Sunday, November 2, 2014

Appraising the Antiques Roadshow

The Antiques Roadshow is one of my favorite shows on television.  What I most like about the show is its willingness to look at art and antiques through the lens of the market;  I suspect that like a vast majority of its 13 million weekly viewers, I am most interested in the monetary value of the objects presented.  While the background of the objects, their makers, milieu and aesthetic qualities are deeply appealing, I admit that I might not watch as religiously if each segment didn't end with each the expert’s declaration of their opinion of the value of the item(s) discussed and I enjoy trying to guess the value before it is announced. The engaging, well-produced show harnesses our fascination with monetary value to highlight history and artistic skill and deserves the many awards and honors it has received, and as a professional in the field of art, I appreciate the interest it has without a doubt generated in collecting and treasuring our shared cultural heritage.

Lark Mason with  a set of rhino horn cups,
appraised at $1 - $1.5 Million, one of the records on the show

Like anyone who watches a TV show that covers their area of interest, however, I have a few very pointed criticisms.  This is not unusual.  I have a friend who refused to watch The Sopranos because it reinforces negative stereotypes of Italian-Americans, and my physician sister cannot abide any medical drama because none of the interns or residents ever looks tired.  Unlike these fictitious shows, however, the Roadshow deals in reality.  Unlike most reality TV shows, this one, I think for many viewers, rings true. The experts are able to convey enthusiasm and authority, the owners who bring the pieces in are obviously everyday people, the setting looks like a trade fair with which we are all familiar, and after all it’s public television –it can be extremely hard to remember that it is still a TV show.

Reading a few online ‘behind-the-scenes’ articles about the show, and in discussing it with colleagues, a few of whom are actually experts on the show, I have come to understand a bit about how the show is put together.  Attendees are sorted into categories immediately upon entering the venue and then wait on long lines to see the relevant expert.  Interest in the show is so intense that tickets are distributed by lottery.  Approximately 3,000 people come to the typical event in a day, each of them bringing two things to be looked at.  From this hoard, about 90 items are selected for individual presentation, with the appraiser making a pitch to one of the producers, who then decides if it is worth taking the time to shoot a piece.  It can be an ‘over the shoulder’ segment, which is less time-consuming, but with items of particular interest, the owner, after signing a waiver  is brought to a green room in anticipation of a one-on-one with the expert.  Everyone is wildly busy, so it may take up to 4 hours for the owner to get in front of the cameras.  While they wait, like talent on any TV show, they are given food and drink and a comfortable place to sit.  Since the show prizes the reactions of these people when the expert does ‘the reveal’, they are kept apart from each other, lest they learn anything more about their piece.  At that point, they know something is up, but, as regular viewers know, their works can sometimes be used as a teaching moment, explaining why something is a fake. 

 The "Green Room" at a recent venue

While the delay, in part, allows the camera guys and producers to do their work, there is also a private area in the arena where the expert can do research, both on the internet and by consulting books.  They almost always have some off-site support as well: assistants or a team back home that have additional resources handy that can help with comparables and to provide information that can be presented on air.  They may also call on the opinions and insights of their fellow experts at the venue.  Finally, especially in the case of furniture, many objects have been submitted in advance (this is often to alleviate the hassle of moving heavy objects in if they are not that interesting), which again gives the presenters time to put together an engaging story about the art and to give an informed opinion of value. Naturally, the owner is not aware of any of this work; it is their reaction which we all want to see. When it is at last show time, object and owner are brought before the camera and the magic is made. 

While this makes for great television, it at once glamorizes and diminishes the work that an expert does.  The viewer is given the impression that experts know off the top of their head where and exactly when a maker was born and died.  The presenter seemingly woke up knowing which two sailboats competed for the America’s Cup in 1906, or can look at a necklace and tell at a glance how many carats of diamonds are in it, as well as their color and clarity.

I don’t for a second question these experts.  They are on the front-lines, looking at thousands of works a day, honing their eyes and knowledge.  There is no question in my mind that they could probably speak almost as well about most of the objects without doing any research at all.  And of course, many times you hear them say that they ‘did some research’ or ‘consulted with their colleagues’.  So I am not accusing them of lying; it is really more a function of how a TV show is made.  I suppose when we watch a cooking show and a perfect pie pops out of the oven the moment after a raw one is put in, or when the cook grabs a handful of chopped ingredients without showing us the chopping, we all inherently understand that the boring stuff has been glossed over.  Who wants to see an expert referring to online price databases or looking through a hallmark book of old silver?

My issue here is that it gives the impression that expertise is innate and effortless.  By excising almost all references to the nitty gritty, the Roadshow runs the risk of making the process of appraising seem capricious. I don’t want to overstate the case, but I do feel there is a tendency towards privileging the expert on the show, that it sometimes feels as if the expert is making a pronouncement rather than expressing an opinion.  When the expert is seen to be able to bestow a value without having to consult anything but their own mind, we are getting very close to making the whole thing seem subjective.

I am also convinced that the show engenders an expectation that experts can produce immediate, credible opinions of value.  My evidence here is hardly scientific, but I have heard from numerous dealers and appraisers that they have been shown an image of a work of art on a phone and been asked for a value.  The phone-holders are invariably incredulous when their request is declined.  Nobody wants to hear that appraising art involves drudgery.  (I should also note that people paying appraisers by the hour are especially adverse to the idea that the process can be time consuming).   By making appraising seem subjective, effortless and immediate, Roadshow does the field a great disservice.

I hasten to add that I don’t blame the experts on the program.  It is the producers who are making this happen and they are doing so in order to make a TV show which 13 million people enjoy.  I get it.  But would it be so hard to have some cutaways to the experts conferring with each other, talking on the phone to their offices, looking over each other’s shoulders at laptops, deep in discussion while looking at comparables?  Or maybe have a very short segment behind the scenes about how it all works?  I don’t mean to suggest that as a TV show, the Roadshow has a responsibility towards the field of appraising, my point is that it might be a better show if they gave us all a glimpse of just how amazing these experts are.  They don’t just know an awful lot, they have research skills, they are able to direct other people to help them, they are able to network and build collegial relationships with other experts.  I think we would all be more impressed, not less.

My other concern with the Antiques Roadshow is much more serious.  I feel that the values presented are misleading.  In the course of one show, a viewer might hear “I would say a conservative auction estimate would be…”, “In a retail shop, I would not be surprised if…” and “As an insurance value I would say that this is…”   This is not surprising.  Some of the experts work at auction houses, others have retail shops and still others are appraisers who do a lot of insurance work.  But there is never any explanation of what these various values mean or how they differ.  Whatever number(s) the expert gives is displayed along the bottom of the screen at the end of a segment.  Again, this is not the experts fault; after all, they clearly state exactly what value they are giving.  But I fear that these distinctions get a bit lost in the shuffle.  The Roadshow audience is probably very sophisticated and no doubt picks up on these differences as I do. Nonetheless, I think the practice of flashing a value without stating what sort of value it is crosses the line between making a fun TV show and distorting the reality it purports to convey.  For of course, an insurance value is pretty close to what would be asked in a retail shop…but not quite.  Insurance values usually encompass sales tax and/or shipping, as well as any framing or other charges for creating a pleasing manner in which to present a piece.  Auction estimates might be wholesale, or not. 

The expert's value is displayed along with the show's 
trademark treasure chest and sound of coins clinking.

What all of these values encompass is the commissions due the seller.  In almost every instance, in my estimation, the owners stand to gain at least 20% less than the value stated on the show.  For items below $5,000, I would say it is probably more like 40 – 60%  less.  Again, a lot of people probably know this, but judging by the reaction of some of the owners, I am not so sure.  The guy who has a vintage toy  for which he paid $500 and who is told to insure it for $800 looks delighted, but I imagine he will not look so happy when he is offered $325 when he tries to sell it.  I suppose the owners will find out soon enough about the spread between the bid and the ask if they don’t know it already, but the rest of us are left with the impression that anybody, not just an insurance company who collected premiums and made a commitment to pay if the item were lost, would buy that toy for $800.

The problem with all this is that it makes everything seem worth more than it is, or should I say, it tilts towards the most optimistic notions of value.  On one level, who cares?  It’s just a TV show.  And who is harmed if we choose the highest possible value when thinking about a piece?  In my view, it is the dealer who actually has to sell the work and make a living that takes the hit, which serves to undermine the public’s confidence in the entire art profession.  Commissions are extremely high in the art market.  There are a lot of reasons for this.  For one thing, it is hard to sell art…it takes time as well as having a large network of buyers, and a seller needs a context in which to do so:  an art fair, or a gallery, all of which takes money.  Furthermore, art needs to be insured as well as transported and shipped properly.  People who deal in antique clocks have to spend at least 4 hours assembling and disassembling each clock for display at a fair—think of that the next time you see a booth with 18 different clocks on display.

Almost always on the program you will hear the expert ask if the person has had it appraised before.  Occasionally an owner will say “My wife had it appraised 15 years and the appraiser offered her $1,000 for it so she knew it was worth more”.   This stands to reason.  Someone in the business of selling art will naturally offer less cash upfront than what they can sell it for later.  More often than not, the expert on the show comes up with a value that is worth way more. This perpetuates the notion that the art world is just a giant confidence game where the little guy is going to get screwed. (There are actually a lot of informed insiders who think the same thing, but that’s a topic for a different blog post!).   In other words, by contrasting what someone would actually have paid in the past with what you should insure something for now without any nuance, the show does a great disservice to the very profession it seems to celebrate. 

I should also note that this anecdote (which is based on my memory of a number of segments, I am not referencing a specific one here) is typical in that ‘appraisers’ are usually made to look unscrupulous.  The field of appraising has become increasingly professional over the years in response to situations such as this.  It is wildly unethical for someone to approach an owner as an appraiser and to then offer to purchase or take on consignment a work of art without disclosing that they have switched roles.  An appraiser has a fiduciary duty towards their clients which would not allow them to enter into a different sort of agreement with a client without making them aware of the change.   

Obviously, there were the bad old days when unethical behavior was more commonplace than it is today.  But the field now has strong member organizations that look after the profession.  It is thus unfair that the program more often than not refers to anyone who previously gave a value as an ‘appraiser’.  It may well have been that the person was a dealer.  I may be splitting hairs here, but all of the presenters are experts and should be very precise in the language they use and they should ask the owners to be specific about who exactly it was that gave them a value previously.

My suggestion regarding the various valuations used interchangeably on the Roadshow is that the experts ALWAYS quote marketable cash value…that is, what is the amount that a seller would receive, net of fees and expenses, in an orderly transaction, one that allowed for sufficient time to market the work and so forth.  I suppose the lower numbers might be less compelling on one level.   If they liked, they could then quote the retail or the insurance value so we all understood exactly what the piece was worth, in the expert’s opinion.  I know the program is entertainment, not a public service documentary using real-world examples about how values are arrived at in a USPAP compliant appraisal report.   But it would be more real.  Is not that what the Antiques Roadshow is supposed to be?  

John Tett, “What Happens Behind the Scenes Before an Antiques Roadshow Appraisal?”   AV, March 25, 2014

Bonnie McCarthy “Behind the Scenes at the Antiques Roadshow”  Huffington Post, October 2, 2013

Sunday, October 5, 2014

Have the DIA Appraisals Failed?

The court in the City of Detroit bankruptcy trial has heard 17 days of testimony to date and while the matter of the Detroit Art Institute’s art collection has not been settled, this seems like a good time to take a look again at the various appraisals and how they have been used in the case so far.  From my perspective, it would appear that in terms of providing a solid number which the court could use to it make a decision, the appraisers have not succeeded.  I have not attended any of the sessions and have relied upon the Detroit Free Press’s excellent coverage, including a live blog from the courtroom, but from what I can gather, the exact numbers from the four different reports rarely, if ever get mentioned.   There are countless decisions that go through an attorney or a witness’ mind as they stand in court, so I do not presume to know exactly why this is happening, but I do think that on some basic level, it must be because all of the appraisals lack credibility.

As I outlined in my previous post, 4 different entities took a swing at coming up with a value for some or all of the DIA collection.  The City of Detroit (COD) commissioned two of them:  Christie’s, which appraised all works purchased directly with COD money and then Artvest, which incorporated Christie’s values and went on to value the entire collection.  Both Christie’s and Artvest also provided the COD with ideas about how to monetize the collection without selling it.  Then, two of the COD’s bond insurers, creditors who opposed the way in which they are being treated under the bankruptcy plan, Syncora and Financial Guaranty Insurance Company (FGIC) hired Winston Art Group and Victor Wiener Associates (VGA) respectively to provide their own opinions of the value of the collection. 

Over the past month, Syncora dropped its opposition to the bankruptcy plan in exchange for some important concessions from the COD.  Rumors that FGIC would settle as well have persisted, however to date this has not happened.  While there are certainly many other creditors who would insist on the trial continuing, if FGIC were to settle  it seems likely that the bankruptcy plan would move forward in its current form, subject to Judge Steven Rhode’s approval; Judge Rhodes would presumably have some influence over the final plan, but in terms of the DIA collection, the “Grand Bargain” whereby the DIA collection would be placed safely away from the grasp of any COD creditors in exchange for money raised from private and public sources would stay intact.

Two important witnesses have given testimony that deals directly with DIA and the Grand Bargain: Emergency Manager Kevyn Orr and Michael Plummer, the principal at Artvest who authored the extensive appraisal of DIA’s entire collection.  Plummer, to repcap, came up with a number in his report of between $2.7 and $4.6 Billion, which he then proceeded to discount in various different scenarios, estimating that the most the collection could hope to fetch would be $1.8 Billion, and it might even be as low as $800 Million, give or take.  In his direct testimony, Plummer described his methodology in arriving at his figures and as might be expected defended his report, but the discussion didn’t really seem to have focused on his numbers.  Instead, Plummer emphasized how difficult the process of selling DIA’s collection would be.  He notes the legal challenges that DIA would mount at every step, and he indicated that many potential buyers would stay away out of sympathy with the DIA and that the entire matter would end up hurting more than helping, as by the end of it, the Museum would be ‘denuded’, as well as lacking in credibility moving forward.

Emergency Manager Orr, the mastermind of the bankruptcy plan, sounded similar notes in his testimony, which Orr’s was notably lacking in any specifics.  He claimed that the DIA would lose funding, that donors would no longer give art to the museum and that its standing with other museums  would be diminished if the collection were sold.  Instead of going down that road, Orr feels the Grand Bargain is a better alternative.  Orr considered “what was reasonable in terms of preserving a City asset” and concluded that the amount of money proffered was just that. 

Judge Rhodes at various points seemed to be very receptive to the idea that the DIA provides a place where the Detroit community can thrive.  His questioning of a DIA trustee focused on the school groups who visit the museum.  Orr and Plummer made similar points and Roger Penske, a billionaire philanthropist who has taken an active role in trying to assist the city as it tries to recover claimed that the economic benefit of having a world-class collection of fine art in Detroit was incalculable.  “You can’t put a price tag on that.”

Indeed.  I find it amazing that nobody is really hanging their hat on a particular number and then stating that the Grand Bargain is a fair price.  Surely if there was consensus about the number, then another number could be calculated that was reasonable.  A striking exchange between Ed Soto, the lawyer for FGIC and Orr sums it up.  Pointing out that the idea of the Grand Bargain began before the entire collection was appraised:

Soto:  “You agreed to the Grand Bargain without knowing
                     the value of the entire collection?”

Orr:  “Correct.”

At another juncture, Orr admitted that he never took action to explore alternatives to selling art proposed by Christie’s.  This is astounding.  The COD expended resources commissioning Christie’s to help it think of ways to get some money in the pot without selling the art and then ignored them.

The bankruptcy has many moving parts and the DIA collection is merely one of a number of things that need to be sorted out before the COD can put this tragedy in the rear-view mirror.  As such, it does make sense to look at the various matters broadly; other parts of the trial seem to get very bogged down in the minutia.  Nonetheless, I am surprised at how wishy-washy the discussion about DIA has been to date.  Attorney Nicholas O’Donnell, upon whom I lean on heavily in this blog, is of the opinion that Orr is a magician.  In his view, selling the DIA collection was never going to happen and the fact that $800 million appeared via the Grand Bargain is essentially found money.  This might explain the vagueness of Orr’s testimony.  Why bother being specific about how the number was arrived at when it’s all a big bluff?  Such specificity would not serve Orr’s purpose here.  Perhaps all he wants to do is appear to be considering selling.

Another striking point all of the DIA-related witnesses made is how nasty DIA would be regarding any sales.  Annemarie Erickson, the Vice-President of DIA promised Judge Rhodes that the DIA would litigate, adding that it was the museum’s ‘obligation’ to protect the collection.  Plummer made this point in his report, and Orr said on the stand that the Grand Bargain averted a very costly legal fight.  This argument holds a lot of water—the Museum probably would be relentless in seeking judicial relief if the COD decided to sell off the collection.  However, the COD would be doing so to provide basic services to its citizens and to meet the obligations it had made to its former employees as well as to its many other creditors.  The DIA could easily be accused of elitism, trying to retain assets that appeal to the few in the face of true hardship.  Thus, if Orr was bluffing about his desire to sell, perhaps the DIA was bluffing too.  After all, it is easier to threaten to sue in the abstract than to actually do so.  So here again, it may be that many of the players have no interest in actually discussing the appraised values put forward by four highly qualified firms. 

The prominent appraiser Beverly Schreiber Jacoby , in a recent op-ed piece in the Detroit Free Press provides another astute take on the situation.  While many observers, me included, have looked intensely at the appraisers and marveled at the disparity between their reports, Jacoby bravely points a finger at DIA, noting that they share the blame for the opacity of the value of the works within their collection. She points out that the DIA staff, like most  American museums “do not routinely prepare baseline financial statements of the total value of the permanent collection”.   While this may shock some people, it actually makes sense.  The art that they hold cannot ethically be sold for operating expenses, so why waste time figuring out its value for the annual report?  When works are lent or moved, they would of course be given insurance values, but in general there would be no need to have an up to date insurance appraisal for every object in a museum.  If the whole place were to go up in flames, whatever the maximum number is on the insurance policy would be claimed and it would be a fraction of their true monetary value.  So again, why expend the time and money appraising things that are probably worth more than they can afford to insure in the first place?

However understandable this might be, it has added confusion in this case. Jacoby further says that the culture of the museum world renders the idea of valuation taboo.  The scholars who work at museums are in many cases constrained by their institutions from discussing how much things might sell for and the entire idea of assigning a number value to a cultural object is anathema to the museum world in every instance.  It is important to note here that Victor Wiener, in his deposition before the trial made it clear that the information he received from DIA in preparing his report was woefully inadequate for his purpose.  Jacoby’s conclusion is that “…the cloistered ideals represented by museum culture have a price of their own" because such willful ignorance of the market value of the works in their care has made it difficult for all the participants in the bankruptcy process to make informed decisions.  

It is quite brave of her to make this observation.  The DIA is often seen as a blameless victim in this process and I doubt her views will be welcomed by many in the art world.  But the point that Jacoby is making is not that they should encourage the sale of their art, but that a more open, collaborative approach to the idea of placing a number on the art would have resulted in a less painful process.  After all, what the Court needs to know, really, is what number is fair?  That would result in all sides being able to agree on the Grand Bargain number and the collection could thus be protected with the chance that many stakeholders would feel that the outcome was just.

This is not to say that Jacoby holds the appraisers blameless.  DIA’s deliberate lack of interest in valuations, along with an adversarial stance towards the entire matter of deaccessioning means that the insurance values that both Artvest and Victor Wiener Associates (the only two appraisers who took a crack at putting a number on the whole collection) relied upon were faulty and thus suspect and they should have known it.  Their reliance on these values means that their reports are unreliable.  She also goes on to cast aspersions on the VWA report, without naming it, objecting to the idea that a DIA sale would be “the sale of the century”, and coming down clearly on the side of Artvest, agreeing that such deaccessioning would be at bankruptcy liquidation prices. 

Jacoby also makes the point that “a valuation… is a hypothetical and written on behalf of the intended user”, by which she means that it is a bit simplistic to use any of the appraisals as a concrete fact upon which a fair and just decision could be based.  This is a corollary to the point I made in my earlier post, that all of the Detroit appraisals take into account the viewpoint of their client.  Jacoby notes that nobody should have assumed that the appraisers would come up with anything close to a consensus, given the varying methodologies used and that conflict was inevitable.  In her view, the fact that the appraisers could not get together and agree on a set of assumptions and methods beforehand has led to the confusion and wildly different results.

I agree with Jacoby in that the appraisers did indeed use different methods on behalf of different intended users and she is absolutely correct that this is a problem.  However, it is not fair to blame them, as she seems to imply.  After all, earlier this year the Court itself rejected the creditor’s motion to create a panel of independent appraisers, forcing the two major creditors to hire their own experts who could rebut the COD’s reports which arguably favor a low number for the Grand Bargain.  It would have been nice if everyone had banded together and played nice, but the adversarial nature of a bankruptcy proceeding is unlikely to produce such cooperation.   I also question her assertion that the works would be sold at liquidation value.  Again, the potential buyers of any of the DIA art would be able to make the argument that they are paying money into a fund to benefit people who worked hard and deserve to be paid what was promised to them.  Nonetheless, I do admire her willingness to take a side in the discussion.

Another point Jacoby makes here is pertinent.  She notes the appraisers all had “exceptionally limited research time,” with an inordinate “size, scope and scale.”  She notes that this led them to rely unduly on auction results that can be accessed on the internet, eschewing the more time consuming process of checking with dealers and trying to verify private sales.   I have to split hairs with her here.  All of the appraisers involved have extensive innate knowledge of the private markets in which they are experts—this is one reason they are in fact experts.  They of course attend art fairs, gallery shows and stay on top of the markets they appraise in.  So even in a short amount of time, they can bring that knowledge to bear upon the problems they are solving and not rely solely on whatever the internet spits out.  But the appraisers themselves uniformly noted that they were operating under severely tight time constraints and it is in fact a considerable limiting condition to try and appraise a collection of 60,000 objects in 2 weeks, or even two months. 

All of this has caused me to change my mind about the appraisal of the DIA collection.  I had thought that perhaps one of the appraisers had got it right.  But based on the fact that we are deep into the trial and not one of the reports seems to have even seen the light of day signals to me that they are not credible.  Certainly Plummer’s ideas on discounting the possible value of the art based on the threat of litigation, the aversion many potential buyers would have to making a bid for any of the objects and the generally difficulty in disposing of much of the collection in a manner which would achieve a premium have seemingly taken hold in the discussion.  But his actual numbers and the startling ways in which he dealt with huge swathes of the works haven’t warranted as much as a tweet. 

I had hoped that our profession could, as Victor Wiener stated, serve the public interest and provide independent, useful information in a process that is incredibly painful.  [Wiener may well take the stand before all of this is over and if he does it will be newsworthy.  Wiener (who I have noted before has been an instructor of mine at NYU)  is a seasoned courtroom player and the excahanges between him and the COD lawyers is bound to be contentious].   

But reading Schreiber and discussing this matter with other appraisers has made me think that I was a bit naïve.  Gayle Skluzacek, one of the top appraisers in the US (and an instructor of mine at NYU), in a private conversation, questions whether a credible appraisal could have been prepared under the assignment conditions.  It may be a case where the appraiser would need to withdraw from the assignment according to the USPAP Scope of Work Rule.  As Jacoby puts it, the case is a missed opportunity for the appraisal profession to have fostered trust by airing the issue of conflicting agendas rather than each report resolutely hewing to their client's own requirements.  In my opinion, it might be that rather than helping, the various reports have unintentionally made the situation worse and allowed the perception to be reinforced that the appraisal process is capricious and thus unreliable.  

Please note that the archive of the Detroit Free Press' blog is not always entirely accessible.  I have tried to provide links in my post wherever possible, but some of my quotes are taken from notes I made while reading the blog live and that content does not appear to be accessible at the moment.  Despite the glitches with the live blog, the Free Press has been providing an invaluable public service in their coverage of the case, and you may visit their website and search around to find a great deal of information about the goings on in the courtroom.  Reporter Nathan Bomley's Twitter feed is also a great resource.  

Thursday, September 11, 2014

$800 Million or $8 Billion for Detroit's Art? It Depends on Who Is Asking

The current dustup over the collection of the Detroit Institute of Arts, which involves many contentious issues in the political and legal arenas, is fascinating from the perspective of fine art appraisals.  The bankruptcy case provides front-row seats as some of the top appraisers in the country publicly assign values to the same works of art.  While each is doing their best to develop credible results, they are reaching vastly different conclusions. The appraisal profession struggles mightily with the concept of subjectivity, but as the Detroit case illustrates, it is difficult to reach a consensus when valuing works of art in the hypothetical.  It also demonstrates that no appraisal exists in a vacuum: the viewpoint of the client as well as any other intended user of an appraisal naturally comes into play during the process of developing an opinion of value.

The breaking news that the various creditors may be settling probably renders all of the work that the appraisers have done in this case moot.  However, I think the case shines a bright light onto something with which the appraisal profession is a bit uneasy: appraisers adopt a point of view which will benefit their client.  However USPAP clearly states that an appraiser “must not advocate the cause or interest of any party or issue”.  So what gives?  My view is that what matters is that the decisions and methods that an appraiser uses must be credible.  When USPAP speaks of advocacy, it means that an appraiser can’t cherry-pick comparables, or ignore facts that affect value; every close comparable must be dealt with and all relevant facts need to be considered.  The document must be credible.  But we aren’t dealing with stocks or bonds here; works of art are unique and the market for them opaque.  Reasonable people can differ over almost every aspect of an appraisal.  So naturally, as an appraiser goes about their work, they are going to adopt the point of view of the person who hired them.  The report has to be defensible, reasoned, and proper in every way.  But if you are not taking your client’s point of view in a subjective situation, you aren’t doing your job.

Jan Steen's Gamblers Quarreling, c. 1665
COD's appraiser puts this at $1 Million and DIA has it insured for $1.5 Million;
The two opposing appraisers assign values of $10 Million and $13.5 Million

All of the below appraisals were taking place while the so-called “Grand Bargain” was being struck, whereby a pile of money, from private foundations as well as the State of Michigan, would be paid to creditors in exchange for taking any of DIA’s art off the table, forever.  They are still arguing over the legality of this transaction, as well as over who should get whatever money does actually get transferred, but, most importantly from the appraisal angle, the various parties are sparring over how large the pile of money should be.  In other words, irrespective of whether or not any of DIA’s collection is sold, it now matters how much it is worth.  The methodology used and the type of value established are where the rubber meets the road.


In August of 2013, the emergency manager of the City of Detroit announced that Christie’s was being retained to evaluate the part of the DIA collection comprised of works acquired with City of Detroit (COD) funds, explicitly excluding any work that was donated. They were also asked to give advice on how to monetize the collection without selling it. The odd assignment resulted in an odd document, produced in December of last year, that provides values for the works and then goes on to explain how not to sell them, which is probably not a  typical assignment for an auction house.  Christie’s cover letter states that Fair Market Value (FMV) was the valuation they arrived at and pointedly claims that these values were not auction estimates, but then they go on to give wide ranges of values which look exactly like what you’d see in an auction catalog!  Their report also does not give any comparables, although they claim to be using the market data approach.  And perhaps worst of all, neither the appraisal nor the cover letter makes any reference to USPAP.  At this point in time, one would expect a major institution like Christie’s to be adhering to the professional guidelines while performing appraisals.  But I digress.

The appraisal covers almost 2,800 objects; however they eliminated almost 1,000 as being of little or no value.  The remaining 1,741 objects were then valued at between $454 and $867 million (you may see the report here  the very important cover letter which details the parameters of the appraisal is here).  The appraisal itself is divided into three parts:  works on view, works in storage with a value above $50,000 and then stored work valued below $50,000.   As might be expected, most of the value was concentrated in the first group, the 326 works actually on display in the museum galleries. 

This assignment is no joke; they had to appraise 1,741 objects in about 4 months, knowing that their values would immediately be made public and that more than a few people would look at them as greedy lowlifes, aiding and abetting the unholy process of stripping DIA of its art and angling to get the works on consignment for themselves.  Christie’s sorted through almost 2,800 objects from the entire history of humanity, spanning very diverse regions and cultures.  By focusing on the works actually on display, they cleverly narrowed the focus onto the works which are the most valuable.  Furthermore, they presumably did not have to bother the DIA art handlers, and were able to simply walk around the museum.  So, right off the bat, instead of eating up time appraising 2,800 objects, they looked closely at 326 and, by their reckoning, captured about 90% of the total value of the collection.   Then, in going through the various lists from DIA, they found another 80 works with a value of over $50,000, which they itemized, and the rest they simply lumped together in a single number.  Along the way, Christie’s could not resist patting themselves on the back for reattributing two works of Asian art which they found to be much more important than DIA had realized.

Christie’s is a major force in the art world of course, with resources, manpower and a huge network at their disposal to rely on when providing valuation services.  So, despite the lack of comparables in the report, one has to lend considerable credence to their efforts.  I do think it is odd to simply zero out 1,000 works.  They are described as a collection of photographs of little interest, a group of paintings by local artists and some coins and so on.  But really, zero?  I mean, not even $100?  I suppose this is a rounding error in the whole scheme of things, but these are the sorts of decisions that along the way begin to add up.

More importantly, the values that Christie’s comes up with are puzzling.  Their cover letter says that they are establishing FMV, with all the ‘willing buyer/willing seller/relevant marketplace’ boilerplate. However, they go on to say that the buyer’s premium has not been considered, which is always included when figuring Fair Market Value, at least in the USPAP and IRS definition of the term.  The wide range for the works is also strange, with the final top number almost double the low one.  They explain that the lower number is the more conservative and the higher the “most advantageous” between the willing parties.  As both Elizabeth von Habsburg and Victor Wiener (appraisers who later evaluated DIA;’s collection for some of COD’s creditors) point out in their depositions, having a range is sometimes OK in many appraisal situations, but a range this wide is borderline useless in most case.  In this instance, however, it serves their client well. 

The tricky nature of the assignment is perhaps one reason that Christie’s was being so fuzzy about the type of value they came up with as well as the big range.  Their client, the Emergency Manager of Detroit is trying to save the city.  He wants Detroit to become a functioning municipality with a future that has a hope of meeting its obligations, with a community of taxpayers who stay put and as such wants to have a world-class art collection within the city limits. He doesn’t want to sell it. But he also needs to be seen as doing his best to pay the City’s debts—it is his responsibility as fiduciary, so he commissioned the appraisal and is here going through the motions of ‘putting every asset on the table’.  At the same time, he has lined up a group of donors to protect the collection who he can’t really afford to fleece as he needs them for a bunch of other gifts down the road.  So the appraisal is rather vague on a number of important issues such as what exactly the art is worth and by what definition the value is being calculated.  Such flexibility allows the Manager and COD’s lawyers to use it in a variety of ways to achieve the Grand Bargain and to make it look like the best possible outcome. 

The rest of Christie’s report proposed various ideas for creating a revenue stream from the collection without selling it, such as creating a “Masterpiece Trust” which would be accessed by a consortium of museums who would pay DIA for the privilege.  As it doesn’t really concern the appraisal of the works, I will not discuss these ideas here, except to again note that the report is a real hybrid behind which the overriding goal almost certainly is to deflect the option of selling off the collection.

Diego Rivera's Power of Industry fresco from 1935
While all the other appraisers assumed this could not be safely removed from the wall,
Victor Wiener Associates argues that it can and thus has significant value


During the wait for this document, a group of creditors (the ones most likely to receive the lowest amount for their claims) petitioned the judge to appoint a panel of independent appraisers to do the job instead of Christie’s, but the judge turned them down, despite the obvious benefit to the employment prospects of independent appraisers. (Nicholas O’Donnell has an excellent collection of posts about the legal aspects of the case here). However, there was much more to come.  Blocked from assembling an appraisal panel, the aforementioned group of creditors solicited bids from prospective buyers of parts of the collection as well as from a lender willing to make a loan to Detroit taking the collections as collateral.  In many ways this makes a lot of sense:  what better way to determine the value of anything than to actually get a bid? 

The offers are worth a look. (The Art Market Monitor covered  this matter quite comprehensively here).  According to court documents, 4 entities indicated interest in the collection:

-Poly International Auction house offered ‘up to$1 Billion’ for all the Chinese art, subject to their examining it.

-Yuan Capital, an investment group with partners offered between $895 Million and $1.4 Billion for 114 works of their choice.

-Bell Capital Partners, another investment group offered $1.75 Billion for everything (not sure if that included the empty vitrines, but it probably did).

-Art Capital Group offered a $2 Billion loan against the entire collection, with an interest rate of between 6 – 9%

Like an appraisal, these numbers are hypothetical.  The prospective participants did have to provide some proof that they had the ability to close any proposed transaction and that they weren’t simply shills for the creditors, but they could easily back out of any deal and, of course, the works aren’t actually for sale at this point.  So, like the various appraisals, these offers become less about reality and more about jostling for position in the legal cage-match.


In July, 2014, the COD revealed that it had commissioned an appraisal of the entire collection from Artvest, an ‘independent advisory firm that provides investment advice for the art market”, according to their website.  This is not an appraisal company, per se, but again the COD was not looking for a straightforward appraisal.  As was the case with Christie’s, the COD directed Artvest to not only come up with values, but to come up with some ideas of how to generate income from the collection without selling it.  Artvest was also tasked with exploring how feasible it was to actually sell the whole collection, as well as to examine the proposed deals that the creditors had generated. 

The legal strategy here is easy to discern:  by putting the whole collection forward, the COD again was ostensibly following the emergency manager’s claim that ‘everything is on the table’.  The creditors had obviously made enough headway with their demands that the entire collection was up for grabs that the COD had to address it.  The COD was also stealing a march on any creditor who was appraising the collection as a whole and taking the opportunity to diminish any possible impact that the offers for parts of the collection might have.

Artvest comes up with a number between $2.7 and $4.6 Billion, and then lands on the midpoint of about $3.68 Billion. They arrived at the number in the following manner:  First, they simply accepted Christie’s appraisal of 2,800 COD works, taking the mid-point of their high/low range.  This makes sense; Christie’s is obviously a reputable company and probably the mid-point was what Christie’s was intending to be used all along.  Besides, they still had a lot of objects to appraise. 

Artvest then undertook their own appraisal of remaining works in the collection that they identified as high value, by which they meant anything listed on DIA’s insurance as $1 Million or higher, and/or which they spotted during their own walk-through of the collection which they thought would be over $750,000.  To do this work, they hired four appraisers [two of whom I know professionally:  Betty Krulick is the President of the AAA, of which I am a student member and aspire to become a full-fledged member, and Sabine Wilson, who was an instructor of mine at NYU].  This step also seems sensible; they were trying to spend their time wisely, focusing only on the high-value items, and a filter of the insurance values combined with a walk-thru seems credible to me.

The work the appraisers did is credible as well.  All four were striving to establish FMV and in most cases, they actually list the comparable that they felt was the closest, which made for very pleasurable reading, at least for me.  Added up, the four appraisers assigned values of between $1.6 and $2.4 Billion, which Artvest averaged to $2.05 Billion.

However, this covered only another 423 works, meaning they still had another large group to account for.  Their next step was to basically group everything into various categories (Contemporary, American Furniture, Islamic, and so on).  They then took the average value for objects under $750,000 in Christie’s report, using the lower estimate and multiplied that by the number of objects in each category, and neatly appraised about 57,000 objects.  In this equation, they also excluded anything that was listed under $5,000 (I assume on DIA’s insurance).

This last step I find a bit off.  I certainly recognize that it is not possible to appraise over 60,000 without a team of 300 appraisers working for a year.  (By the time a smaller team finished, the market would have moved!)  So obviously, some assumptions have to be made.  But for these 57,000 objects, they came up with a value of $971 Million.  Bear in mind, they were creaming off anything above $750,000 as they walked around the museum.  That certainly leaves a lot of money on the table, as I assume there must be a number of $500,000 works in the collection.  Interestingly, Artvest makes the argument that this methodology actually overstates the value, since a lot of what is in a museum collection is low-end stuff that they simply agreed to accept as gifts in order to get a few choice items from wealthy donors; in other words, to flatter collectors they agree to accept an entire collection when only a few things are museum quality.  This is debatable, but deft, giving cover to a rather sweeping decision.  In my opinion, to take 57,000 objects in a major museum and pencil in $971 Million just doesn’t pass the smell test.

I also question the decision to zero out everything under $5,000.  Artvest states that it would cost more to catalogue, ship and sell these works than $5,000 in their reasoning, but I disagree. Christie’s zeroed out 1,000 objects; it is likely that Artvest has zeroed out ten times that.  They are dismissed along the way as pottery shards, arrow heads and textile fragments.  Surely these things have a value. I mean, mightn’t someone out there like to own an arrow head from DIA and be willing to pay, say $20?  Or $30?  And maybe there are a few really good ones.   Artvest argues that it would cost more to sell them than their value, which again might well be true.  But this is something one can control for later in the appraisal by, perhaps applying some discounts and so on in a later step.

And in fact, Artvest does one whole heck of a lot of adjusting.  Indeed, although they used very credible appraisers to establish FMV, Artvest refers to the all of the values as “indicative value” which is not an appraisal term as far as I am aware.  An internet search reveals it to be an investment term which is a preliminary estimate of the bid/ask of a given security.  And this is exactly the manner in which Artvest uses the numbers.  Having established what they hope is a credible ‘indicative value’ Artvest proceeds to apply all sorts of discounts and scenarios to the top line and end up with a range of values from about $1.84 Billion to as low as $850 Million dollars, for the whole shebang. 

Bear in mind that evening sales of contemporary art are considered a failure if they fail to crack $400 Million in one night.  How on earth can the entire contents of one of the best museums in the United States ever be listed at $850 Million?   There were at least two offers for more than that for parts of the collection!

Taking a look at the report, it makes the following points about the market in general, relying heavily on their interpretation of Clare McAndrew’s latest TEFAF reports:

-People think the art market is hot, but it is only the big ticket items that sell well; the middle and low part of the market is soft.  While maybe 500 objects in the museum are masterpieces, a lot of it would fall into the ‘soft’ part of the market.

-Three of the four hottest categories in the market have declined since 2011.

-Except for Contemporary, the art market has reached a plateau and the new money from the BRIC countries that fueled the current boom is waning, so the rest of the market is probably going to go down in the next five years.

-Contemporary art has peaked and it too could reach a ‘breaking point” and go down soon.  Lots of savvy collectors are selling, which is another sign of a top.  And when it all crashes, it crashes hard, like in 2008, when everything went down by 50%.
-Because it is a bankruptcy situation, the DIA would not be able to sell privately and would have to go through auction, which is more risky.  And the two best auction houses wouldn’t agree to handle most of the small-ticket items in the collection, meaning smaller firms would handle the sale and the prices would be lower and the buy-in rates higher.

Reading through this report, you would have thought that the art market had been in a slump over the past few years, except for the occasional masterpiece that comes up at a contemporary sale, and that it was about to cease functioning altogether in the near future. 

What am I missing here?  Is it possible that the art market is so bad?  Is everything I see and hear showing that a lot of people are buying a lot of art a mirage?  I do agree that selling art is not as easy as it looks and that we needn’t get carried away by all the glamour and hype, but I feel Artvest goes overboard.

Then, turning to DIA’s situation in particular, Artvest notes:

-A lot of what DIA has is out of favor at the moment (like American Art in particular)

-A DIA sale would be boycotted by a lot of collectors, museums in particular would refuse to buy and even if they didn’t, they don’t have any money to buy art anyway, so a private sale to another institution would be off the table.

-The big ticket items would attract a lot of attention at a sale and the notoriety would work against achieving high prices.

-Selling everything at once means you need to look at liquidation value, as well as apply a blockage discount.

-Things would inevitably be bought-in, which would further reduce their value, as they would be burned.

-The amount of work on offer would be way too high for Christie’s or Sotheby’s to offer guarantees, increasing risk.

-Since there is so much work, it would be best to sell things over time, which also increases risk, so if you don’t apply a liquidation and or blockage discount, you have to apply a discount that takes into account the time factor.

-Litigation would prolong and hinder the sales process at every juncture.

-Controversial museum sales in the recent past have not done well at auction.

Some of these are good points, some seem a stretch.  A later report by Victor Wiener rebuts a lot of these claims so I won’t go into it much here.  What is important to note is that Artvest is saying that the DIA provenance would hurt rather than help a given work’s prospects at a sale.

The above factors lead Artvest to apply various discounts in different scenarios.  In every case, there is at least a 50% discount applied to the value before reaching the bottom line.

These scenarios are:

A.      An immediate sale to a single buyer (requiring a discount to get a liquidation value or at least blockage)

B.      Applying all the other possible discounts besides blockage/liquidation just because the whole situation is screwed up and also because the Contemporary market is about to crater

C.      Assuming a 3-5 year window to sell everything, requiring a discount for the risk of the passage of time and for things buying in

D.      A 3-5 window, but where litigation drags things out.

Then, for each of the above, Artvest runs the numbers twice, once at the mid-point and once at the low estimate of their ranges—never the high.

In short, the Artvest report takes a very dim view on the entire matter; it opines that at most, the creditors would be lucky to get $1.8 Billion.  Again, all of these assumptions are ones that an appraiser is allowed to make.  And the decision to go low is, of course, dictated by the client.  The question is, is this credible to start low and then discount heavily?

Really, the Artvest document cannot really be called an appraisal at all; they themselves do not refer to it as such. It is properly an “Expert Witness Report” and as such it is really a partisan legal filing meant to buttress the argument that the Grand Bargain is fair.   Again, the point of view of the client has affected the final numbers.

Renoir's Woman in Armchair from 1874;
Insured by DIA for $14 Million and appraised by Artvest at $10 Million;
Winston assigns a value of $15 Million and VWA appraised this at $22.5 Million


While the COD was working on their side of the story, two creditors took matters into their own hands and hired their own appraisers.  Winston Art Group’s Elizabeth von Habsburg was hired by Syncora and Victor Weiner Associates was hired by FGIC to develop their own theories of the monetary value of DIA’s art.  Both of these clients are bond insurers who stand to get hammered in the bankruptcy; if they can sell off the art to get paid in full, they would, and if they can get the Grand Bargain to kick in more money, that also helps them. (They were also involved in generating the offers mentioned above).  So their motivation is to get a higher number than Christie’s and Artvest.  [I note here that I have had professional interactions with Winston Art Group and Ms. von Habsburg is on the board of the American Appraisers Association; Victor Weiner has been my instructor for two appraisal classes at NYU].  The Wiener appraisal can be found in its entirety on the State of Michigan website; I have been unable to find a copy of the Winston report, but a lot of the information in it appears on Wiener’s and her deposition can be found online.

The Wiener appraisal, along with his long, contentious deposition, makes for a great read.  Unlike Christie’s or Artvest, VWA puts a single specific number on the collection: $8,149,232,354, although it immediately states that the number is ‘probably more than that’.  The value given is Marketable Cash Value (MCV), which is what it sounds like:  the amount of money a seller would get after all commissions and expenses have been taken out of the selling price.  VWA and Artvest are the only two appraisals that look at the collection as a whole so I will focus on them together here.

It is interesting to consider what might be the most appropriate value in this situation.  When things are being donated for charitable purposes, or when they are gifted under non-charitable circumstances, or when an estate is being settled, the value used is FMV.  One might argue that under the Grand Bargain, the work is not being sold, and is, in a sense, being donated or gifted, so FMV makes sense.

However, VWA’s client wanted them to consider the possibility of using the DIA art as collateral, so in that case MCV is much more appropriate.  Furthermore, even though it is a lower number, it allows the creditors to say that this is what one could actually get.  And course, even though MCV is typically lower than FMV, the appraisers came up with a much higher number than Artvest.

What was their methodology?  I should start by saying that finally in all of this appraising, VWA mentions adhering to USPAP, which is a great relief!  Disappointingly, most of their comparables are contained in the workfile and are not publish, but it should be noted that VWA is claiming the high ground by invoking USPAP.

VWA’s first step was to appraise 387 objects themselves.  It is somewhat unclear exactly how these were chosen, as they range in value from $175 Million down to $2,000.  In his deposition, Wiener states that they were trying to at once capture the really expensive items, but to also create a sample, appraising objects from all the various departments at DIA, which would then help them later on in their appraisal.  Like appraisers before them, VWA gives a range, in this case $3.09 – $4.04 Billion and lands on $3.56 Billion for the first batch.  Since these are all individually appraised, using comps, one would need to actually see the comps to critique them, but the methodology as described is sound.

Second, VWA took all of the 596 works that they themselves had not appraised but that had been individually appraised by either Christie’s/Artvest as well as Winston, and then averaged the midpoints of their valuations and came up with $311 Million.    Again, this is a decision an appraiser has to make to get a project done under the deadline but it must be credible.  Is it credible to take an average of other values and simply use them?  It is certainly problematic.  For one thing, all the other values purport to be FMV.  VWA is reporting MCV, so it’s not apples to apples, at least on the face of it.  In his deposition, Wiener stated that because they had done their own appraising of a lot of things and compared them to the other appraisers, they felt everyone else was too low, so by taking their FMV, they felt it was ‘implicit’ that these were really the lower Marketable Cash Value.  Also, VWA spends considerable time attacking the numbers of both Christie’s and Artvest, so it does make it a bit harder for them to simply take their word for it, but again, by averaging Winston in with it, VWA felt as if they had controlled for a lot of these errors.

Then, like everyone before them, VWA had almost 60,000 objects left to deal with. 

In the third step, they took everything that was left over that was given an insurance value by DIA and not appraised by Christie’s/Artvest or Winston, just over 16,000 objects .  Here it gets very interesting.  VWA recognizing that insurance values (let’s call them Retail Replacement Values, although DIA doesn’t) are unreliable.  Firstly, they might be out of date and secondly RRV is almost always way, way higher than MCV.  So, to control for this they calculated the average age of the listed RRVs and they also compared the RRVs to works that they themselves had appraised.  This gave them a factor with which to adjust DIA’s RRV, and they gave the group a value of almost $759 Million.

Here again, the appraiser is struggling to find a way to credibly appraise a huge amount of disparate material in a short amount of time.  Relying on RRVs requires a few leaps of faith, and VWA does acknowledge that in their report.    Values used for insurance do not always correspond to the realities of the marketplace and the manner in which they are generated is not always the most rigorous.  Nonetheless, these values have to come from somewhere and DIA, being a world-class institution would presumably spend some time making sure that their collection was properly insured, especially when objects were being moved, conserved or loaned.  Furthermore, VWA compared a sample of objects it had appraised on its own with the insurance values that DIA had listed and made a reasoned effort to extrapolate based on these results.  Because it relies upon individual values assigned to individual pieces by someone connected to DIA, I do find this to be credible, as unorthodox as it might be. 

VWA then had just under 43,000 works of art left after these three steps.  This large group of items had not been appraised by anybody and had no insurance values assigned by DIA.  What they did was use the groupings that DIA used to describe the works (Asian, Islamic, Old Master, Contemporary and so on).  They then went to the 2013 auction sales results from Christie’s and Sotheby’s and figured out the average selling price for each work within each category.  They then decided to add a premium or subtract a discount based on how strong that particular market is.  VWA refers to this as a “pricing matrix”

So, for example, there were 1,679 objects on the DIA inventory listed as “Ancient” in the final group.  VWA calculated that the average selling price at the two major auction houses in this category in 2013 was $80,049.  So they multiplied 1,679 to 80,049.  Then, because they think that the ancient market is strong and because the DIA provenance would enhance the desirability of the works as well as insure that the pieces would not violate international laws governing the trade in antiquities, they add a multiple of 25% for this category.  So, 1,679 x 80,049 = $ 134,402,271.  Then, the 25% premium brings it up to $1,680,02,838.  (VWA has a slightly different number in their report, page 214, likely due to rounding). 

They do this for every category and come up with about $3.5 Billion for that group.  I have thought about this a lot and read the VWA report a number of times and I don’t think the pricing matrix approach as they use it here works.  For one thing, I tried to follow along with the data they used (they relied on pages 67-69 of the Artvest report which tabulates the number of lots and values at the two houses in 2013) and could not replicate the factors they were using…I come up with lower average prices than they do in every instance.  But more importantly, I feel that their method overstates values.  For one thing, they are only looking at what works sold; they are not adjusting for the fact that some things buy-in.  In other words, they are not dividing the gross sales numbers with the total number of works offered for sale but rather only those that actually sold.  Furthermore, as COD’s lawyers point out, VWA is taking the top two auction houses and looking at their sales which include some very important items and using those results to appraise a selection of works which has already been filtered a number of times for high-value items.  Indeed, the works they are using this formula on have NO INSURANCE VALUES listed.  I am willing to imagine that DIA has a few pricey items in there.  But a lot of it must be things that would never appear at any auction, let alone Christie’s or Sotheby’s. 

VWA’s final number is about $8.1 Billion, almost $3.5 Billion higher than Artvest’s. Furthermore, their $8.1 Billion is MCV, whereas Artvest’s is an ‘indicative value’, subject to at least a 50% discount.  Clearly, the two sides are very far apart.

VWA’s report is laden with arguments for why they think the DIA collection is worth more than what Artvest says.  Their report attacks a great deal of Artvest’s assumptions and conclusions while arguing that instead of discounting works because they come from DIA, one should be augmenting them.

Specifically, VWA states:

-Michael Plummer, who signed the Artvest report is not an appraise, the report is not USPAP compliant.

-The DIA collection is incredibly important, assembled through the efforts of some of the richest and knowledgeable collectors of the 20th Century.

-A museum provenance enhances works at auction and many collectors see deaccesioning as a great opportunity to acquire great works.  (VWA here deftly quote their adversary’s experts, Christie’s, who say as much in a number of their own publications.)

-Celebrity adds excitement and a DIA sale would be the “Sale of the Century” resulting in a feeding frenzy.

-The current market pays a premium for works of extraordinary quality, of which DIA’s collection contains many.

-Artvest misinterprets and cherry picks data from the TEFAF report, which, in VWA’s opinion shows that auction numbers are down because of a lack of supply of quality works, which would not be the case with a DIA sale.  Artvest also uses 2011 to show that a peak has been reached, but overall, the market for art has not peaked when looking at a longer timeframe.

-The new money flowing into the market from emerging economies has only begun and is not about to dry up.
-The steep  rise of the art market in the past 10 years is not ‘once in a lifetime’ as it happened before in the late 1980s.

-By using limited time frames, Artvest incorrectly shows that a number of collecting categories are out of favor.

To make a number of these arguments, VWA hired two outside consultants to prepare reports, Zhang Yi, who was a co-author of the recent TEFAF report as well as Dr. Janet Barth, an economist with a specialty in the art market.

Overall, they do a pretty good job of pounding on Artvest.  As I indicated above, I feel that Artvest went way too far in the grim picture they paint of the art market.  On the other hand, it may well be that VWA is being too aggressive.  For example, while a DIA provenance would certainly appeal to a lot of collectors, when work is being sold that is of major importance it will already have an astronomical price.  Would the fact that a masterpiece that is unobtainable except in extraordinary circumstances really be sold for more just because it is from DIA?  Wouldn’t everyone bidding on Van Gogh’s Self Portrait already know what their maximum bid would be irrespective of the fact that it came from DIA instead of, say, a private collection?  But in general, VWA dismantles Artvest’s rather shaky arguments, and hiring outside experts to assist in this adds greatly to the credibility in this regard.


Winston Art Group, like VWA, is a major player in the appraisal field.  As mentioned above, Elizabeth von Habsburg, a principle at Winston, headed the team that appraised part of DIA’s collection.  Unfortunately, I have not been able to obtain a copy of their actual report, although information from it is included by VWA in their report, and von Habsburg’s deposition regarding it are available online. In total, they examined 582 objects from throughout the collection and assigned a FMV of $1.74 Billion.  Unlike Christie’s, they use the accepted definition of FMV, which includes the buyer’s premium and/or any other commissions due the seller. 

It is not clear how the 582 works were chosen; von Habsburg stated that it was her clients who gave her the list to work off of.   Looking at the range of values they provided as well as the material, it seems to me as if it was trying to capture all the masterpieces and then do a sampling of the rest of the collection.  My guess here is that the Winston report is meant to do what VWA’s does: illustrate that the COD is coming in too low, but, unlike VWA,  without relying on any statistical gymnastics to try and figure out what the whole thing is worth.  If they can take the top 100 works, show that Artvest and/or Christies are too low on a case-by-case basis, they will have scored some points for their client.  Also, by doing a sample, they can give their side more ammunition to attack the findings of Artvest and Christie’s.

The works Winston appraised to not synch exactly with all the others, so it is hard to quickly say if they are higher or lower.  Without doing a full-scale analysis of their values, it seems as if they are sometimes the lowest and sometimes the highest.  In general, though, it seems safe to say that they come in quite a bit lower than VWA and a little bit higher than Artvest.   None of their values seemed way off, at least in the areas that I am familiar with, and it seems reasonable to assume that they could defend their valuations.

What is interesting to think about with Winston and VWA is that, presumably, the two creditors who commissioned these appraisals coordinated their efforts with each other.  I have no way of knowing this, but it would stand to reason that since they have the common goal of undermining the COD’s appraisal of the DIA collection, they might check in with each other as they go about this task.  By having VWA do the whole collection and Winston do a sample, the strategy may have been to give both of their lawyers ammunition in the fight.  However, the two existence of two reports also allowed the COD to play them off one another.


Late in August, the COD deposed both Victor Wiener and Elizabeth von Habsburg and then later in the month petitioned the judge to exclude VWA’s report.  As is typical in these legal filings, the language and the tone was withering.   It begins by stating that “Victor Wiener is an appraiser who purported to appraise the entire 60,000-plus collection of art at the Detroit Institute of Arts (“DIA”) in less than
two weeks—a feat that even Mr. Wiener admits had never been achieved in the history of art appraisal.”   It goes on to state that his approach is a ‘mishmash method’, which is ‘slapdash’ and unreliable. 

COD’s major points in this are:

-A lot of VWA’s values are too high…’off the charts’

-Step 2, where other appraisals are simply averaged is unorthodox

-The Step 2 averaging uses numbers that VWA criticizes in other parts of its report

-Step 2 uses other appraiser’s FMV numbers but VWA is calculating MCV

-Step 3 uses values from DIA; these insurance values were old, unreliable and anyway, using insurance values to calculate MCV is a no-no

-VWA admitted to making mistakes which they corrected, but there are likely other ones

-The supplements that VWA applies in Step 3 are arbitrary, cannot be independently tested and the Step 3 methodology has never been used before and in fact was invented by VWA and used for the first time in the appraisal

-Step 4, where the remaining works were compared to average prices at Christie’s and Sotheby’s inflates the values because the works sold at auction are much better than the works in this group, which had been picked of most of the good stuff

-And again, Step 4 is a new invention

COD buttress their argument by pointing out a couple of instances where VWA and Winston were
miles apart on a couple of Rembrandt prints and they quote from von Habsburg’s deposition where she stated that usually an appraiser should never rely on unverified values on spreadsheets or use insurance values to calculate FMV.  (She was not referring to VWA in these statements but rather was responding to a general question).

COD makes some good points.  As I stated above, I think Step 4 is suspect and it is also true that VWA makes it hard to follow along with them in their decision-making. On the other hand, a lot of what Artvest could be criticized in the same way.  They worked quickly, invented new ways of analyzing the data and propose discounts which are impossible to test.  There really is not much difference in the leaps that each firm took in preparing their report, at least in the abstract sense.  If one wants to say that their methods are wrong, one has to deal with them.  Of course some new methods have to be invented here, no major museum’s collection has ever been used as a bargaining chip in a bankruptcy proceeding before.  

In fact, the entire proceeding is an exercise in wild conjecture: how much income will a toll road generate 23 years from now?  What amount of tax revenue can Detroit expect to generate in 2024?  What return will the retiree’s fund earn next year?  In every instance, the answer depends on your point of view.  So when Christie's considers 1,000 objects to be worthless and then Artvest does the same with 10,000, or Victor Wiener Associates adjusts insurance values to calculate marketable cash value, they are not doing anything different from the rest of the experts who are involved in the case and they are making an honest effort to be of use to the court...and their clients.

Friday, July 11, 2014

Here’s A Thought: Pay The Authenticators

The issue of authenticity is again being hotly discussed because a bill is making its way through the New York State Legislature which would enhance protections against lawsuits for experts who provide authentication services.  Obviously, appraisers of all stripes should applaud and support the effort to enact this legislation.  We have been hearing a lot these days that authentication is hard to come by because of the threat of lawsuits.  I think that both the problem and the solution are overstated, especially as it relates to appraisers; the headlines and the received wisdom about the issue need to be examined more closely.  While the authentication process can be complicated by the legal system, an appraiser can work intelligently and professionally with an expert with little risk to either themselves or their client. 

The bill in question (S06794) is actually worth a read; it is short and succinct (You may see it here)  Basically, it would add a section to New York State’s  Arts & Cultural Affairs Law, allowing victorious defendants in art authentication suits to have their costs paid by plaintiffs, and requiring plaintiffs to “prove the elements [of their claim]…by clear and convincing evidence” in order to succeed in their suit.    In US law, it is extremely rare for defendants to collect from plaintiffs, so this is a rather dramatic change.  Furthermore, requiring ‘clear and convincing evidence’ is much stronger than the current ‘preponderance of evidence’ standard.   Nicholas O’Donnell, a prominent art lawyer and author of the excellent Art Law Report blog is quoted in a recent article in Gallerist by Daniel Grant:  “the claimant would need to show that “my expert is clearly right and there is no realistic possibility that the other expert is anything but wrong.” Along with the requirement that an unsuccessful claimant pay the authenticator’s legal costs, the bill “tells people not to bring a case unless they’re absolutely sure they’re right.”

It is hard to argue that this bill is anything but a positive development.  New York State, along with California, leads the country in developing art law legislation, so if it can make it here, it will probably become widely adopted throughout the US, and will likely influence other countries’ thinking about the matter as well.  (Actually, European law grants a lot of power to artists and their heirs in matters of authenticity, but that is another matter).

But a number of things surrounding the whole discussion don’t quite ring true to me.  Many observers note that authentication boards are disbanding and there is a widespread notion that authenticators are currently out of business.  The hope seems to be that they will all immediately start working again should this bill become law.  Then, there is also a sense that had the law been on the books, massive frauds such as the Knoedler debacle would have been curtailed.   I think the real problem here lies in the way in which academia and the market interact; this is not going to be solved overnight and the current bill in Albany will certainly not be the end of the discussion.

According to Ronald Spencer, a widely admired lawyer who practices art law, and who has written extensively on the subject, there are six “…common causes of action asserted against those who authenticate works of visual art”.  He lists them in his essay “The Risk of Legal Liability for Attributions of Visual Art” in the book The Expert Vs. The Object: Judging Fakes and False Attributions in Visual Arts which he edited, and which is required reading for anyone interested in the subject (bits of it are available on GoogleBooks):

1.       Failure to exercise reasonable care
2.       Product Disparagement
3.       Breach of Contract
4.       Negligent misrepresentation and Fraud
5.       False Advertising (both under state law and the Lanham Act)
6.       Defamation

Hahn v. Duveen, one of the earliest cases where authenticity and the legal system interacted, nicely encapsulates the entire issue and is thus often used to start discussions about it.  In this 1929 case, Andrée Hahn, an heiress of considerable means who owned a work attributed to Leonardo da Vinci sued the well-known art dealer Joseph Duveen.  Sir Joseph, upon being shown a photograph of the painting, had publically scoffed at the attribution of the work, and cast aspersions on the expert who had authenticated it; these comments were published in the New York World newspaper.  Hahn apparently had a deal to sell the work to the Kansas City Art Institute (which is still in existence) for $250,000 that fell through after Duveen’s published comments, and she sued Duveen for disparagement. 

Disparagement is the legal concept by which the economic rights of an individual are protected against false statements made by others.  A number of specific conditions must be proved for a suit for disparagement to succeed.  Not only does the person accused of the act have to have made a false statement, it needs to have been published, to have caused an economic loss, and to either have been known to have been false by the disparager or proved that he/she acted recklessly when making the disparaging statement (i.e. the disparager should have known).   

To avoid the issue of disparagement, when an owner or potential buyer of an object needs an expert opinion, they can simply agree not to share the opinion with any third party, except perhaps a specific appraiser, who would also be required to keep the opinion of the expert confidential.  An expert can and should go a step further and require clients to execute an agreement not to sue as a result of any opinion rendered.  While in the recent case of Simon v. Warhol Foundation, a court did allow a lawsuit to proceed despite the existence of such an agreement, this was because the plaintiff had triable allegations that the defendant had engaged in fraudulent behavior.  (Ron Spencer is my source here)  Although courts are generally reluctant to grant exculpatory language in an agreement much weight, especially when one party is an expert and the other is not, the case of Lariviere v. Thaw actually upheld just such an agreement.  Here, the plaintiff tried to sue the Pollock catalog raisonne committee despite having signed an agreement not to do just that and the court struck down his claim on summary judgment.

What about the other items on Spencer’s list?  Like disparagement, defamation would be rendered moot by a confidentiality agreement, as would false advertising.  Regarding the “failure to exercise reasonable care”, I think we can all agree that no professional should be immune from such a requirement.  If you screw up your work, there could be consequences.  The same goes for breach of contract or fraud. But in regards to risk created through good work, a very straightforward confidentiality agreement would go a long way in solving this issue.

Even without such an agreement, in almost every case an expert, having done thorough research and written a proper report, would be immune from such a high burden of proof.  But, as noted by many writers on the subject, it is not the outcome of such a lawsuit, it is the expense of paying to defend oneself that is the problem.   Interestingly, the very subjectivity that makes it difficult to win an authentication case also means that expensive litigation can start almost immediately in such cases, as a plaintiff can reasonably begin to challenge the expert’s credentials, methodology and motives.

Like many subsequent disputes, the Duveen trial was a “battle of the experts”, where each side presented Leonard scholars who disagreed.  The law then, as now, with the ‘preponderance of evidence’ standard commonly used in civil matters, allows the plaintiff to hire their own expert, who can then attack the opinions of the defendant’s expert.    (And, as noted above, the new NY law seeks to up the bar in this regard.)

After a long, inconclusive legal struggle, and facing a very wealthy adversary, Lord Duveen eventually settled the case against him by paying $60,000 rather than continuing to defend himself.  This echoes down to the current discussion, where the legal costs, actual or threatened, are said to drown out the honest opinions of experts.   Indeed, Duveen appears to have been right—the “Leonardo” in question has long been considered to be by another hand.  

So Duveen got screwed, right?  He told the truth and had to pay?  It should be noted that he did act recklessly in making such inflammatory comments to a reporter.  Duveen seems to have been the kind of dealer in the art world whose business plan included attracting attention to himself (another aspect of the case which echoes down to the present day).  Had he simply refrained from promulgating his opinion, he’d have been in better shape, but maybe the $60 grand was a reasonable price to pay for all of the publicity the case generated.  But yes, it would appear that Duveen had to fork over $60,000 in a situation where he correctly outed a Leonardo copy being passed off as original.

This brings up another common refrain in the discussion around this issue: that honest public debate has been stifled by the threat of lawsuits to the detriment of the art world in general.  If only (the sentiment seems to be) there had been a modern-day Duveen strolling the aisles of the ADAA fair telling everyone that the Pollock in the Knoedler booth was a fake, we would all have been spared the awful fallout of that mess.  There were, allegedly, whispers, but nobody said anything out loud.  According to Patricia Cohen in the New York Times, several other scholars and foundations did not share their deeply held suspicions about a number of the Knoedler fakes on advice of their lawyers. 

I certainly believe that this is true.  And I am not sure that it could be any different.  The Constitution grants all of us the freedom of speech.  But lawmakers have constrained this right when it intersects with economic activity.  While I can say pretty much whatever I like about a public figure running for office, this is not the case when business is being done.   The reason disparagement is illegal stems from Congress’ desire to make sure that sellers can market their goods without competitors or anyone else wrongly slighting their wares.

From what I have read, none of the Knoedler buyers seem to have engaged an independent expert to provide them with their opinion.  There were consultants, advisors and intermediaries galore, but, at least from what I can tell, none of the victims hired an authenticator prior to purchase.  The buyers could have retained an expert (or experts), agreeing that the expert’s opinion would remain confidential.  If the expert found the work to be problematic, the client could simply have declined to make the purchase.  End of story.  Knoedler would have had no grounds for a lawsuit for disparagement or any other theory, if the expert’s opinion was kept confidential.

In fact, this sort of set-up, whereby client and expert work together and do not share the results, works every time.   The issue which really is of concern is the demise of free and open discussions where groups of scholars can present their methodologies and findings and reach consensus about authenticity of specific works.  And that is a shame, because consensus is a powerful way to search for the truth, but the law is very clear that not all types of speech are protected. 

The way this all used to work is that every major artist had a few experts (usually academics or museum curators) who devoted their lives to studying the work and who assembled a catalog raisonne.  Dealers and collectors would turn to them in matters of authenticity and once they gave their opinion, that was pretty much that. 

Now, however, there is very little incentive for such an expert to express their learned opinions and the current bill under consideration is unlikely to tip the balance.  After all, why would a scholar stick their neck out, even if they might be able to collect legal fees from their adversary.  They will still have to spend some time if they are sued and they will still have to pay their lawyers upfront.  And, as Donn Zaretsky points out in his Art Law blog, if their adversary turns out to be judgment-proof, they will be stuck.  And of course, they might lose, or even worse, be shown publicly to have made a mistake.  Nobody would welcome having a hostile lawyer review their work no matter what legal protections they might have.

Everything I have read blames this state of affairs on the amount of money now in play in the art world.  This makes sense.  If you own an asset that is potentially worth $10,000, you are not going to call up your lawyer if someone says it is a fake.  But if it’s worth $10 Million, you very well might. 

So, what we are talking when we talk about authentications and the jeopardy that authenticators face is when the art in question is expensive.  No client is going to pay an expert to authenticate an object that is worth $10,000 and then sue them if the expert says it is worthless.  After all, the plaintiff has to pay their lawyer upfront as well.  I am not saying here that the expert (or the appraiser) only has to worry if the art is worth a lot.  (I actually think $10,000 is a lot of money).  If you screw up, you are on the hook.  What I am saying is that you aren't going to be sued for disparagement.  So, when we hear about authentication committees being disbanded, it only affects a small number of objects that we might encounter.  The everyday business of appraising and authenticating continues.  And, I, for one, am happy that a lot of money has flowed into the art world; I am not sure why we should decry this fact.

Of course, appraisers like to point out that they are not authenticators, and our reports are full of disclaimers to that effect.  In any instance where there is a question about authenticity, we are only required to take into account how such questions impact the value of the appraised work.  So, like the rest of the art world, we rely on experts but do not share much of the risk.

Regarding the big ticket items, the real problem is that professional ethics constrain academics and other authenticators from earning a proper sum of money to render opinions.  Much like NCAA athletes, these knowledgeable people create gobs of money for others which they themselves are not allowed to taste.  (Full disclosure: I serve on the Norman Bluhm Catalog Raisonne Committee and am not paid for my work).   I did not do a ton of research here, but checking around a bit I found that, by way of example, the Francis Bacon catalog raisonne committee requires a 500 GBP payment for their services, the Sam Francis Foundation will supply owners with documentation of works from their archives ‘for a nominal fee’ and IFAR charges $3,000, plus expenses for scientific testing and so forth when they undertake research into authenticity.  (It should be noted that IFAR requires owners to allow them to publish their conclusions—an extremely positive requirement).  But the sense seems to be that no entity or person with an academic or museum background should charge a lot for authentications. 

The College Art Association has this to say in their “Standards and Guidelines: Authentications and Attributions” 

In rendering an opinion, it is recommended not to charge a fee, unless circumstances would not be compromised by doing so. One exception to this recommendation would be if the artwork is authentic, published in a catalogue raisonné, and has never been questioned, and if the request is clearly for an affirmation of authentication. Other exceptions would be fees paid to technical experts such as conservators, who are part of a consensus issuing an opinion, and fees paid to authentication committees constituted by artists’ foundations or similar institutions.

But how does it make sense that someone who has deep knowledge and has spent their life becoming an expert on an artist is constrained when it comes to charging what the market will bear?  Obviously, I am not suggesting that experts be incentivized in any way to sway their opinion about the objects they examine.  And the CAA is really trying to protect their members as much as impart an ethical judgment. But why not allow experts to charge enough to cover the expense of an insurance policy that would pay their legal expenses if they got sued?  Why not compensate these individuals in such a way as to make it worth their while to express their opinions publically?  And why is there this sense that artist’s foundations should only collect a modest fee?   If we are worried that the money might corrupt academia, might a transparent market not be a suitable way to weed out incompetent or corrupt experts? 

Looking again at the Knoedler case, there are hints, glimpses and innuendo that some scholar-experts might well have been tempted to cross the line and get paid a bit extra for the services they were providing.  I don’t wish to substantiate them here and these allegations can be accessed elsewhere.  I am bringing it up to ask, if this was the case, who can blame them?  Huge amounts of money were trading hands, why should the expert be underpaid?  If they were paid a proper fee, which was disclosed openly, might that not have been better?  Might that not have fostered the open debate and discussion that we all would like to have seen?

It is often said that the art market is one of the last bastions of a truly free market, which operates without much governmental oversight.  Why are we looking to the government to rectify a problem that has arisen because a lot more money has flowed into this market?  Rather than keep the price of authentication artificially low and pretend that nothing has changed, we should accept that a new way of doing things is in order.  So, while I certainly support the passage of law 6794, I think a much more substantial reboot is in order.

I have tried to acknowledge all of the sources I consulted in preparing this post within the text itself.  A complete list is below. 

Patricia Cohen, “Selling A Fake Painting Takes More Than A Good Artist”  The New York Times, May 2, 2014. link  

Daniel Grant, “New Legislation Would Protect Art Authenticators…” June 4, 2014 post  link 

Nicholas O’Donnell, “Analysis and Views Develop on New York Art Authentication Protection Bill”,  link   

Ronald Spencer, "Protection from Legal Claims for Opinions About the Authenticity of Art", Spencer's Law Journal, Winter 2012/13 (Volume 3, Number 3)  link  

Ronald Spencer, editor, The Expert Vs. The Art Object: Judging Fakes and False Attributions in Visual Arts
(Oxford University Press, 2004) You can buy the book here:  link 

Tracy Zwick, “Good News for People Who Bear Bad News: Legislators Seek to Shield Art Authenticators” Art in America (online), June 5, 2014  link  

Donn Zaretsky, "Authoritative Authentication is Essential to a Well-Functioning Art Market"  The Art Law Blog, June 6, 2014 post.  link