Art Lawsuits

Fellow appraiser Cindy Charleston Rosenberg sent me an interesting article from Artnews on art leasing firm, Artemus filing suit against the Paul Kasmin Gallery regarding potentially false invoices for Frank Stella paintings. It is an interesting read and shows how complicated the intersection of art and finance can be, and the large amount of money involved in art transactions.

Artnews reports

Artemus, a New York–based art-leasing company cofounded by dealer Asher Edelman, has filed suit against Paul Kasmin Gallery, alleging that the Chelsea enterprise “created and back-dated materially false invoices” concerning the sale of a Frank Stella painting in 2014 to dealer Anatole Shagalov and his business Nature Morte, LLC. Those documents, Artemus claims, led it to enter into a deal, under false pretenses, to pay $3.4 million to Shagalov and Nature Morte for the Stella and three other artworks, with Shaglov and Nature Morte then leasing back those works at an annual rate. The news was reported by Courthouse News last month and brought to the art world’s attention yesterday by the widely-read Baer Faxt newsletter.

The unraveling of that transaction over the past year, which centers on the question of whether Shaglov and his company had full ownership of the Stella, has resulted in a flurry of legal action among various parties.

Asked for comment about the suit, Paul Kasmin Gallery said by email through a spokesperson, “The gallery does not have any dealings with Asher Edelman or his art-lending business. It has been pulled into a dispute regarding a transaction in which it was not involved.” A motion to dismiss the suit has been filed by the gallery, saying that the “self-serving, unsupported, and unspecified allegations fall far short of what the law requires in order to state a claim for fraud.” It argues that Artemus has failed to show that the gallery was intent on defrauding Artemus and that the gallery was in no way involved in Artemus’s transaction with Shagalov and Nature Morte.

In the suit, which was filed in July in New York Supreme Court and amended this week, Artemus, which founded by Edelman, banker David Storper, and the Durst Organization, claims that the “fraudulent” documents caused the company to incur “substantial financial harm, including out-of-pocket expenses.”

The Stella in question, titled La Scienza della Fiacca 3.5 X (1984), is a shaped canvas that features an explosion of layered abstract forms. The painting was shown at Kasmin in its 2015 exhibition “Frank Stella: Shape as Form,” and had also been illustrated in the monograph accompanying a 1987 Stella survey at the Museum of Modern Art in New York. (A similar work is owned by the National Gallery of Art in Washington, D.C.)

According to the narrative laid out in the complaint, Paul Kasmin Gallery first entered into a deal to sell the painting to Shagalov and Nature Morte, LLC (which has no relation to the New Delhi gallery of the same name), in August 2014. The agreement drawn up by the Kasmin Gallery, the suit says, held that Shagalov would pay $430,000, entitling him to 60 percent ownership. If the work was not sold in full by January 1, 2016, Shagalov could claim full ownership for an additional $168,000.

In April 2016, as part of a $3.4 million deal involving the Stella canvas and three other works, Shagalov and his company made arrangements to sell La Scienza della Fiacca to Artemus. To begin processing the transaction, Artemus requested documentation of the painting’s ownership, and Shagalov supplied an invoice dated August 2014 from the Paul Kasmin Gallery that stated he would acquire title of the painting by paying $430,000, with no mention of the $168,000 that would be necessary to assume 100 percent ownership of the work.

According to the suit, Shagalov “had not paid off the full balance due on La Scienza (which also had not been sold to any other buyer in the preceding year).” The gallery, in 2016, “consciously chose to create a phony document rather than jeopardize any such transaction between Shagalov and Artemus or a similar a third party,” the suit reads.

Artemus is suing for the “difference in value between the purchase price for La Scienza and what Artemus actually received” (a painting still apparently owned in part by the Kasmin Gallery, on which no sales tax had been paid, according to invoices submitted in evidence), litigation costs, and various other expenses related to these events from Paul Kasmin Gallery. It is also seeking punitive damages.

When Artemus became aware that Kasmin had retained 40 percent ownership of the Stella, it declared that Shagalov and Nature Morte were in breach of their agreement, and it began to make efforts to sell off works that it was holding in collateral. In response, Shagalov and Nature Morte filed suit against Artemus. In 2017, an injunction was issued that kept Artemus from selling the Stella painting and the other three works that were part of the deal.

“Obviously, it’s a slam dunk,” Asher Edelman, a managing member of Artemus, said in a phone conversation with ARTnews. “The forged and pre-dated documents were made at Kasmin in 2016 to document a sale that didn’t take place in 2014.” The case, he said, is an example of what often happens behind the scenes in the art world. “The art space is unregulated. It should be regulated.”

Edelman and Artemus are also embroiled in a suit brought on by Shagalov, who, in 2017, claimed in a complaint that they had engaged him in “a series of fraudulent and illegal actions” during the sale of works by Haring, Stella, and Josef Albers. (La Scienza della Fiacca 3.5 X is one of the works implicated in that case.)

In 2017, Sotheby’s filed suit against Nature Morte, claiming that the company had not paid a $6.5 million sum for a Keith Haring painting for which Shagalov was the winning bidder. And in 2016, Phillips sued Shagalov, alleging that that he had not paid $6 million for works by Morris Louis and Christopher Wool.

Source: Artnews 

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