Sunday, January 31, 2016

Knoedler Trial--Looking Back at Week 1

Looking back over the first week of the Knoedler trial, the strategies of both sides are playing out in a way that has been widely expected:  The plaintiffs, Mr. & Mrs. De Sole, are claiming that they relied on Knoedler Gallery and its president, Ann Freedman, and that she abused their trust.  Freedman, and the holding company that owned the gallery are arguing that she had done substantial due diligence, was herself a victim of the forgery and that the De Soles had an obligation to do a bit of digging themselves.  Remember, it is not a refund that De Sole wants; he wants damages, so the legal hurdle is much higher—how high it should be seems to be the question here.

I have attended three morning sessions so far.  I hope to get to some next week, but work may well get in the way.  Fortunately, many journalists are following the trial closely and have produced some excellent work on the trial such as  MH Miller at ARTnews Eileen Kinsella, Sarah Cascone and Brian Boucher at artnet and Laura Gilbert at The Art Newspaper.

Serious bloggers like Marion Mannecker at The Art Market Monitor have some coverage, and Donn Zaretsky does his usual thorough job aggregating coverage, including Twitter at The Art Law Blog.

The New York Times has run a few pieces, but I have to say, I am surprised they aren’t doing more.  The art press is running circles around the paper of record.

Most people I know in the art world think Freedman is guilty.  Of course, most of the people I know are art dealers and art dealers, it must be said. would have a natural bias against her.  If she is found by the jury to have been so bad that she (and the gallery) have to give the De Soles triple their money back, the point of view that she is an extremely bad apple who is way different from most art dealers can be upheld. If the defense prevails, it might well create a moral hazard in that dealers would not have to pay damages even in cases where their negligence could be proved. 
Either way, as I have said elsewhere, the trial is dragging the profession through the dirt so it is understandable if a lot of people in that profession are angry with Freedman.

Blake Gopnick, in his usual tightly argued, well written, provocative way has pointed out that everybody adored the painting before it was revealed to be a fake, concluding :

“What De Sole's lawsuit really proves is that the art market, and most of our culture, doesn't care about works of art for any inherent virtues they have, or for the creative minds they bear witness to; it cares about them as sacred relics of a sainted maker, touched by his or her hand and only valuable because they have been.”

Gopnick goes on to imply that the thirst for such authenticity is caused by the market itself—providing one more reason in an ocean of them that this case is generating all sorts of awkward conversations for art dealers.

But even the most neutral observer (and Gopnick!) would have to admit that Freedman is guilty of something.  I mean, yes, we are all sinners, but her behavior was pretty crummy, way worse than run-of-the-mill bad.  For example, when you are an art dealer and someone buys something from you for a ton of money, you look after them.  You know...remember their names the next time you see them, invite them to openings, offer them VIP passes to art fairs, and tell them if recent developments have given you reason to have an inkling that the painting they bought might be fake. This last courtesy seems to have been overlooked.

As the years passed after the De Soles bought the painting by Pei Shen Qian which was signed "Rothko" and which strongly resembled the mature work of Mark Rothko, and which was listed as such on the invoice created for the transaction, it became increasingly clear to Freedman that the source of this painting was problematic.  In 2008, for example, 4 years after the sale, she was writing urgent letters to Glafira Rosales begging her for some documentation on the works, asking her that she swear the works were authentic and demanding that she introduce her to the ‘son of the Mexican/Swiss collector’ who was providing these works because the Daedalus Foundation, set up to administer the Robert Motherwell Estate, had determined that all of the ‘Motherwells’ provided by Rosales were fake.  Around that time, Knoedler even hired an outside forensic analyst to look at the materials used in one of the ‘Motherwells’ who came to the same conclusion—the materials used to make the work were not available when it was said to have been created.  (Even as late as July, 2008, she was still selling Rosales material to other clients). Then, in 2009, FBI subpoenaed Knoedler in connection to a criminal probe into Rosales, they put Freedman on leave, and she then resigned.  So along the way it had to have been pretty clear to Freedman that there was a bit of an issue with the Rosales material.

And yet, not once, according to the De Soles, did she pick up the phone and let them know there might be a problem.  It would have been a rather unpleasant call, but I am certain that if she had called up and said she was sorry, that she had been fooled, that she should have known and that she would refund their money when she could, etc. etc., the De Soles would not have been so angry.  Instead, in their telling, the De Soles learned of the problem by reading news reports of another collector who was suing Knoedler over a painting that had come from a ‘Mexican-Swiss’ collection.  Hence, their fury.

In my opinion, that is what is driving this case forward.  The De Soles are paying some eye-watering legal bills, admitting publically that they fell in love with a fake painting and spending their days in a federal courtroom because Freedman didn’t have the decency to break the bad news to them herself.  One very reasonable conclusion one could draw is that Freedman hoped the whole thing would blow over and she hid from the problem rather than confront it.

Random Thoughts

The wheels of justice move slowly.  There is a lot of downtime, with breaks, side bars, jurors who show up late and so forth. Also, they take away everybody’s phone, so there is a lot of time for one’s time to wander. 

Speaking of the jury, in contrast to the audience and entire court, they are a very diverse group of people.  One of them begged off the case after the first day, writing a long letter to the judge where she said she was stressed out and so on.  He let her off the case, so there are now 9 of them…I assume that 6 will decide and thus there are two alternates.  What a pain.  If you want to get off jury duty, can’t you figure out a way to do so before you are selected for the case? 

The judge, Paul Gardephe, is impressive.  He seems to be able to read along as the court reporter types up the testimony as well as listen to what’s going on.  The various objections are checked by him against the record and ruled on quickly.  He seems to know pretty much everything and to have done his homework.  He is able to locate all the various exhibits and so forth immediately.  I was surprised that he occasionally takes over the questioning for the lawyers…he can see objections coming a mile away and jumps in to keep things moving.  This trial is supposed to last a month, but this guy is doing everything he can to speed things along. 

An important matter he is supposed to rule on is the possible appearance of the only appraiser on the list, Elin Ewald.  She is supposed to testify about what the painting would be worth if it were real in the market of 2013 when it was discovered to be a fake.  The judge stated that he found the various filings and citations by both parties to be inadequate regarding the admissibility or relevance of such testimony, in connection with a breach of warranty under the Uniform Commercial Code.  He is supposed to decide soon.  Ewald is easily one of the top appraisers in the country, so I hope to get a chance to see her take the stand; it would also appear that such a ruling would have a great impact on such cases in the future.

One of the most damaging things to Freedman’s defense is the huge mark-up she was charging on this material.  Most times, if a dealer is laying out their own money for a work of art, they would expect to double or maybe triple their money in a short amount of time.  This might sound steep, but there is a great deal of risk that the dealer takes on.  But in some cases, she was making up to 7 or 8 times as much as she paid.  In his opening, her lawyer, Luke Nikas, tried to take the edge off of this by pointing out that she did a ton of work…bringing in the experts, paying for conservation and so forth.  I expect this to be brought up and chewed over more in the coming weeks.

During one of the many breaks, I was chatting with an artist who was sketching the combatants.  I now know why these drawings always show everyone in profile….they aren’t given seats in the front, but have to sit in the audience, so they never see their subjects head-on.  I remarked to this man that most of the sketches seem pretty complimentary, and he told me that the originals are often sold to the various participants in the trial, so of course the artists flatter them!  Amazing.  Even amidst a trial that may well damage the art market, potential sales are being contemplated.  I didn’t get a chance to ask him what the pricing was…my mistake.

A lot of the press over the years as well as some of the legal filings have pointed out that convicted swindler Glafira Rosales lived in Long Island, with the very strong inference that no art dealer who lived there would have access to such masterworks, unless maybe it was the Hamptons.  However, a number of the documents addressed to her that have been showed in court put her residence in Great Neck, which is hardly a slum.  Interestingly enough, she seems to have later moved to the even more tony Sands Point, New York…a bastion of old money that was the real-life location of East Egg in The Great Gatsby.  Rosales seemed to be moving up in the world!

I have written before about how this case has marked the passing of an earlier age in the art world. It is certainly amazing how old-fashioned the art world of 2004 looks today.  Some testimony mentioned a ‘transparency’ which now seems as quaint as a buggy whip but which used to be the ubiquitous way in which art was offered.  There was mention of fax machines as well.  One thing I haven’t heard yet is the gallery being called “Nerd-ler”.  Almost everyone who was in the know called it “Nerd-ler” when I was younger.  Something to do with the way it would have been pronounced in Germany (it used to be you had to study German to get an art history degree!).  In court, however, it’s “Know-dler” all the time. 

At any rate, I will try my best to keep attending the trial, it’s a real eye-opener all of it.

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