Knoedler Trial Update

The NY Times recently published an article about the Knoedler trial where a forensic accountant testified that Knoedler would not have been profitable gallery if it did not sell the Rosales supplies works. Knoedler attorneys denied the accountant's testimony. It also stated that gallery director Anne Freedman was getting a 30% commission on sales. That would mean Freedman earned over $10 million on the Rosales supplied works alone.An art conservator also examined 16 of the fake paintings and determined all had some kind of issue or inconsistency, from improper signatures to "anachronistic materials".

The NY Times reports

For its final 18 years, Knoedler & Company, the 165-year-old business that once reigned as New York’s oldest art gallery, largely depended on profits it made from the sale of fakes attributed to Abstract Expressionist masters such as Jackson Pollock and Willem de Kooning, an accounting expert testified on Friday in Federal District Court in Manhattan.

The expert, Roger Siefert, testified on behalf of Domenico and Eleanore De Sole, who paid Knoedler $8.3 million in 2004 for a painting falsely attributed to Mark Rothko. They have accused the gallery and its former president, Ann Freedman, of participating in fraud by selling more than 30 bogus works that were supplied by Glafira Rosales, a dealer from Long Island. The gallery and Ms. Freedman have said that they too were duped by the forgeries.

Duped or not, the gallery profited handsomely from the fakes, according to Mr. Siefert’s calculations. Using financial reports from the gallery, he said that works supplied to Knoedler by Ms. Rosales sold for $69.7 million between 1994 and 2011, when the gallery closed in advance of a host of lawsuits from collectors.

Without the $32.7 million in net income from the so-called Rosales works, “Knoedler would not have been a profitable enterprise,” Mr. Siefert testified. The gallery’s cumulative deficit for that period would have been about $3 million, he said.

But lawyers for Ms. Freedman and Knoedler challenged his conclusion, suggesting, among other things, that if the gallery had not spent its time selling the Rosales works it would have focused on selling other works that could have made up any deficit.

Ms. Rosales, who has pleaded guilty to criminal charges stemming from the scheme but has not yet been sentenced, earned about $26 million from the sale of the paintings, said Gregory Clarick, a lawyer for the De Soles. All of the works were created in a garage in Queens by an immigrant artist named Pei-Shen Qian, who has said he was typically paid only several thousand dollars for each painting.

Mr. Siefert said that Ms. Freedman had arranged a profit-sharing arrangement with Knoedler and that her commissions had risen over the years, from 10 percent in the 1990s to 30 percent by 2008. He said she had earned $10.3 million in total from the sale of the Rosales works. (Because he was focusing on art sales, he said, he was omitting the fact that in 2011 the gallery earned $18.7 million from the sale of its headquarters, an Upper East Side townhouse.)

Mr. Siefert said his calculations showed that if income from the sale of the Rosales works were removed, the gallery would have operated at a loss in 10 out of the 18 years that he had examined. But when questioned by Mark Robertson, a lawyer for Knoedler, Mr. Siefert acknowledged that if he omitted from his calculations the years from 2009 to 2011, a period when no fakes were sold and Knoedler ran annual deficits from $1.6 million to $2.3 million, the gallery would have made a cumulative profit of about $3 million, even without the sale of any Rosales works, from 1994 to 2008.

Mr. Siefert also agreed, in response to questions from Mr. Robertson and Luke Nikas, a lawyer for Ms. Freedman, that there was no way to tell what sort of profits the gallery might have generated if it had been involved with selling art works other than the forgeries from Ms. Rosales.

Also on Friday, James Martin, an art conservator, testified that he had examined 16 of the Rosales works sold by Knoedler that were said to have been created by different artists between 1949 and 1959, and found indications that they were fake. Signs included suspicious signatures and the use of anachronistic materials, like oil paint with a pigment, Yellow 74, that was not available when the works were supposed to have been made.

“The materials were pointing to a common source,” he said.

Source: The NY Times