Art Crime: The Fine Art of Deceit

Posted on December 11, 2009 by Patricia L. Werner

Pablo Picasso once proclaimed, "we all know that art is not truth." When it comes to the world of fine art these days, truer words may have never be spoken.

Thanks to advances in global communication and technology, fine art forgeries have become big business. Currently, the FBI estimates that art theft, fraud, looting, and trafficking across state and international lines is a "looming criminal enterprise with estimated losses running as high as $6 billion annually." Indeed, crimes against art have become so popular that the FBI has a dedicated "Art Crime Team" comprised of 13 Special Agents responsible for investigating art crime and bringing criminals to justice.

Art counterfeiting scams can be sophisticated and global in nature. For example, in March 2008, federal criminal charges were filed against seven individuals who, between July 1999 and October 2007, caused counterfeit prints of works by Pablo Picasso, Marc Chagall, Andy Warhol and others, to be manufactured in Spain and Italy - complete with forged signatures and fabricated certificates of authenticity. The bogus works were then distributed to various art dealers in the U.S. who knew they were counterfeit yet sold them as "limited edition" prints to wholesale and retail customers. Many of the prints were sold through eBay. Together, the seven defendants allegedly reaped more than $5 million dollars in illegal proceeds.

The U.S. legal system provides several options for dealing with art forgeries. Defendants are susceptible to criminal prosecution under federal laws, including the Racketeer Influenced and Corrupt Organizations Act ("RICO") and federal wire fraud or mail fraud statutes, where applicable. Defendants may also be prosecuted under state criminal laws that prohibit fraud and forgeries. Art forgery may also be subject to civil sanctions, including liability under the Federal Trade Commission Act and state statutes concerning fraud, material misrepresentation, etc.

The impact of art forgery is not limited to artists and collectors, but rather may have a significant influence on the U.S. economy and security. According to the International AntiCounterfeiting Coalition (IACC), counterfeiting costs U.S. businesses $200 billion to $250 billion annually. In addition, counterfeit products are directly responsible for the loss of more than 750,000 American jobs and, since 1982, the global trade in illegitimate goods has increased from $5.5 billion to approximately $600 billion annually. Moreover, terrorist operations, including the 1993 attack on the World Trade Center and the 2004 Madrid train bombings, are funded through the sale of counterfeit goods.

So, it behooves as all to act with caution and skepticism when a deal looks too good to be true, because it probably is.
Tags: , , , ,

5 Ways To Protect Against Crooked Art Dealers

Posted on July 16, 2009 by Coco Soodek

Did you see this article about a prominent art dealer accused of stealing his clients art and money? According to the article and to this one, this art dealer hung his clients’ art in his gallery, sold it (sometimes more than once) and kept the money. A giant Ponzi scheme. Allegedly, Robert De Niro and John McEnroe were victims. I don’t know if these allegations are true. And, most dealers I know are terrific and honest and good. But, I do hear stories about crooked dealers more than I would like from a variety of people (and, in fact, just today).

Can we avoid this breach of trust? No, not completely. Think of all the smart and worldly people who lost everything down Madoff’s drain. Getting swindled is a risk of doing business.

But, there are things people can do to narrow the risk.

1. Get A Contract. When people give possession of art to anyone – even their mothers – they often write a contract. In the contract, people often identity (a) the work; (b) the reason to give possession of the art; (c) the conditions of selling the work - for instance, a minimum sale price or a minimum amount paid to the owner; (d) who is responsible for safekeeping and insuring the work; and (e) a grant of a security interest.

2. Pick the Right Dealer. People often do a little research on the art dealer before they sign the contract, looking for a pattern of lawsuits or complaints.

3. Get Own Art Insurance. Art collectors often get their own insurance, even if their art dealers are also covered. This allows collectors a second recourse if they get swindled or the work gets damaged and the dealer’s insurance proves to be inadequate.

4. Get a Right to Status Reports. Some people demand that the art dealer keep the art owner informed on the whereabouts of the art.

5. Check Up. Nothing beats continuing vigilance. Periodically check up on an art dealer, visiting their works and asking for reports of sales activity. Just showing energy and attention could make the difference in how an art dealer does business.

Most art dealers are honest, ethical, professional and dedicated business people who will take good care of you and your art – only a small minority are not. The value of art, and the presence of bad apples mixed in with the good, means we often need to take precautions. This is not always easy. A gallery owner may identify a request for a contract and protections as an inaccurate accusation of dishonesty. A gallery owner may also claim that contracts are time consuming, expensive and rarely needed. Both claims are correct.

Most of the time, the dealer can be trusted, the contract is too expensive and too long and the parties never pull it out of the file once signed. But, we take these precautions for the moments when the gallery owner is a fraud, the contract had just what you needed and it acts as your sword in the fight with the gallery.

Doing business on a handshake is essentially a bet in favor of the gallery owner’s integrity. When you bet wrong, you lose, not just money, but an irreplaceable work of art and piece of mind. How you proceed is up to you.
Tags: , , , , ,