Knoedler & Co Trial

The Wall Street Journal reported the Knoedler trial on a forged Mark Rothko purchased for $8 million in 2004 from the Knoedler. The WSJ give a good overview and a quick update of the situation and is an interesting read. I will post on the trial and events as news is released.

The Wall Street Journal reports
On the verge of a trial over the art-forgery scandal that sank one of New York’s most venerable galleries, this much, at least, is agreed upon: The black-and-red painting that sold for more than $8 million in 2004 is definitely not by Mark Rothko.

Whether that fact was known by Ann Freedman, the former president of Knoedler & Co. who sold the work to the family of Sotheby’s Chairman Domenico De Sole, is another matter.

On Monday, Mr. De Sole and his wife, Eleanore, will square off in Manhattan federal court against Ms. Freedman and her former employer in a fraud and racketeering lawsuit. It alleges Ms. Freedman and Knoedler were part of a yearslong scheme to defraud buyers who purchased counterfeits attributed to Rothko, Jackson Pollock, Richard Diebenkorn and other major midcentury American artists.

Ms. Freedman and Knoedler have said in court filings that they believed the works were authentic.

The De Soles’ lawsuit is the first to come to trial since Knoedler, a blue-chip gallery founded 170 years ago, shut down in 2011 amid forgery allegations.

The scandal rocked the art world, where secrecy is common and works can sell for millions to buyers who may not even know the name of the previous owner.

It also highlighted the challenges of determining an artwork’s authenticity at a time when prices for in-demand artists continue to surge. Last spring, two Rothko paintings were auctioned, on back-to-back nights, for $46.5 million and $82 million, respectively.

“You’re looking at a vast pool of money chasing a finite pool of art,” said Pepe Karmel, associate professor in the art-history department at New York University. “The temptations are huge.”

Mr. Karmel, a Pollock specialist, is among a number of scholars who Knoedler told buyers had viewed works that later turned out to be fake.

“I passed through the gallery when they had some would-be Pollocks there,” he said, but didn’t venture an opinion, adding that he doesn’t know whether Ms. Freedman was aware the works were counterfeit.

These days, he said, “No art historian in his or her right mind will give a public or even a private opinion about authenticity, because you can be sued.”

The Knoedler affair offers a prime example.

Between 1994 and 2008, Knoedler sold more than 30 fake paintings to galleries and art collectors, reaping what the judge overseeing the De Sole case has called “outlandish profits” from works that were actually created by a man living in Queens.

The pieces were supplied by Glafira Rosales, a Long Island art dealer. Ms. Rosales said she had access to a trove of modern masterworks acquired by an anonymous collector dubbed “Mr. X,” who had lived in Mexico and whose son and heir wished to sell the works discreetly.

Ms. Freedman has said she was duped by Ms. Rosales and that the artworks were sold in good faith. She also personally bought a handful of paintings from Ms. Rosales.

In 2013, Ms. Rosales pleaded guilty to taking part in a scheme to pass the works off as genuine. She is now awaiting sentencing.

No criminal charges have been filed against Ms. Freedman or Knoedler, according to her lawyer, Luke Nikas. Five of the 10 civil suits filed against them have been settled, he said.

Lawyers for the De Soles say the gallery made some $40 million in profits from the fakes, which it sold for increasingly hefty sums despite having no documentation showing the works had been sold by the artists or bought by a collector at any time.

“Banking on their unblemished and impeccable reputations, Knoedler and Freedman fraudulently warranted that the work was an authentic Rothko, when they knew or should have known otherwise, lied about their knowledge of the work’s provenance, and hid the true facts,” according to the complaint. The De Soles are seeking as much as $25 million in damages.

Their lawsuit also alleges that the defunct gallery’s parent company, 8-31 Holdings Inc., is liable for the claims against Knoedler because the two operated as a single economic entity. Lawyers for the gallery and 8-31 Holdings maintain they are separate companies. The judge overseeing the case, Paul G. Gardephe, dismissed claims against 8-31’s chairman, Michael Hammer, last year.

The defense team for Ms. Freedman argues that she believed the Rothko and other Rosales works were genuine: “she sought opinions from experts around the world, exposed the works to critical eyes at every opportunity, and even purchased works for her own art collection,” according to a November court filing.

Filings on behalf of Ms. Freedman and Knoedler say the De Soles were sophisticated buyers who failed to exercise appropriate due diligence when purchasing the supposed Rothko—for example, by not contacting anyone on a list of experts that Knoedler said had viewed the work. Knoedler also disputes the De Soles’ claim for breach of warranty, saying, “Ms. Freedman’s representations to plaintiffs that the work was created by Rothko is an opinion rather than a warranty.” ​

Ms. Freedman, the De Soles and a parade of other art-world notables are expected to take the stand over the course of the trial, which is scheduled to last about four weeks.

Potential witnesses include David Anfam, a British art historian and leading authority on Rothko, and Dana Cranmer, the former conservator for the Mark Rothko Foundation, according to court filings. The artist’s son, Christopher Rothko, and Gretchen Diebenkorn Grant, the daughter of artist Richard Diebenkorn, whose family expressed concerns about the authenticity of some Rosales-supplied works, may also testify.

A main point of contention: Ms. Freedman’s state of mind at the time of the sale.

The De Soles allege that Ms. Freedman and Knoedler knew—or should have known—the “Rothko” and other works supplied by Ms. Rosales were counterfeit, given the number of works, the low prices the gallery paid for them and the shifting stories about their provenance.

“Merely pleading the existence of red flags does not establish that a defendant was reckless,” Ms. Freedman’s lawyers wrote. “Freedman did not know that the Rosales works were forgeries when Knoedler sold them, so she could not have knowingly participated in a scheme to sell forged paintings.”
Source: The Wall Street Journal 

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