legal and Ethical Responsibilities?

There are no explicit regulations regarding museums’ obligations to investigate and disclose purported fakes. Ultimately, the art market polices itself and curators and museum administrators have their boards of directors to report to and codes of ethics to uphold. However, these codes sparsely mention fakes and forgeries.

The American Alliance of Museum’s (“AAM”) Code of Ethics expresses the common tenet that museums are stewards of the world’s natural and cultural common property, holding their collections for the benefit of the public. It does not mention fakes or forgeries, but exhibiting and acquiring such items unawares conceivably threatens the core mission by taking resources away from genuine artifacts. Interestingly, the American Association of Art Museum Curators’ ethical guide, the Professional Practices for Art Museum Curators, and the American Association of Art Museum Directors’ Code of Ethics, also overlook issues of fakes and forgeries. The exception to this is the American Association of Art Museum Directors’ Professional Practices in Art Museums, but forgery is mentioned just once, merely as a potential reason to deaccession an art object. Given the recent interest in fakes and forgeries as a cultural phenomenon, museums have been collecting and exhibiting fakes for their unique albeit detrimental effect on the art history canon.

Regarding faked antiquities, the American Association of Museums announced in 2008 “New Standards on Collecting of Archaeological Material and Ancient Art”, which advocated reference to the 1970 UNESCO Convention on the Means of Prohibiting and Preventing the Illicit Import, Export, and Transfer of Ownership of Cultural Property. The section on existing collections stipulated that, in the interests of public trust, research and accountability, museums should “make available the known ownership history of archeological material and ancient art in their collections, and make serious efforts to allocate time and funding to conduct research on objects where provenance is incomplete or uncertain.”

The antiquities trade is susceptible to forgeries, as writes Leila A. Amineddoleh, an art lawyer specializing in art and cultural heritage law, and an adjunct professor at Fordham University School of Law. This susceptibility comes down to trade in unprovenanced antiquities being driven by demand, including from within the black market. For example, a large number of purported Coptic sculptures from the late fourth century in Egypt entered the international art market in the 1960s, at a time when Coptic art was not widely understood by scholars, yet was popular with collectors. Recently, historians have concluded that most of them – including a considerable collection within the Brooklyn Museum – are fake, thereby distorting our understanding of Christian iconography in ancient Egyptian art. Accountability for museums, most of which are privately owned in the US, seems to come more from public pressure and bad press. In 2009, The Brooklyn Museum responded to these unflattering allegations by planning an entire exhibition dedicated to the forgeries. Some scholars, such as the art crime professor Noah Charney, have noted that museums may only assume moderate shame in acquiring forgeries.  

Another explanation for the lack of rigid rules in this area is Hoving’s idea that it is anathema for an expert to dub an authentic work as fake. This opinion appears to be shared throughout his field. In a 2011 publication, Professor Andrew Stewart of the University of California posits that the “sin” of accusing a genuine antiquity as fake is “much more heinous” than authenticating a forgery). According to Stewart, such can be associated with a rush to judgment and the imposition of one’s own ego on the object. According to Sharon Flescher, the Director of the International Foundation of Art Research (IFAR), art attributions can and do shift over time. In her essay on IFAR in Ronald D. Spencer’s 2004 book, The Expert versus the Object: Judging Fakes and False Attributions in the Visual Arts, Flescher argues that scholars should not be encumbered by threats of litigation or pressure from the art market to make such determinations.

A Tale of Two Heads

Screen Shot 2017-06-21 at 12.02.37 PMImage: the Metropolitan Museum of Art’s Head of King David, #38.180, whose authentication is questioned by Robert Walsh. The Met’s website gives the following data: c. 1145, made in Paris, fine-grained limestone, 33lb.

In 2012, Robert Walsh, a New York antiques dealer, purchased a limestone head at a Greenwich Village antiques store, believing it to be a sleeper. (A sleeper is an orphaned artifact which may become attributed to a known and famous creator.) Walsh learned that that the Metropolitan Museum of Art was exhibiting a similar head, apparently originating from the Cathedral de Notre-Dame, and began investigating. Where did Met acquire its sculpture, and what did the two pieces have in common? These questions led Walsh down a twisting, years-long road of research.

The Met describes its sculpture as a head of King David, originating from the St. Anne portal of the west facade of the Cathedral de Notre-Dame in Paris. The portals contained monumental sculptures of each of the Kings of Judah, which were decapitated and presumably destroyed in the political fervor of the French Revolution.

Walsh researched both pieces using scientific analysis, provenance and stylistic research, and theorized that the Met was exhibiting a 1920s copy of his own authentic sculpture. He concluded that neither sculpture originated from the Cathedral de Notre-Dame, but that his was a French antique, and that there were some inconsistencies in the Met sculpture’s provenance. The Met sculpture was sold by a French art dealer, Georges Demotte, who was active in the 1920s and 1930s and who is believed to have sold forgeries to museums. Demotte’s original catalogue listing of the piece for his New York gallery in 1930 contained no mention of either Notre-Dame or King David. Instead, the sculpture was said to have been discovered in St. Germain de Pres, which is located further down the River Seine. Walsh believes that the author of the Met’s work is Emile Boutron, an accomplished conservator and forger employed by Georges Demotte.

Allegedly, these findings were shared with Met’s Medieval Department in 2012, but the curators were unconvinced that their King David was inauthentic. Walsh later contacted the Louvre, which had purchased a very similar sculptural head, also from the controversial Demotte New York Gallery, in 1934. According to Walsh, the Louvre removed the sculpture from public display. 

In 2014, Walsh, through his company Latipac, Inc. (now dissolved), served a Summons with Notice on the Met, apparently seeking to preclude the Met from challenging the authenticity of Walsh’s sculpture. Other threatened causes of action, which did not manifest in court action, were breach of the museum’s Collection Management Policy (on a theory that Latipac is its intended third-party beneficiary), as well as a series of tortious actions, including defamation, interference with prospective economic relations, injurious falsehood and product disparagement.

In October 2014, both sculptures were reportedly drilled and tested at the Met by an expert in French limestone from the the Limestone Sculpture Provenance Project at the University of Missouri at St. Louis. The test results revealed that Walsh’s sculpture consists of Burgundian limestone, whereas the Met sculpture was sculpted from Paris Lutetian limestone.

The Subtle Art of Authentication

In an effort to curb fakes and forgeries in the art market and in museum collections, three general methods of authentication have emerged.

1. Provenance Research:

Provenance is the record of the ownership or chain of title of a work of art or antique. Works with clear, substantiated and complete provenances are naturally of a higher financial value, based on risk and return. (For more on this, see Gail Feigenbaum and Inge Jackson Reist’s 2012 book “Provenance: An Alternate History of Art” and Art Watch UK’s upcoming publication detailing the proceedings of its 2015 London conference “Art, Law and Crises of Connoisseurship”). Works with questionable or incomplete provenances, such as the Met’s sculpture, will often lead an authenticator to research further the object’s history and affiliation with suspicious characters appearing within the chain of title.

The circumstances of the Met’s acquisition of its sculpture are noteworthy. According to Walsh, James Rorimer, one of the Monuments Men and 1930s curator for medieval art at the Met, oversaw the 1937 acquisition of the Met sculpture from the renowned dealer Arnold Seligmann for $2,500. Apparently, Seligmann had purchased it from Demotte’s New York Gallery in 1934. The 1930 Demotte Gallery Sculpted Portraits exhibition catalogue listed it as “Head #9, Crowned King’s Head”, and claimed it was excavated from St. Germain de Pres. Also in the Sculpted Portraits catalogue was an entry for “Head #10”, which the Louvre acquired from Demotte in 1934. Whether Rorimer believed Head #9 to be real or not, he clearly believed it to be worth acquiring for the museum. The Met’s sculpture was not included in the 1970 medieval sculpture catalogue, The Year 1200: A Centennial Exhibition at the Metropolitan Museum of Art, where over 50 stone sculptures – including a series of heads – were showcased together with medieval mosaics, coins, stained glass, frescoes and other artefacts.

2. Scientific data

Business of authenticating is a risky proposition. Increasingly, scientific expertise and methods are used for testing of different artifacts depending on the age and materials of the piece. Testing methods may include elemental analysis, microspectroscopy, molecular analysis, carbon-dating, pigment analysis, x-ray fluorescence, and even fingerprint testing. The most common indicator that a work of art is forged is the detection of materials  on the work which were not manufactured or used until after the work’s purported era. Orion Analytical, a private lab which was purchased by Sotheby’s in 2016, was one of the most highly regarded art analysis companies in the United States, as it combined scientific testing with connoisseurship. Sotheby’s cited the use of modern materials in an alleged old master work as grounds for revoking a private sale and seeking reimbursement from the broker in a recently filed lawsuit regarding an £8.4 million Frans Hals painting which turned out to be a forgery.  

Similarly, the famous forger Wolfgang Beltracchi, who was convicted in 2011 and released from prison in 2015 after he and his wife sold hundreds of fake works attributed to Pablo Picasso, Fernard Léger, Max Ernst and others, was ultimately exposed through forensic analysis. Dr. Nicholas Eastaugh tested the pigments of a painting the Beltracchis claimed to be by the Dutch artist Heinrich Campendonk, and uncovered titanium white, which did not exist in 1915 when the work was supposedly painted.

The forensic testing of Walsh and the Met’s sculptures, done by the University of Missouri’s limestone experts as part of the settlement agreement, assisted with identifying the source of the material used, but fell short of providing the date of creation to the objects. Although  scientific analysis may be helpful in determining whether an object is fake, it is unable to confirm an object’s authenticity without the stylistic knowledge of a connoisseur.

3. Connoisseurship 

The least precise and most subjective form of authentication is connoisseurship, or expert aesthetic judgment. It relies upon an expert’s training, expertise, and – more often than not – gut instincts. Expert opinions are heavily relied upon by dealers, auction houses and museums. Connoisseurship is at once heavily subject to corruption, and powerful enough to hold sway in court.

Connoisseurs have been known to be fooled by highly skilled forgers. Last year’s Knoedler trial revealed how a single artist could paint, from his garage in Queens, a raft of fake de Koonings, Rothkos, Pollocks and other masterpieces, which would pass muster with some of the most prominent experts and gallerists. Similarly, Wolfgang Beltracchi duped scholars, museums, auction houses, gallerists, and even Max Ernst’s widow, with his numerous forgeries. In a recent documentary on Beltracchi, he brags that his forged Vermeers, Rembrandts and Leonardos are currently in circulation, and that Leonardo da Vinci’s work is “not difficult” to copy.

Walsh relied on his own connoisseurship and his belief that he uncovered in the Greenwich village antiques store a valuable and probably medieval find. According to him, experts in Paris with deep knowledge of the facades of the Cathedral de Notre-Dame were adamant that such a sculpture did not match the Cathedral’s sculptural program.

The Object v. the World: Curatorial Sins

Museum directors, experienced or non, may be faced with claims and possibilities of having fakes in their collections. For the Expert versus the Object: Judging Fakes and False Attributions in the Visual Arts, attorney Ronald D. Spencer conducted an interview with the former director of the Frick Museum, Samuel Sachs II. According to Sachs, museums should be ready to purchase high-quality and interesting work even if there are ongoing authentication disputes: “Ultimately, aesthetic quality holds sway even over matters of attribution or authenticity. Museums can hang a picture that is absolutely, certifiably by artist X, but if it is a weak picture, why do it?”.

It appears that encyclopedic art museums, including the Met, abide by this rule of thumb. Another rule of thumb: shock or disbelief should come not from having acquired a forgery but from inaction when flags are raised about authenticity. And such flags are raised regularly for most museums. One of the most notorious art hoaxes of the 20th century involves the Met’s acquisition of three “Etruscan” terracotta warriors from 1915 – 1921. Following their exhibition in 1933, scholars began to suspect, on grounds of connoisseurship, that the statues were anachronistic to the Etruscan style. The statues were finally scientifically tested in 1960, and their glazes revealed the presence of manganese, a mineral uncharacteristic to Etruscan sculpture. Months later, the sculptor Alfredo Fioravanti signed an affidavit confessing that the statues were forged. Brothers Pio and Alfonso Ricardi had fabricated them for the dealer Domenico Fuschini. In 1961, the Met accepted that the works were inauthentic.

The Metropolitan Museum of Art announced yesterday that, as a result of recently completed studies, its three “Etruscan” terracotta statues must be considered of doubtful authenticity. For some years there have been conflicting claims about these statues on stylistic grounds. Recently the staff of the Museum began a series of modern scientific and technical analyses. These developed convincing proof that these famous statues were not made in ancient times.

~ Feb. 14, 1961 Press Release

Critics of the Etruscan misattribution point out the Met’s lackluster investigations and ignorance of many “red flags” during the 30 years of their exhibition. Hoving would later go on to suggest that Gisela Richter, the Greek and Roman curator who acquired the pieces for the Met, was likely taken in by “pride” and “curatorial greed”.

Pride, greed, sloth, wrath… these art market sins allow forgeries to penetrate and pollute collections. However, hiding the existence of embarrassing yet known forgeries directly undermines museums’ obligations to expose and educate the general public about its cultural history – a responsibility espoused by the AAM in its various policy documents. It is safe to say that museums should, as organizations of public trust, act impartially and employ third party experts to investigate such claims, working collegially with individuals who present sound theories that a work’s authenticity is questionable. After all, forgers can be incredibly skillful, and even the most renowned connoisseurs can be duped.

A biblical character, King David was known to have been righteous and effective in administering justice. The dispute over his representation and the motives behind the actions of various private and public players, if nothing else, may help provide a measure of justice to the subject of due diligence in authentication. And that’s something worth losing your head over.

List of Sources

Disclaimer: This article is intended for educational purposes only and is not meant to provide legal or business advice.

WYWH: Immigration Law and the Arts – NICE WORK IF YOU CAN GET IN

 

By Katherine Jennings

 

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Photo credit: Center for Art Law.

On March 9, 2017, the Center for Art Law held an Art Law Mixer addressing the timely and provocative topic of immigration issues confronted by immigrant artists with the recent issuance of EO 13769, among other anti-immigrant measures. The 45th President commenced his presidency with a barrage of Executive Orders (EOs) including EO 13769*, which was signed by Trump on January 27, 2017, and restricted travel to the U.S. from seven Muslim-majority countries and by all refugees. This EO has had far-reaching and devastating effects on immigrants including immigrant artists. It has wreaked havoc and confusion at the borders. Antagonizing foreign dignitaries, it has quickly been met with outrage and resistance by artist activists, art organizations, and lawyers.

 

The Georges Bergès Gallery, a stylish, SoHo gallery with an international focus, was the apt and welcoming site of the two-hour event, a first Center for Art Law (the “Center”) program to address immigration issues. It was composed of a wine and cheese reception and presentation by the founders of Lehach Filippa, an immigration law firm intended to serve creative professionals, followed by a Q&A. The discussion was moderated by Irina Tarsis, founder of the Center. Attendees included lawyers, artists and law students. After a brief warm up period during which attendees were encouraged “to talk to someone you didn’t come with,” Georges Bergès, the founder of the eponymous contemporary art gallery, spoke briefly to welcome all and to talk about the global perspective of his gallery. Bergès said his goal is to find authentic artists who are working in their own cultural context.

On to the substantive portion of the evening, Tarsis introduced Alejandro Filippa, Esq. and Michael Lehach, Esq, founding partners of Lehach Filippa. Lehach and Filippa spoke about the O-1 visa, commonly referred to as the “artist visa”, and the process of applying for work permits as a foreign artist. The current political climate and the effects of the anti-immigrant executive orders from President Donald Trump was also a topic of discussion. Filippa speculated that if the current precedent of an excessive number of executive orders is any indication, we will likely see more pushback and restrictions to immigration applications and processes in the future.

In order to qualify for an O-1 visa, or artist visa, an applicant must demonstrate “extraordinary ability by sustained national or international acclaim and must be coming temporarily to the United States to continue to work in the area of extraordinary ability.” Extraordinary ability in the field of arts means “distinction.” The Immigration Act of 1990 (Pub.L. 101-649, 104 Stat. 4978) was a national reform of immigration that, among other things, excluded artists and entertainers (as well as athletes and nurses) from qualifying for H-1B visas. Two new categories, O and P, were introduced for extraordinarily skilled foreigners in the arts and sciences. The 1990 legislation was created in response to the Immigration and Nationality Act of 1952 (Pub.L.), aka the McCarran-Walter Act, which was meant “to exclude certain immigrants from immigrating to America, post-World War II and in the early Cold War.

Clearly, both Lehach and Filippa enjoy their law practice and are competent, dedicated professionals. Their passion was evident as they spoke about the process of creating a solid application in order to achieve success in obtaining an artist visa. Advocating for their clients is predicated upon a solid application with supporting documentation. Involved in facilitating artist visas and residence applications, they represent foreign creative professionals who want to work in the US and creative organizations seeking foreign talent to work in their US office. Their clients are from diverse industries such as the performing arts, music, fashion, film, photography, design, fine art, journalism and more. These “extraordinary aliens” have included tattoo artists, dancers, and rappers. The client may seek Temporary Work Visas and /or Permanent Residence based on Extraordinary Ability.

Lehach and Filippa outlined the proof needed to establish a valid application for an artist visa. In addition to a detailed resume, the client should include all relevant documents regarding their awards, notable clients, publications and press, and work history. An applicant must provide at least eight references by professionals who can attest to the extraordinary abilities of the applicant. Noting that an applicant’s file can be huge, they also spoke about how they have to be from important and respected sources. Lehach noted that it would not do a client any good if he were to provide his private residence as a gallery that would show the applicant artist’s work. Rather, the gallery must be a well-known and established entity.

Another crucial component of the application is an itinerary of the events and activities in the beneficiary’s field of extraordinary ability. You must have a plan of what you will be doing, with whom and when, and it has to be concrete. This constitutes the Sponsorship aspect of the application. For example, the applicant must provide an established list of galleries who will show his or her work and a concomitant timeline. An Employer, an Agency, or an Agent is an acceptable sponsor. Finally, it is helpful for the applicant to have a portfolio as a physical manifestation of the accomplishments detailed in his or her resume.

Lehach and Filippa also spoke about the case of an application for an Artist Visa being rejected. They said it is much better to refile, than appeal, because the immigration agents can be fickle. Noting that it can often be difficult to decide what constitutes extraordinary ability, they said it is crucial to initially establish a solid case. Their law firm also deals with other immigration issues such as obtaining permanent residency, obtaining a green card, and asylum issues, and extension of artist visas.

The presentation was followed by a lively question and answer session. Both presenters showed obvious delight in their chosen field and were quick to address each question thoughtfully. One interesting tidbit revealed during the Q&A was that under the right circumstances there is even a provision for bringing an artist’s muse into the country on a visa. As for the immigration ban that instigated the theme of the evening, “a judge sitting on an Island in the Pacific” ruled it unenforceable.

*Note that on February 3, 2017, EO 13769 was given a temporary restraining order in a decision from the Ninth Circuit of the Court of Appeals. EO 13769 was revoked as of 3/16/17.

About the Author: Katherine Jennings is a lawyer and contemporary realist oil painter living in New Jersey. She has a B.A. in History from Duke University and a J.D. from Fordham University School of Law where she was an Associate Editor of the Fordham International Law Journal. Having practiced intellectual property and immigration law, she is also certified as an Art Law Mediator with VLA. She was recently accepted into the Copyist Program at the Metropolitan Museum of Art and her work may be viewed at www.katherinejenningsfineart.com.

 

It Takes Two to Tango: The Importance of Artist-Gallery Contracts

By Scotti Hill*

tango-108483_1280

Creative Commons.

Of course galleries are venues of intellectual engagement and social activity, but it can be easy to forget that they also act as hubs for commercial exchange. The same mechanisms that govern relationships between blue-chip artists and mega-galleries ought to be in place to protect emerging artists and pop-up galleries as well. Beneath the veneer of originality and artistic merit lie monetarily-driven representation agreements and consignment contracts. The status quo is driven by mutual interest: galleries need artists to create their inventory so their clients have something to buy, and artists need galleries for their infrastructure and access to art buyers. By creating a roadmap that enables both parties to navigate their working relationships, contracts are at once practical and imperative. So, given the importance of a well-drafted and carefully negotiated contract in almost all areas of commerce, why do artists and galleries often fail to formalize the nature of their relationships in contractual form?

On July 19, 2016, Center for Art Law hosted an art law mixer entitled “Good Fences Make Good Contracts” to explore the question of contracts between artists and galleries. As a follow up, this article examines the intricacies of standard representation and consignment agreements, while also delving into the legal basis for such contracts–namely the Uniform Commercial Code Sect. 9-102 and the New York Arts and Cultural Affairs Law §12.01, Artist and Merchant Relationships. To illustrate benefits of having carefully crafted contracts between artists and galleries, some high-profile relationships, such as the representation and the rumored split between Richard Prince and the Gagosian Gallery highlight select  issues that may arise in an artist-gallery relationship.

Introduction to the Standard Artist-Gallery Contract

Screen Shot 2016-08-15 at 1.04.59 PMWhen entering into a commercial relationship, an artist or gallery may choose to draft a standard representation agreement whereby the gallery agrees to work as an agent on the artist’s behalf. The scope of this agency is negotiated by the parties, as some galleries hope to serve as an artist’s exclusive agent in a geographic area (New York City, for example), while others agree to serve as agent for one specific medium or collection the artist produces. Such agreements set provisions for matters like how revenue is shared after a sale, whether the gallery receives commissions on work sold from the artist’s studio, and the duration and scope of consignment. The following items are also commonly included in artist-gallery contracts:

  • Duration of contract including renewal and termination clauses;
  • Commission structure, terms of payment and other accounting procedures;
  • Transportation procedures;
  • Gallery promotion, marketing and copyright;
  • Coverage and provisions of insurance policies.

After establishing representation with a gallery, artists then consign their artwork to them for safekeeping with the expectation the gallery will sell their inventory. By definition, consignment is the act of assigning the property of one party (consigner, be it an artist or a collector) to that of another (consignee, here a gallery), for sale under contract. As part of the larger representation contract, a consignment agreement should list all the works given to a gallery by the consignor, with an authority to sell a specified group of the artist’s work and providing an indexical record of works in the gallery’s possession.

Uniform Commercial Code (UCC) Sect. 9-102, and New York Arts and Cultural Affair Law §12.01, Artist and Merchant Relationships

While the Uniform Commercial Code is the overarching body of laws concerning the sale of goods and commercial transactions federally, each state has adopted its own commercial code. UCC Section 9-102 sets guidelines for parties engaging in commerce regardless of the existence of a written contract. As it relates to the consignment relationship between artist and gallery, the UCC dictates important provisions that have been upheld over time by case law, namely the criteria and value of goods classified under ‘consignment’ and consignor’s rights in the event of bankruptcy. See Jacobs v. Kraken Inv. Ltd., (In re Salander-O’Reilly Galleries, LLC), 506 B.R. 600 (Bankr. S.D.N.Y. 2014)

In addition to the UCC, thirty-one states have adopted statutes to address the specific circumstances governing art transactions. In New York, for example, the New York Arts and Cultural Affairs Law (NYACAL), Article 12, provides a governing structure for interpreting contracts between artists and galleries. On November 6, 2012, New York’s consignment law was updated to include additional protections for artists by imposing stricter measures on galleries and dealers as consignors. The updated NYACAL addresses three fundamental weaknesses in earlier consignment law: requiring dealers and galleries to place sale funds in a protected trust, awarding attorneys fees for successful petitioners and requiring that critical sections of the consignment agreement be memorialized in writing. The 2012 amendment directly addresses the UCC’s problematic rendering of consigned artwork eligible for seizure by creditors, which is perhaps one of the UCC’s most controversial points.

Before the 2012 revision to the law, creditors could legally seize artworks in a consigner’s possession in order to fulfill unpaid debts. Although galleries do not own artworks on consignment, the creditor exists as a third party outside of, and therefore not bound by, the terms of a contract forged between the artist and gallery. The lack of solid legal remedies for consignors is what has propelled many states to revise their laws to deal specifically with the consignment of art, while in New York, the mammoth Salander-O’Reilly Galleries lawsuit became a catalyst for the amendment.

As such, an important provision exists in many amended state laws: that the gallery be rendered trustees to the artist’s property, which necessitates they hold revenue from the sale of an artwork in a special trust–apart from other gallery funds–that will be paid in full to the artist at an agreed upon time. This amendment works to 1) prevent creditors from seizing consigned art because the value of such works is protected in a trust, and 2) protect trust funds from being improperly used by the galleries to fulfill other financial obligations.

Indeed both parties may take advantage of vague contractual terms or actively work against the creation of a contract. Amended laws aim to prevent this by adding specific fiduciary responsibilities for both parties. Ultimately, if the artist-gallery partnership exists in a state without a comprehensive consignment statute, the parties can, and should, provide through contract the provisions missing from state law.

Richard Prince and Gagosian Gallery Split

After more than a decade and a string of highly successful exhibitions together, news broke in June 2016 that Richard Prince and Gagosian Gallery were going their separate ways. Neither the  veracity of the news nor the details of the alleged split are known, but if true may be explained by the mounting costs from legal battles involving the pair in recent years, which implicate and name Larry Gagosian and his gallery as a contributory infringer.  See Graham v. Richard Prince, Gagosian Gallery, Inc., and Lawrence Gagosian, Cariou v. Prince, Gagosian Gallery, Inc. and Lawrence Gagosian, and Dennis Morris v. Richard Prince, Gagosian Gallery, Inc. and Does 1 through 10 inclusive.

As part of his famous appropriation work, Prince takes the copyright-protected work of other creators and repurposes it in new contexts. While critics and collectors have repeatedly lauded this process, photographers whose work has been used without permission have taken a different approach. From 2014-2016, three copyright infringement lawsuits were filed against Prince by photographers Patrick Cariou, Donald Graham and Dennis Morris. In Cariou v. Prince, 714 F.3d 694 (2nd Cir. 2013), the Second Circuit Court of Appeals held that Prince did not infringe the copyright of 25 of the 30 images he appropriated from Patrick Cariou’s collection of photographs under the fair use exception of copyright law. For his use of the remaining five images in the collection, Prince settled out of court. The infringement cases brought by Graham and Morris are ongoing.

As agents working on the artist’s behalf, galleries accompany artists through creative peaks and declines. While much is made about how important contracts are for artists, galleries are wise to incorporate a termination clause in the contract in order to guard themselves from potential problems that may arise in the course of the relationship. A well-drafted termination clause, for example, is helpful in providing a protocol for the  manner in which the parties can terminate their professional relationship; a termination clause affords the party on the receiving end of the “breakup” adequate time to prepare for the transition. This is particularly important in instances where the gallery has crafted an exhibition or otherwise made plans with specific artworks. A typical clause of this kind would require the party initiating the split to give notice of anywhere from one to three months to the other party.

We do not know if Prince had a contract with Gagosian, but at the very least, it is likely the two agreed upon such critical provisions as payment and consignment of inventory. Despite news of the split earlier this summer, Prince is still featured on Gagosian’s website, which may indicate the two have yet to part ways. And even then, the separation may only be temporary.  After all, artist Damien Hirst reunited with the Gagosian Gallery for 2016’s Frieze New York following a three year split.

Conclusion

Although many states have amended their consignment laws, still other states have yet to follow suit. In areas of the nation where art represents a decidedly small segment of the larger economy, less incentive exists to add in the necessary protections that have been greatly appreciated in large art markets. On a practical level, however, artists can protect themselves by being vocal about their desire for a consignment contract. Contracts create a roadmap for the artist-gallery relationship and can offer clarity  if/when any unforeseen grey areas arise in the course of doing business together. When entering into a business relationship with a gallery, artists are wise to seek out feedback from their peers about the gallery’s reputation and its willingness to negotiate mutually beneficial terms at the outset. Various resources exist online, most important of which are copies of the standard representation and consignment agreements that can serve as a starting point for both parties. Ultimately, if an artist is faced with unique circumstances relating to their practice or needs, they may wish to seek legal representation before, and oftentimes during, their formal acceptance of a gallery’s offer of representation.

* * *

nieto_dickens_art_law_mixer_2016_2_web

Photo by Luis Nieto Dickens | @vla_newyork

On July 19, 2016, Center for Art Law (the “Center”) hosted “Good Fences Make Good Neighbors,” a Summer Art Law Mixer made possible with support from the New York Volunteer Lawyers for the Arts. The event focused on contracts between artists and galleries and how attorneys negotiate on behalf of their clients. Moderated by the Founding Director of the Center, Irina Tarsis, the panel featured three speakers, all attorneys specializing in art law. Dean Nicyper, a litigator with Withers Worldwide, and involved with revising the NYACAL law, provided a general overview of the legal considerations of artist-gallery contracts, Amelia Brankov of Frankfurt Kurnit Klein & Selz, spoke about the ways in which artists can advocate on their own behalf in forging contracts with galleries and Katherine Wilson-Milne of Schindler Cohen & Hochman, commented on what considerations galleries have when drafting contracts with artists. Attendees, including practicing attorneys, students and artists, asked questions ranging from the appropriate etiquette of negotiating such contracts to how to best situate oneself to prevent and later reconcile potential legal issues that arise from this union. One main take-away from the evening was that that clear terms of a consignment agreement between artists and dealers make for good symbiotic relations between the two key players in the art market.

Select Sources:

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 serves as a summer 2016 legal intern for the Center for Art Law, and works as an art critic and curator. Prior to law school, she received a Master’s Degree in art history and visual studies. She can be reached at scottiaustinhill@gmail.com

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

Alternative Alternatives: ALT2 Conference Review

By Jessica M. Curley

On 29 September 2014, Bonhams auction house, together with BigelowSands LLC, hosted the fourth ALT2 Conference at its Madison Avenue location in New York City, where about 100 attendees from a multitude of industries including banking, marketing, commodity trading, and law gathered to hear world leading experts in these fields discuss investments in “alternative alternative assets.” The three panels were dedicated to rare gems and diamonds, healthcare and entertainment royalty rights, and vintage cars. Some of the speakers included Susan Abeles, Director of US Jewelry, Roger Miller, CEO of Alchemy Copyrights and CIO the Bicycle Music Company, and Bruce Wennerstrom, Founder, Chairman and CEO of the Greenwich Concours d’Elegance. The half-day conference was followed by a wine tasting event lead by Jennifer Williams-Bulkeley, Managing Partner of AOC Investment Advisors.

An “alternative asset” is a newer type of asset that traditionally had not been included in a standard investment portfolio. Some “alternative assets” include hedge funds, venture capital, real property, and commodities. A distinguished class of alternative assets, so-called “alternative alternative assets,” has begun to increase in popularity and includes diamonds, fine art, stringed instruments, vintage cars, healthcare and entertainment royalty rights, wine and vintage watches.

At ALT2 event experts discussed how these alternative alternative assets have gained in popularity and are becoming increasingly accepted as a way to further diversify investment portfolios. For example, panelist Alan Landau, CEO and co-founding Partner of Novel Asset Management, attorney by training and graduate of Benjamin N. Cardozo School of Law, advised that the diamond industry is not highly regulated in general, and that because diamonds are not classified as a financial product, they are not regulated by securities laws despite their being utilized for investment purposes. Mahyar Makzani, Co-Founder & Joint Managing Director of Sciens Colour Diamonds Fund, who moderated the panel on diamonds, noted that his fund voluntarily provides clients with “comfort points” to fill the gap created by the lack of regulatory oversight of this specific asset class.

Experts on the music, healthcare and film royalty rights panel advised that these less institutionalized assets are governed by traditional US intellectual property law. Dempsey Gable, Managing Director & Founding Fund Manager of the Opportunity Fund within Alternative Investments of APG Asset Management, explained that under US copyright law, films and television shows can be licensed to provide low yield low risk investment opportunities for investors. Panelist Tadd Wessel, Managing Director of OrbiMed, advised on the complexities of the healthcare system, and spoke to ways in which US patent law affects investment decisions regarding healthcare royalties.

The final panel, dedicated to vintage cars, discussed the steadily increasing valuation of classic cars, and the asset class’ low volatility and low correlation to other alternative alternative asset classes. Panelist Eric Minoff, a Specialist in the Motoring Department at Bonhams, advised the audience on the rapid growth of motorcar sales at auction, noting the increasing investor interest in this type of asset. Bonhams recently auctioned a 1962 Ferrari 250 GTO Berlinetta, which went for $38 million, making it the most valuable car to ever be sold at auction.

The panels seemed to strike a chord with attendees whose questions largely pertained to the regulation of certain asset classes, liquidity issues, and yield to risk ratios. The panel dedicated to royalty rights was most informative on the issue of regulation, and was of significant interest to attorneys, as this asset class is strictly governed and regulated by US intellectual property law. Regulation of diamonds and vintage cars is much less extensive, but both respective panels noted that increased investor interest could create a demand for heightened oversight. Liquidity potential also varied greatly among the various alternative alternative assets, as discussed by each panel. For example, whereas the ability to easily sell diamonds on the market make them highly liquid, copyright licenses, however, involve complex ownership and usage issues that prevent the asset from being easily alienable, and therefore have low liquidity. Yield to risk ratios also varied across the asset classes with film and TV shows providing a low risk low yield investment opportunity, while other tangible assets had a higher risk due the potential for physical damage or loss.

The ALT2 Conferences are by invitation only.

About the Author: Jessica M. Curley is a post-graduate fellow from the Benjamin N. Cardozo School of Law. She is pursuing her interest in art law and financial regulation in New York, and may be reached at jessicamcurleyATgmailDOTcom.

Whois Gurlitt.info?

by Irina Tarsis, Esq.

2014-02-23

Collage: Gurlitt’s Munich apartment; portrait; Salzburg house; door plaque.

You know you are in need of a reputation management when the entire world knows your name and your address and nobody is thinking of sending you greeting cards. Also, reputation management might be a good idea when 1) your father was an art dealer connected to the Nazis, 2) you are caught hoarding  hundreds of valuable artworks of questionable provenance, and 3) you may or may not have been hiding Nazi-era looted art as well as avoiding paying income taxes.

Regardless of whether the Monuments Men-mania is dying down or not, Cornelius Gurlitt saga continues to unfold. With the German government contemplating changing its statute of limitations laws to allow for the recovery of looted art, and the international community is antsy to jump into the game of reviewing Gurlitt’s trove. Countless headlines, tweets and posts have embarrassed the Bavarian authorities and prompted the creation of a special international task force to review provenance of paintings and works on paper taken from Gurlitt’s apartment in Munich in 2012 and from his house in Salzburg in February 2014.

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Gurlitt.info website.

Initially taciturn and reticent to speak in his own defense, Gurlitt had made asked for his art back, alleging that he did nothing wrong and wondered why he had been separated from his property. Since then the tone has evolved, and now there is a bilingual website dedicated to explaining Gurlitt’s position and soliciting claims for works that he originally had no plans to relinquish. The website went live on 18 February 2014 — see: http://www.gurlitt.info. On the homepage, there is an image of a gentile and approachable man, not in his early 80s – not Gurlitt – used to epitomize him and invites website visitors to engage in “[d]iscussions about the Gurlitt case.”

The website names four individuals working for Gurlitt: Dr. Hannes Hartung (Private Law)Prof. Dr. Tido Park (Criminal)Derek Setting (Criminal)Christoph Edel (maintainer)  as well as Stephen Holziger of Holziger Associates (the spokesperson for Gulritt, who registered the Gurlitt.info domain name). According to Holzinger, the Gurlitt.info website, “reiterates our willingness to engage in a dialog with both the general public and any claimants.”  As Holzinger’s own website states, the services his ‘highly specialized communications consulting form’ provides include development and implementation of “purposeful communication and reputation management strategies for entrepreneurs, wealthy families, executive and advisory board members, corporations, SMEs, investors, institutions and associations in crisis situations, in case of disputes and during civil and criminal court proceedings,” otherwise, a public relations company for the wealthy with big problems. Perhaps the recent revelation of the Salzburg stash was a public relations move prompted by Holzinger in an effort to build up goodwill and to preemptively ward off another wave of press coverage. Indeed, it was Holzinger, who revealed on 11 February 2014, “that Mr Gurlitt has more works at his house in Salzburg, Austria, on top of the 1,400 pieces found at his Munich home in 2012.” Just imagine the firestorm, had the news of the Salzburg stash been scooped by the media instead…

Gurlitt.info states that only four families have come forward so far to claim works in the Gurlitt trove and that at most, only 3% of the entire collection may constitute Nazi-era looted art, the rest being rightfully owned by Gurlitt. As the German authorities continue to make heads and tails of the story, provenance researchers must be able access to the collection in order to assist in the investigation. It is more probable than not that more families will step forward and offer proof of ownership in other works taken from Gurlitt.

In the meantime, at least according to the Gurlitt.info:

“the Gurlitt case is by no means unique. Nazi plunder in German museums has long been known to be a problem. And there is definitely still a lot of looted art in private and public collections. Quantitatively speaking private and public collections may well contain considerably more instances of suspected looted art than in the case of Cornelius Gurlitt.”

Sources: Gurlitt.info; Holzinger Associates; ArtInfo; The Independent;

About the Author: Irina Tarsis, Esq. is the Founder of Center for Art Law; in addition to provenance research and teaching, she focuses her practice on business and art law.  She may be reached at itsartlaw@gmail.com

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

Fall of the Italian Empire: Protecting Italian Art and Cultural Heritage with a Smaller Budget

By Nora Choueiri

When people think of Italy, they think of Leonardo da Vinci and Michelangelo, the country with the dozens of UNESCO heritage sites (49 at last count), and a nation with very strict art and cultural heritage laws. One does not generally think of art and cultural heritage sites falling apart because of lack of funding. But that has become the harsh reality in a country suffering from the European economic crisis. With the current recession, the Italian government has significantly cut its cultural budget in order to fight down Italy’s $2.5 trillion (yes, with a ‘T’) public debt. The heavy financial burden has left the country without the funds necessary to restore, let alone maintain, its national heritage. Even more traditional forms of fundraising, such as through ticket sales, are not enough to keep up with the demand for restoration and preservation. As a result, Italy has had to come up with other solutions.Screen shot 2014-02-10 at 11.27.26 PM

One unique and very contemporary solution to the problem: use social media and let the people decide.  Under a program called “L’Arte Aiuta l’Arte” or “Art Helping Art,” the Italian government selected eight works of art that it deemed ‘important’ to Italy’s cultural heritage and in need of restoration.  Using Facebook as a tool, the government posted pictures of the pieces online and asked its citizens to vote to determine which one of the eight should be restored first. The painting titled “Madonna con il Bambino/Madonna and child” by Pietro Perugino emerged as the winner, with the government promising to restore the remaining seven paintings in the future.

Even architectural bastions like Italy’s iconic Colosseum are not immune from the scarcity of funding, and private funding is one of the other solutions that has surfaced to fill the void left by the government. The Colosseum had been in need of restoration for years—chunks of marble had literally been falling off the structure— when work finally began in December 2013.  However it is not the Italian government footing the $33 million bill, but rather Diego Della Valle, CEO and founder of the Italian luxury fashion brand Tod’s.  The Colosseum is far from the only important Italian site in need of restoration, and many others throughout Italy are suffering from lack of funding, including the ancient city of Pompeii, where it is increasingly commonplace for beams and walls of historical buildings to collapse.

The Italian government’s financial woes have led them through emergency decree to sell off around 350 properties that include historic buildings in Rome, Milan and Venice. Included among the properties is Orsini Castle, a medieval fort built for Pope Nicholas III in the thirteenth century (it could be yours for a cool 15 million euros!). This raises the question of how, despite Italy’s rigorous cultural heritage laws, these properties could legally be sold to private owners?

The question is especially pertinent when considering the recent case of contemporary Italian artist Francesco Vezzoli who found himself in a great deal of legal trouble when he tried to export a dilapidated and deconsecrated old Italian church as part of an art exhibit at MOMA PS1, to be titled “The Church of Vezzoli.” Vezzoli had contracted to buy nineteenth century church ruins from the owner for around $100,000 after he found the roofless structure for sale online in the southern Italian town of Montegiordano.

The church was to be reconstructed in the courtyard of the MOMA’s PS1 exhibition space in Queens and repurposed to house a series of Vezzoli’s video artworks as the third and final phase of the artist’s international retrospective called “The Trinity.” However as the church was being dismantled, a passerby complained to the Ministry of Culture, effectively stopping the dismantling and export of the church. Vezzoli then found himself being investigated for criminal conduct, with prosecutors examining whether to charge him with trying to export items of artistic and cultural value without the proper authorization, a serious crime in Italy that carries a fine or jail sentence of up to four years.

Vezzoli, represented by Jacobacci Associates attorney Massimo Sterpi, alleges he acquired the church with the blessing of the town’s mayor, and that in an examination of the estate in 1988, the regional superintendent had not found the church to have any cultural value as a monument. Further, Vezzoli contends that the roofless church was falling downhill, and that “[w]e almost felt we were doing some good” by re-erecting and repurposing the church at MOMA PS1. No matter the outcome of the investigation, it is too late for the MOMA PS1 exhibit, which had to be canceled. Though Vezzoli’s project was certainly unconventional (not only for national heritage reasons but religious ones as well), one cannot help but ask what would’ve been better, leaving the forgotten structure in its state of decay until it almost inevitably collapsed or allowing a renowned albeit provocative Italian artist tour it in some of the most notorious museums in the world?

It is undeniable that today Italy is suffering from a lack of funds, and neither government funding nor private donors are able to keep up with demands of restoring and preserving Italy’s rich art and cultural heritage. Yet despite the budget crunch, Italy still appears to be monitoring the international trafficking of its cultural heritage. Most recently, Italy demanded the immediate return of about 700 ancient objects, ranging from jewelry to sculptures that were part of the private collection of now bankrupt British antiquities dealer Robin Symes. The Italian government believes that these items were taken from Italy illegally. The accounting firm BDO was planning on selling off Symes’s collection in order to pay taxes owed by Robin Symes Ltd., but Italy has warned that if it does not receive detailed information about the status of each of the 700 items, that it may sue BDO in the United Kingdom under the Dealing in Cultural Offenses Act. Though the importance of a nation monitoring the illegal trade of its antiquities cannot be denied, one cannot help but wonder how much a potential international lawsuit would cost the already cash-strapped Italian government, and given the examples of “L’Arte Aiuta l’Arte,” the Colosseum, and Pompeii, whether Italy would even have the funds necessary to ensure the antiquities were properly cared for were they to eventually acquire them.

About the Author: Nora Choueiri, is a third year law student at Fordham University School of Law interested in art, cultural heritage, IP and international law, and is currently a legal intern at the Samuelson-Glushko Intellectual Property and Information Law Clinic. She may be reached at nchoueiri29@gmail.com.

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

Vancouver Art Dealer Sues Andy Warhol Foundation Over Sale of Wayne Gretzky Polaroids

On May 31, Frans Wynans Fine Art, a Vancouver art dealer and gallery, filed a complaint against the Andy Warhol Foundation for the Visual Arts in British Columbia Supreme Court for selling Polaroid photographs taken by Warhol of hockey star Wayne Gretzky in 1983. Wynans claims that in 1983, he signed a deal with Gretzky’s company to commission Andy Warhol to create six paintings of the famed hockey player. The complaint alleges that Warhol took an unknown number of Polaroids of Gretzky in a three-hour photo shoot that took place in September, 1983. Wynans further claims he paid Gretzky’s company $50,000, in addition to royalty payments, to license the artwork and also paid Warhol $175,000 to create it. The deal granted copyright to Warhol, but stated that both Wynans and Warhol needed Gretzky’s permission to “reproduce, restrike, utilize, or otherwise exploit the Art.” Wynans also claims that the agreement gave him the exclusive right to sell the works. After Warhol died in 1987, his works, including the Gretzky Polaroids, were transferred to the Warhol Foundation.

In November, 2012, Frans Wynans stated that he heard about a Christie’s auction that featured “four unique Polaroid prints” of Gretzky, which were sold for $9,000. Wynans claims that the Warhol Foundation breached the 1983 deal by directly competing with Wynans and refusing to deliver the photos before the were sold off.

It appears that Wynans wants his piece of the Warhol pie. After the artist’s death in 1987, the six Gretzky original paintings, which sold for $35,000, were suddenly worth at least $100,000 each and the silkscreen prints, which originally sold for $2,000, shot up $6,000. The complaint states that, “being fully occupied with the marketing and selling the Paintings and Prints, Mr. Wynans gave no thought to the Photos.” He was unaware of the continued existence of the photographs and feels he should be duly compensated.

Stay tuned for further developments as this case unfolds.

Sources: Courthouse NewsCBC

Order of Business At Auction, Red Flag or Paddle?

Steven Brooks, a collector of Old Masters, says that a painting he bought from Sotheby’s for £57,600 in 2004 (about $90,000 today) is worthless because it was once owned by the war criminal Hermann Goering, and might have been looted by the Nazis.  The painting, Allegorical Portrait of a Lady as Diana Wounded by Cupid, is by the 18th-century French artist, Louis-Michel van Loo. The Goering connection came to light in 2010, when Brooks sought to sell the painting at Christie’s. When Christie’s specialists discovered that Goering had bought the work in 1939, Christie’s refused to accept it for auction, citing concerns about being able to convey good title.

In a complaint filed against Sotheby’s in California on March 21, Brooks alleges that Sotheby’s should have researched the provenance and informed potential buyers that the work had been owned by Goering; that the Goering connection creates “a cloud on title” that renders the painting unsalable and without value; and that Sotheby’s refuses either to put it up for auction or refund his money.

The case is unusual in many respects.  First, it is standard practice for auction catalogues to contain Conditions of Sale, Terms of Guarantee, and Glossaries of Terms.  A typical* Sotheby’s catalogue from 2001 states, under Conditions of Sale:
The following Conditions of Sale and Terms of Guarantee are Sotheby’s, Inc. and the Consignor’s entire agreement with the purchaser relative to the property listed in this catalogue…

By participating in any sale, you acknowledge that you are bound by these terms and conditions.
      1.     [A]ll property is sold “AS IS” without any representations or warranties by us or the Consignor as to merchantability, fitness for a particular purpose, the correctness of the catalogue or other description of the…provenance…of any property…and no statement anywhere, whether oral or written,…shall be deemed such a warranty, representation or assumption of liability.

Even in the Opaque Art World, Taxes are Certain: Glafira Rosales/Gonzalez Indicted for Income Tax Evasion

Knoedler Gallery was a reputable art gallery, in existence for over 150 years. When it closed in 2011, accusations that it sold forgeries were just starting to mount. Art collectors are still steaming over purchases of suspect artworks. In fact, another case, according to the New York Times Reporter Patricia Cohen this one is No.6, has been filed earlier this month by the former ambassador to Romania, Nicholas F. Taubman who bought a fake Clyfford Still from the now defunct gallery in 2005. Like dozens of other suspect works, this Clyfford Still came to Knoedler from the stock of the Long Island art dealer Glafira Rosales, a.k.a. Glafira Gonzales (“Rosales”).

Naturalized citizen of the United States, Rosales sold dozens of art works attributed to important 20th century artists, including Mark Rothko, Robert Motherwell, and Jackson Pollock on behalf of fictitious clients. As a part of her elaborate scheme, Rosales lead the Knoedler staff to believe that all of the works she offered were owned and consigned to her by others. Between 2006 and 2008, the proceeds of Rosales’ sales exceeded $14 million. Now, the charges brought against her allege that she was “dealing in fake artworks for fake clients;” however, this is not the thrust of the accusations. In a complaint dated May 20, 2013, Rosales is accused of evading taxes owed on the proceeds from the sale of these fake works. It is an Al Capone story all over again, minus the murder and prostitution.

For years, Rosales omitted or significantly understated her gross receipts; she also failed to comply with mandatory IRS filing requirements. Specifically, Rosales under-reported her income, by omitting at least $12.5 million from her returns between 2006 and 2008. Also, between 2007 and 2011, she failed to report to the IRS the existence and worth of her foreign bank accounts, a mandatory requirement for U.S. taxpayers with foreign holdings in excess of $10,000 during any given year. The IRS investigators were able to trace money transfers to accounts connected to Rosales located in La Coruna and Lugo, Spain.

The eight counts of violations brought against Rosales, if combined (three false tax returns and five years of willful failure to file disclosures), carry a maximum penalty of 34 years in prison and a maximum fine of $1,550,000.

If Glafira Rosales qualifies as the Trojan Horse of the Knoedler Gallery, the Achilles hill of that horse may be her income tax forms.

Source: Sealed Complaint; The New York Times.