Wednesday, February 10, 2016

That's All Folks

Even as an anticlimax, this was anticlimactic.  As was widely expected after yesterday’s sudden suspension of proceedings, the De Sole v. Ann Freedman/Knoedler case was settled this morning (February 10).  While expectations of seeing Freedman and her boss, Michael Hammer, on the witness stand were significantly lowered yesterday, there was still some faint hope that the case would keep going.  However, I did not take it as a good sign that when I walked in a tech person was winding up AV cables off the floor, all the computers were off, and the opposing attorneys were chatting and laughing together with the courtroom clerk.  At that point, it was just a matter of waiting for the judge to come in and announce the settlement and thank the jury for their service and dismiss them…which never happened. I did wonder if the judge let the jury off in private to allow them to escape back to their lives without being harassed by the journalists and TV producers in the audience.  But we never even saw him again, unless he came out much later after everyone was gone.  I thought there would be some sort of final ending to the formal proceedings, but we all sort of gave up and got on with the day.

Eventually, the various attorneys made themselves available to the small crush of reporters and all of them reveled very little, except to say how happy their clients were.  Indeed, despite the fact that they had been snarling at each other for years through their counselors, the parties now professed to be in a high state of contentment.  I can assure you that is not the way the audience felt.  It was as if we had been watching Star Wars and it stopped before Luke Skywalker blew up the Death Star. For those of us who had hoped for a reckoning of some sort, this was a let-down. 

The obvious thing to wonder is why it stopped now?  Was it in direct response to the testimony of Knoedler’s accountant who spoke of Michael Hammer’s lavish lifestyle and casual way of ignoring standard corporate practice and simply grabbing money from his holding company’s subsidiaries whenever he liked?  While that testimony was, I hear, pretty obnoxious, the defense had to have been prepared for that; she was and is an employee of Hammer’s after all and they would have met with her numerous times and would know what kind of witness she would be.  Also, it just doesn’t ring true to me that Hammer would fold up his tent in direct response to that.  After all, he appeared in the courthouse wearing a velvet jacket and skinny jeans, sporting a deep tan (the courtroom artist said she was going to use the same color on him as she did on the De Sole’s ‘Rothko’!) so I can’t see that he was at all embarrassed or concerned about being perceived as unduly rich.

More likely, Hammer and his counsel got serious about settling after Freedman cut and ran.  For one thing, while the jury was told by the judge to disregard that fact, that it shouldn’t color their judgement, it would be easy to conclude that the jury might take that as an admission of guilt.  And if Freedman was to be perceived as having done the wrong thing, then it would be very hard for Hammer to have skated. 

Eileen Kinsella from Artnet managed to elicit some words from Hammer’s attorney Charles Schmerler that, while rather bland, hint at the effect that Freedman’s settlement might have had on their thinking. She reported that he told her it was “a fair, reasonable and good settlement and added that he was pleased to see the settlement with Ann Freedman, which happened this past weekend and had enabled today’s agreement.”  Marion Maneker at the Art Market Monitor has the opinion that this could mean that they wanted Freedman to share some of the costs of the settlement, which might well make some sense.  
The more I think about it, the more I am convinced that once Freedman settled, this trial was doomed.  Of course, they waited until after some more witnesses suffered on the stand.
Greg Clarick, the attorney for the De Soles, was also pretty robotic in his comments to the assembled but he did gloat a little bit, in that he said that the wrongdoing was obvious and that he and his clients were glad to have gotten the facts of the case out in public.  I suppose that the plaintiff in any case that settles before the jury gets the case usually can claim victory, but the consensus is that he and his partners had put forward a strong case.  Clarick did go on to say how proud he and his firm were of the De Soles in that they toughed it out and went to court. 

On that point I agree with him.   Mr. and Mrs. De Sole have indeed done a great service to the art world, especially the New York art world, by going as far as they did.  This case has made it clear that dealers shirk due diligence at their own peril and that being an ethical secondary market dealer requires the ability to actually look at the goods with a critical eye.  It also should be an opportunity for the conversation about how to produce catalogs raisonne in a way that fairly compensates the scholars, protecting them from legal actions while requiring them to so the work without regard for the market.  That won’t be easy.

I am not suggesting the De Sole’s motives were altruistic; they wanted to get compensation for the huge amount of money they lost when they bought the fake Rothko. It is not up to them to sponsor the creation of case law that will guide the practice of art dealing. Yet by their endurance has yielded some potentially positive results and for that they should be congratulated.

The legal system is not perfect, but the same can be said for the self-policing system the art world has regarding the conduct of art dealers.  In this case, while the plaintiffs got some sort of recompense and while many of the witnesses who had played a role in this mess got some comeuppance, there was collateral damage.  So while the De Soles should be congratulated, I would also like to suggest gratitude towards people like Melissa de Medeiros, Edye Weissler and Frank Del Deo, employees at Knoedler who suffered when the business imploded, and now had to go through the process of being deposed and then examined at trial…when Ann Freedman did not.

I should note here that I had previously written that Jimmy Andrade was completely blameless…he is the former doorman at Knoedler who apparently introduced Glafira Rosales to Knoedler.  I may well have been wrong about him, having read through the various complaints and so forth.  I plan on doing some more follow-up, so will refrain from saying more, but his role may well have been more complicit than I understood. [Note: I finally found the memorandum which dismissed him from the case on summary judgment.  As I originally thought, the guy was innocent, having merely introduced Rosales to Freedman; coincidentally, he was also acquainted with David Herbert.  For this reason, the original complaint included him as part of a conspiracy, and I couldn't find the order dimissing him form the case..but now I have.  He did nothing wrong.] 

While I am on the subject of my being wrong, I would also like to point out that I had previously assumed that the De Soles had been offered their money back but they were angry because the work would be worth way more had it been real, and that Freedman had never called them up when the truth was coming out…they read it in the papers.  While I remain convinced that if Freedman had exhibited a modicum of graciousness towards her clients, some of their rancor would have been lessened, I now understand that the original offer by the defendants to the De Soles was for less than half of what they had paid.  Furthermore, as I now understand, pretty much all the rest of the parties that have settled have done so for far below what they originally paid.  For example, it was revealed yesterday during the examination of Ruth Blankschen that one of the other victims, Pierre LaGrange, accepted $6.4 Million against a $17 Million loss on the ‘Pollock’ he bought.   Thus I was quite naïve.  Obviously, the huge expense of skilled lawyers is a factor in all of these settlements, as is the incredible hassle of suing someone.  The buyers of these fakes who settled before trial avoided both of these considerable burdens, and also were spared the public embarrassment of having been taken by a faker.  Of course, these names have spilled out at trial, but as far as I can tell, nobody is calling attention to them, so that is worth something.  It should also be noted that Glafira Rosales was assessed a huge fine and presumably some of her assets will go to the victims here.  I am also wondering aloud if these buyers can't write the loss off against their taxes or perhaps claim it on an insurance policy.  But I think it is safe to say that despite how happy their lawyers say they are, Ann Freedman and Michael Hammer will notice that there has been a decrease in their net worth.

My current thinking is that it was extremely beneficial and bracing to have the adversarial gaze of the law profession cast upon the art world.  All of us can benefit from the reminder to be more aware of the things we say, the documents we create and the need for solid research.  But by the same token, the underlying reasons that allowed works of art to be sold without solid provenances and airtight attributions have not disappeared, nor have the temptations to buy into an impossible fantasy. I think most informed people in the art world understand this to be an extremely atypical situation, whereby a gallery of this prominence and a person who had distinguished herself to the degree that Freedman had got caught up in something like this. 

I plan on posting a few more pieces on the trial and the aftermath, but I did want to thank everyone who has provided me with positive feedback about this blog during the trial.  It is extremely gratifying.  I can promise you that I will not be able to write 2,000 words a day going forward and that I certainly do not consider myself a journalist.  On this blog, I am able to say and do things that real journalists cannot.

Again, I would like to point out that the New York art press absolutely killed it when it came to covering this case. Eileen Kinsella, Cait Munro and Brian Boucher at Artnet , Michael Miller at Artnews and Laura Gilbert at The Art Newspaper have done a great service in providing a record of what went on, from the voir dire to the…well…whatever it was that today was…the end anyway. 

There are still 4 active cases pending in this entire matter, but it is hard to imagine that these will not now settle as well.  Freedman and Hammer didn't stand up and swear to tell the whole truth this week so there is little reason to see why they ever will.


  1. I have appreciated the interesting and insightful pieces on this case.

    Having some background in organizational dynamics, my guess is that people involved in this were likely "drinking their own Kool-Aid," as the saying goes, and had become "true believers" in the works and in the story of their provenance. It seems that salesmanship more than critical thinking was at work, though it should have been the reverse in a situation such as this - and buyers were certainly expecting so.

    I suspect that the last several days of the trial were a wake-up call for defendants still at least partly in denial, putting into perspective how the few supportive opinions and positive signs that they had grasped on to and over-hyped to clients, were, in hindsight, overshadowed by the many qualified indications and outright warning signs that had been downplayed, and by the fundamental problems with the plausibility of the situation taken as a whole. It may have started to seem that the standard of willful disregard for the truth, if not deliberate fraud, might well be met.

    One thing we may now never know, and that could be part of the reason for ending the case at this point, is that there may be a shortage of assets and no real "deep pockets", and it is a genuine problem to find funds to make clients whole. The way that the proceeds from the sale of the Knoedler building appear to have been quickly disbursed rather than held in reserve for settlements - something that might be challenged as hiding of assets, by creditors with judgments - and the way that the companies were used for personal expenses, may mean that they were a principal asset and major source of income. The remaining gallery, Hammer, has a website that on closer inspection starts to raise questions about its health, too; amongst other things, it's not even fully updated about their recent move from the Park Avenue location they had only been in since about the time Knoedler closed.

    And on one other financial point, I think it is still quite uncertain how much those who settled previously may have received in total, considering that on top of what the gallery paid out, Freedman may have returned commissions, and in some cases there were also other partners in the works who may have kicked in. Apparently, though, clients weren't being reimbursed in full, as the De Soles were insisting on.

  2. make some good points, especially in regards to how the proceeds from the sale of the building were not set aside--at all-for compensation. As I think of it, that may well have struck a chord with the jury, since at that point it was clear there was a serious problem. I am not sure I agree with you that Hammer Galleries is in any immediate trouble, as they were open for business last week with a very strong show and participated in Miami Basel. But your larger point about there being enough assets is quite valid. There are a more cases pending so it will be interesting to see if they settle.

    Thank you for taking the time to write such a thoughtful reply.