The Knoedler Trial

The NY Times reports on the opening arguments in the Knoedler trial.

Perhaps the most anticipated trial exploring the art market in recent years began Monday in United States District Court in Manhattan with a lawyer for a couple that bought a fake Rothko asserting in her opening argument that Knoedler & Company, a once-celebrated Manhattan gallery that is now defunct, had deceived its customers while selling them dozens of fake works that it said were by master artists.

The couple, Domenico and Eleanore De Sole, paid Knoedler $8.3 million in 2004 for the purported Rothko, “Untitled, 1956.” In 2012 they sued the gallery and its former director and president, Ann Freedman, accusing them of racketeering and fraud in the sale and asking for damages of $25 million. Mr. De Sole is chairman of the board of Sotheby’s.

“These defendants were lying to their clients about the paintings,” Emily Reisbaum, a lawyer for the De Soles told 10 jurors. “They were also hiding the truth.”

The gallery and Ms. Freedman have denied the accusations, though they acknowledge now that the works were fake. They say they too were taken in by an elaborate scheme to sell counterfeit art.

Knoedler was the oldest gallery in New York when it closed in 2011, just ahead of a number of lawsuits by collectors who came to suspect they had been sold fakes. All of the forgeries, more than 30, came from Glafira Rosales, a little-known dealer from Long Island who had obtained them over a period of many years from a painter in Queens, Pei-Shen Qian.

But Ms. Rosales presented them, instead, as having come from a mysterious collection and consigned them to Knoedler for sale. She pleaded guilty in 2013 to wire fraud, money laundering and tax evasion.

The lawyers for the De Soles say the gallery realized, or should have realized, that the paintings were fake and Ms. Reisbaum previewed the case Monday, saying there were several areas that pointed to culpability.

The paintings came with undocumented, vague histories and the gallery had paid “bargain basement” prices for them, despite the fact that they were said to be by artists like Jackson Pollock and Robert Motherwell, she said.

Ms. Freedman, she said, had made what Ms. Reisbaum called “suspicious payments” to Ms. Rosales on 28 occasions — cash payments of $9,000, just below the level at which banks must inform the federal government of a large cash transaction. (Addressing that assertion after the court session had ended, Luke Nikas, a lawyer for Ms. Freedman, said that payments to Ms. Rosales were in no way secretive or hidden, adding, “Knoedler recorded every single cash payment to Rosales on its books and records, which were audited by one of the finest accounting firms in the country.”)

Ms. Freedman and Knoedler also provided changing provenances to buyers, Ms. Reisbaum went on to tell the jurors, in an apparent effort to explain where paintings came from.

“There was even a Pollock with a misspelled signature,” she told the jurors.

That Pollock was one of three paintings from Ms. Rosales that Ms. Freedman ended up owning herself, a decision that her lawyers have suggested is evidence she had no doubt the paintings were real.

Her lawyers and those for the gallery have long maintained that they too were fooled, as were, they say, various experts to whom they showed the works. Those lawyers are scheduled to present their opening arguments Tuesday.

“We look forward to presenting our case tomorrow, when we will show that Ann Freedman believed in these paintings,” Mr. Nikas said in a statement.

Source: The NY Times