5/20/2019

Excerpt from the Digital Journal of Advanced Appraisal Practice - Art Crimes and Misdemeanors: Managing Risk in Estate Administration and in Appraisals of Stigmatized Art


Attorney Sarah Moore Johnson, Esq. of Birchstone Moore LLC and Cindy Charleston-Rosenberg, ISA CAPP, Art Appraisal Firm LLC and ISA Private Client Services Group contributed an interesting article to the Spring edition of the Digital Journal of Advanced Appraisal Practice. In the block quote is a short excerpt from the beginning of the article. It is a well sourced article on stigmatized art, such as forgeries, stolen art, incorrect attributions, illegal art and unidentified works.

The article takes an interesting approach as it takes a summary look at different types of examples of stigmatized art and how an appraiser should deal questionable art.

To download a free copy of the Digital Journal of Advanced Appraisal Practice, sponsored by the International Society of Appraisers Private Client Services, click HERE.

From the Digital Journal of Advanced Appraisal Practice
Art collectors and their estates can experience disastrous outcomes when art is acquired without proper due diligence and when art is incorrectly valued.  At the root of these problems are various types of stigmatized art that commonly lurk in estate collections, including forgeries, stolen art, mistakenly attributed or unidentified works, and art that is illegal to own or trade.  Failure to properly identify and value stigmatized works can result in avoidable excess tax liability, unequal distributions to heirs, overpayment of insurance premiums, family disputes, and increased vulnerability to IRS challenge.

This article provides guidance to appraisers, trust and estate attorneys, and wealth managers on how to identify stigmatized art that may complicate estate administration. It discusses the associated legal and monetary risks can be managed through advanced strategies and diligence in the selection of relevantly qualified experts.

PART ONE — TYPES OF STIGMATIZED ART
FORGED ART

Over the past decade the international art market has been deeply challenged by forgery scandals, with no segment of the art world left immune. The discovery of forgeries brokered at premiere levels of the gallery and auction markets has resulted in shifting standards and expected practices for collectors and advisors. Collectors should no longer rely solely on the vetting of their eminent gallery or auction house to confirm authorship, as the following examples show.

Galleries: Knoedler & Company forgery scandal
In 2011, Knoedler & Company — one of New York's oldest and most revered art galleries — abruptly shuttered its doors in the wake of an $80 million forgery scandal. Since its opening in 1846, Knoedler had been a leading supplier of Old Master paintings to barons of the Gilded Age, including Cornelius Vanderbilt and J.P. Morgan. 

In 1994, a previously unknown art dealer, Glafira Rosales, visited Knoedler gallery director Ann Freedman. Rosales claimed to represent the reclusive heir of a private collector, who had built a world-class American abstract expressionist collection by purchasing directly from then-living artists including Robert Motherwell, Richard Diebenkorn, Jackson Pollock, and Mark Rothko. Rosales reportedly represented to Ms. Freedman that the heir refused to allow the collector's identity to be revealed, and that provenance (history of ownership), including original sale documentation, could not be supplied. These works, passed off as originals, were later discovered to have been expertly painted by Chinese immigrant Pei-Shen Qian in his Brooklyn garage.

Over the next 14 years, Rosales worked in tandem with her boyfriend and his brother to place dozens of fakes in the collections of Knoedler’s prominent and sophisticated clientele. In promoting the works, Freedman reportedly represented to buyers that the unidentified collector was known to the gallery. 

One victim, Domenico De Sole, a board member of Sotheby’s and former CEO of the Gucci Group, purchased a fake Mark Rothko from Knoedler for a reported $8.3 million. The De Soles sued Knoedler under the federal RICO Act as running a racketeering operation and settled after a full trial. Many other victims settled out of court.

Allegations raised by plaintiffs include that Freedman failed to exercise diligence in confirming provenance and that early warnings from authenticators had been ignored.   John Elderfield, an eminent art historian, and Gretchen Diebenkorn Grant, the daughter of painter Richard Diebenkorn, both testified that, as early as the mid-1990s, they’d indicated to Freedman that works represented as Diebenkorns were dubious. Jack Flam, president of the Dedalus Foundation, dedicated to the legacy of artist Robert Motherwell, also testified that in 2008 he’d disputed two works attributed to Motherwell.

Despite a lack of confirmed provenance and early authenticity concerns voiced by recognized authorities, Freedman continued to represent works from this collection for another decade. Commentators also point to the unusually high differential between Knoedler's cost and sale prices as another obvious cause for concern. These factors suggest, that at the very least, Freedman acted with a reckless lack of due diligence.

The Knoedler scandal deeply undermined buyers’ trust in the vetting process of prominent galleries and other eminent sources and highlights the need for buyers of significant works to exercise more diligence in advance of purchase. The scandal also brought into sharp focus the professional appraiser’s responsibility to confirm authorship with recognized authentication experts before concluding value.

Auction: Old Master forgery scandal
As the art world was still reeling from the Knoedler scandal, European art collector Giuliano Ruffini emerged as a common link in an Old Master forgery scandal involving an estimated $250 million in forged art.

In 2010, Ruffini sold a work attributed to artist Frans Hals to London-based art dealer Mark Weiss, and Weiss sold the work through Sotheby’s in 2011 for $10.8 million. When authenticity suspicions arose after the sale, Sotheby’s employed forensic analysis and discovered the work contained synthetic pigments not invented until the 20th century. Sotheby’s reimbursed the buyer and sued Mark Weiss for breach of contract. 

Sotheby’s traced back chains of title for other works originating with Ruffini, identifying a work titled “St. Jerome” attributed to 16th century Italian artist Parmigianino, that had been consigned by a collector who’d also purchased from Ruffini. Through forensic analysis, Sotheby’s also determined this work to be a fake and refunded the buyer. The painting had been displayed in prominent museums and endorsed by independent specialists as either by or in the “circle of” Parmigianino.

Ruffini is also connected to “Venus with a Veil,” attributed by experts to Lucas Cranach the Elder and sold to Hans-Adam II, the Prince of Liechtenstein, for €7 million (approximately $7.95 million). The image of the ancient Greek goddess was seized by the French authorities in March 2016.  Ruffini is currently being investigated by the French police and says he never claimed any of the works were authentic.

The Terrus Museum forgery scandal
The Terrus Museum in Elne, France, dedicated more than 20 years to collecting the works of √Čtienne Terrus, a local artist best known for his landscapes of the Roussillon region. As the museum was expanding to house its growing collection, it discovered 82 of its 140 works were counterfeits. Smaller museums are particularly vulnerable to forgeries because they often lack the budget to hire professional curators or to conduct proper diligence.

The Palazzo Ducale museum scandal: Modigliani fakes
In the summer of 2017, a major Amedeo Modigliani exhibition at the Palazzo Ducale in Genoa, Italy, was shut down amid authenticity concerns. Of the exhibition’s 30 works, 20 were later confirmed to be forgeries.

Modigliani is one of the most forged artists in the world. Modigliani scholar Marc Restellini reports there are at least 1,000 Modigliani fakes in circulation.  Modigliani originals are particularly difficult to confirm as a result of the artist’s penchant for trading art for drinks, an incomplete catalogue raisonn√©, and various experts jockeying for positioning as the recognized authority, often issuing contrary opinions. 
Source: The Digital Journal of Advanced Appraisal Practice 



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