Those who fight visual art frauds know that these schemes, like many others, are easier to prevent than to investigate and resolve satisfactorily after the fact. This article offers tips and resources CFEs can use to help clients recognize their risky behaviors and fraudsters' ploys before crimes go down.
Unique works of visual art — such as watercolors, figurines or collages — require security from theft and forgery and subsequent false statements that enable their fraudulent sale at exaggerated prices.
If a victim of art fraud — an artist or buyer — brings legal action, his ability to prevail often depends on whether he acted swiftly enough to comply with the governing jurisdiction's statute of limitations, as interpreted by its courts.
REPORT IT OR REGRET IT
The time: 1946. The place: New York's burgeoning art circuit. Alfred Stieglitz, the modernist photographer who propelled his once-disparaged medium into the realm of fine art, had just died of heart failure at the age of 65. His widow, renowned visual artist Georgia O'Keeffe, was struggling to settle Stieglitz's estate, which included thousands of his photographs and hundreds of works by her and numerous avant-garde artists.
A recent painful memory made this task harder. Only four months earlier, O'Keeffe had discovered that three of her paintings were missing from An American Place, the famed gallery Stieglitz had founded to promote their work and others' amid the excitement of New York's new position as art capital of the world. But because Stieglitz's health was deteriorating, O'Keeffe did not tell him of the loss, which she then valued at $150. Neither did she tell the authorities.
"I was certain [the police] could not or would not do anything about what I'm sure they would have thought was a minor theft," she said later.
Decades afterward, in 1976, O'Keeffe learned that someone had sold the paintings a year earlier to a Princeton, N.J., art gallery owner for $35,000. O'Keeffe promptly contacted the buyer, who, because he had bought the paintings in good faith from a legitimate seller, refused to cede them to O'Keeffe.
When O'Keeffe filed suit against the buyer, Patrick Snyder, the trial court found in his favor. The court's verdict was based on its determination that the six-year statute of limitations had begun running when O'Keeffe discovered the theft. Based on that interpretation, the statute had passed well before O'Keeffe had filed her claim.
O'Keeffe won a reversal at the appellate level, but ultimately lost when Snyder's appeal to the Supreme Court of New Jersey resulted in a reinstatement of the trial court's ruling. Therefore, had O'Keeffe reported the thefts when she discovered them, her claim would have trumped Snyder's rights as a buyer in good faith.
THE POWER OF SHARED INFORMATION
The Art Dealers Association of America (ADAA), a non-profit organization in New York, was ahead of its time in the early 1960s when it established perhaps the first art theft registry (a list of paintings known to have been stolen) not maintained by a law enforcement agency or an insurance company. The registry allowed ADAA members to determine if works brought to them had been reported missing by their owners.
Over time, other organizations amassed troves of data that made it easier to investigate and prevent art fraud. Eventually the major systems merged under the aegis of the Art Loss Register, which now is the world's largest private database of information on lost and stolen art, antiques and collectibles. Founded in London, the ALR maintains offices in New York, Cologne, Amsterdam and Paris.
In 2012, the ADAA will observe its the 50th anniversary. Representing approximately 175 prominent American galleries, it's the oldest and largest organization of its kind in the U.S. Part of the value of such associations is their collective commitment to a code of conduct governing member dealers' relations with clients, artists, other dealers and auctions.
"Getting admitted to the ADAA isn't easy," said Linda Blumberg, the group's executive director. "A candidate dealer cannot apply; it must be recommended by a member."
ADAA aims to maintain its ethical and professional standards. Experienced members with knowledge of virtually all the industry's players might scrutinize a candidate's reputation and profile for a full year.
"ADAA members know each other personally or by reputation and show works in the same art fairs," Blumberg said. "When anyone in this business behaves questionably, we all find out about it quickly." Communal awareness is bad news for fraudsters, who thrive on victims' ignorance of past and current scams.
In addition, ADAA members have long served on FBI and U.S. Internal Revenue Service advisory panels on art fraud.
To individuals who wish to buy art, Blumberg offers this advice:
1. Visit galleries and museums to identify the types of art that interest you most.
2. Establish relationships with dealers who specialize in those fields and have sterling reputations and many satisfied clients.
3. Perform whatever due diligence is necessary to confirm all information you receive about artworks and those offering them for sale.
CFEs with clients who buy art should emphasize to them that you get no more out of due diligence than you put into it.
REALLY REAL OR REALLY FAKE?
"Provenance — the history of who created and has owned a work of art and when — in some cases isn't worth the paper it's printed on," said Bonnie Magness-Gardiner, Ph.D., program director of the FBI Art Crime Team in Washington, D.C. "It's not uncommon for certificates of authenticity themselves to be forgeries complementing fake or stolen art. So it pays to evaluate them from as many perspectives as you can."
For example, don't hesitate to question an official-looking document purportedly issued by a foreign government as proof that a piece of art is authentic. Contact that nation's ministry of culture to discover if it issues such certificates, and if so, if the names of those who signed the document match those of officials authorized to make such attestations.
"Sure, that can be expensive," she acknowledged. "But when you're evaluating a supposedly high-value work of art, inadequate due diligence can wind up costing much more than getting complete and accurate information at the outset."
ART FRAUD SPECIALISTS
The Art Crime Team, established in 2004 to investigate the looting of the Baghdad Museum after the Iraqi government collapsed, rapidly responds to art and cultural property crimes. The group has recovered more than 2,600 stolen art works valued at more than $142 million.
FBI jurisdiction over such matters depends on several factors.
"If art worth at least $5,000 is stolen and crosses a state or international boundary, we handle it under the National Stolen Property Act, also known as the interstate transportation of stolen property statute [Title 18, United States Code, Sections 2314-2315]," Magness-Gardiner said. "However, if the art is stolen in a single jurisdiction, and the thief doesn't move it across a state line, the FBI won't have jurisdiction unless the object was taken from a museum, which is governed by the theft of major artwork statute [Title 18, United States Code, Section 668]. Last, art-related crimes involving wire or mail fraud also fall within the FBI's purview."
In addition to Magness-Gardiner, the team consists of 14 special agents with at least five years' experience in criminal investigations.
"I'm a specialist here at headquarters," she said, "and I support field agents who are trained investigators. My skill is not forensic analysis. But I know how the business of art works in the United States and overseas, I have a long background in analyzing illicit business and government relationships and I can put agents in touch with numerous experts whose knowledge is specific to particular types of crime or artwork. Some members of the team have degrees in archaeology or anthropology; others are lawyers or accountants. What unites us is our interest in solving crimes against art and cultural property."
ART FRAUDSTERS AND VICTIMS
"Various kinds of people commit art crimes," Magness-Gardiner said. "Some are first-time offenders, who can be difficult to track because they're relatively unpredictable. Others make a career of it. They might have been caught a few times but don't know anything else. So they do it over and over. Often, a name-based background check will turn up references to their involvement in prior art frauds."
Magness-Gardiner does not believe the Internet has changed the fundamentals of art fraud. Fraudsters still succeed, she said, by capitalizing on professional and amateur buyers' greed and excessive emotional attachment to certain artworks.
"Art buyers sometimes fall in love with the appearance or history of a work of art," she said. "And because they have a strong emotional investment in it, they fail to check the authenticity and source. That's one reason why art is difficult to buy prudently and so easy to sell fraudulently."
Robert Tie is a New York business writer.
Current Art Fraud Cases
Stolen art: Paris, November 2011
The Hotel Druout, an art auction house established in 1852, discovered evidence that 600 of the artworks in its inventory probably were stolen at some point in the past. But because no one knows who the real owners are, French police have established a website listing the questionable pieces. Source: The Financial Times, Nov. 18, 2011.
Forged art: Cologne, Germany, November 2011
Four defendants received sentences of up to six years for their roles in Germany's largest-ever art forgery case. Experts at the Lempertz art salesroom (founded in Cologne in 1845), and Christie's (founded in London in1766) were among those fooled by counterfeit German expressionist and French paintings documented with phony provenances from nonexistent collectors. Source: The Financial Times, Nov. 5-6, 2011.
Misrepresentation: New York, November 2011
A federal judge sentenced art investor Thomas Doyle to six years in prison and ordered him to pay restitution to a victim from whom Doyle fraudulently solicited $880,000 to purchase a painting by 19th century French artist Jean-Baptiste Camille Corot. Doyle had told the victim he could buy the work from a third party at its alleged market value of $1.1 million. In return, the victim would have an 80 percent interest in the painting, which Doyle said he could re-sell for a $1.7 million. In fact, Doyle had paid only $775,000 for the painting, and no one was willing to buy it for any more than that. Source: FBI
What to Do When an Art Theft Is Discovered
- Protect the scene of the crime; do not let staff or visitors disturb evidence.
- Notify local police immediately.
- Determine when the missing object was last seen and what has happened at the crime scene since then.
- Provide police with descriptions and images of the missing object.
- Stay in touch with police to ensure their actions and investigations are timely and appropriate.
Information and Training
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