BEWARE OF PREDATORY DEALERS

http://www.cnn.com/2009/CRIME/07/14/art.dealer.indicted/index.html

The case is seemingly inconceivable. You have entrusted your artwork, which might as well be a member of your family, to the care of a gallery you trust only to discover that the dealer you are working with is up to no good. The recent indictment of prominent New York dealer Lawrence Salander has thrust predatory dealers into the spotlight and highlighted an unseemly side of the art world that no one really wishes to speak of and fewer wish to believe they could be a victim of… that of civil theft, grand theft and grand larceny by a respected gallery.

New York’s Upper East Side Gallery Salander-OReilly, provided Lawrence Salander, his wife Julie and his family a lavish lifestyle full of the finest cars, luxury homes, food, clothing and an extravagant lifestyle by selling high-end fine art to a distinguished world-wide clientele. A member of the Art Dealers Association of America for over twenty years, Salander-OReilly exhibited at the annual Armory show in New York, Tefaf at Maastricht and Art Basel Miami. Lawrence Salander himself was a member of The Art and Antique Dealers League of America and the Appraisers Association of America. He was the first private art dealer to sit on the board of The National Indemnity Project of The National Endowment for the Humanities. In 2003, Salander-OReilly was named The Best Gallery in the World by the Robb Report.
However, beneath the surface, it is alleged that Salander ran a ponzi scheme (a scheme echoing that of the indicted financier Bernard Madoff) in which he sold consigned works, took the cash, and paid deffered payments out to other consignors offering a range of explanations for his actions along the way. His payments snowballed into owing dozens of consignors monthly “dividends” which he would attempt to keep in front of with month-to-month sales. This “dividend” system financed Salander’s extravagant lifestyle, including his Manhattan townhouse, his 66-acre estate home and the lavish parties he threw for his wife and family members, all while he was barely keeping himself afloat in these “dividends”. His investors, including Forbes members, Artists, estates, tennis great John McEnroe and actor Robert DiNiro claim he stole in excess of $88Million through his fraudulent business practices, which included outright theft of artwork, selling “shares” of artworks to multiple people, selling artwork below the promised consignment prices and paying “dividends” to consignors when artwork was already paid in full.
Mr. Salander’s troubles began when several consignors filed lawsuits due to defaulting on the “dividend” payments he promised by specific deadlines. Salander allegedly sold many works by Robert DiNiro Sr. (Father of the actor) without either informing Mr. DiNiro or remitting proceeds for their sale. This was the crux of several of the suits brought against Mr. Salander which amounted to 100 separate counts spanning fraud, grand larceny, securities fraud, forgery, breach of contract and other offenses. The affair become public when London dealer Clovis Whitfield withdrew paintings from a Salander-O’Reilly exhibit because of Salander’s mounting legal troubles. Creditors are said to be owed in excess of $300M and Mr. Salander faces up to 25 years in prison if convicted of grand larceny alone.

This leads to the inevitable question… What can you do to protect yourself?

Well, there are several consumer protections in place which protect buyers and sellers/consignors in the United States. Many states will have laws specific to their borders, but for purposes of this blog, we will utilize Florida statutes and criteria. A useful text is The Artist-Gallery Partnership, by Tad Crawford and Susan Mellon (http://www.amazon.com/Artist-Gallery-Partnership-Third-Practical-Consigning/dp/1581156456/ref=sr_1_1/181-0314806-2703807?ie=UTF8&s=books&qid=1247710903&sr=1-1)

As a seller, artist or consignor: When you consign your artwork to a gallery you have entrusted an asset to another person or company. Just as with other assets, this has certain risks and certain rewards. The reward is obviously that your work is placed with someone who has knowledge and expertise on how best to market and sell your work in the shortest possible time-frame for the most amount of money. Conversely, you run the risk of a predatory gallery selling your work for less than value, not remitting payment according to terms of contract or outright theft.
It is good practice to familiarize yourself with any gallery you are considering consigning works to. Speak with other merchants in and around the gallery you are considering. Contact references, consignors and artists the gallery deals with for impressions on the overall demeanor and temperament toward business practices. Contact the Better Business Bureau (www.bbb.org) or the Florida Department of Agriculture and Consumer Services (www.doacs.state.fl.us/) to determine if any consumer actions have been filed and remain unresolved. Scrutinize your contract and have it reviewed by an attorney.
Once your work is contracted, consigned and in gallery residence, always be certain that your consignment contract is up-to-date with the entity which has physical possession of the artwork if it is not retained by the seller. (Oftentimes, galleries or partnerships are dissolved resulting in contracts being annulled. Among other issues, this may significantly affect insurance coverage in the gallery in the event of something catastrophic occurring to your item). Once a quarter, conduct a physical inspection of your item to make certain it has not been sold without your knowledge. If you are unable to inspect due to distance or infirmity, contact someone you trust locally or the local Sheriff’s office so that they might inspect your item for you. Make certain that offers lower than the contracted price are submitted to you in writing and agreed to in writing and do not agree to deferred payment plans without written assurance that the works will remain in the gallery until you are paid in full for your item. Sometimes even good galleries have difficult time paying the bills in this economic climate. However, you need to do everything possible to prevent your asset from paying only their bills.

Florida statutes state that your consignment contract must provide for:
*The proceeds of the sale must be delivered to the artist (Consignor) at a schedule agreed to by the artist (Consignor) and the art dealer
*The art dealer is responsible for the stated value of the artwork in the event of loss or damage while the artwork is in possession of the art dealer. (See parameters of consignors and galleries under UCC= Uniform Commercial Code Statutes)
*The artwork will only be sold by the art dealer for an amount at least equal to that agreed to by the artist (Consignor) in writing
*The artwork may be used or displayed by the art dealer only with prior written consent of the artist (Consignor) and only if the artist (Consignor) is acknowledged in such use or display
*An artwork delivered to an art dealer for the purpose of sale or exhibition, and the artist’s (Consignor’s) share of the proceeds of any sale by the art dealer, creates a priority in favor of the artist (Consignor) over any claims, liens or security interests in the artwork by creditors of the art dealer
(SOURCE: The Artist-Gallery Partnership, by Tad Crawford) Violations of these rules of conduct are punishable by up to 60 days in jail, six months of probation and a $500 fine for each instance.

As a Buyer: Your purchase order is a contract. Make certain that this contract provides you the basic parameters of what, where, how and when. Your purchase order should state the date, the value of the work, the price paid, numbering (if applicable) and the payment terms which have been satisfied at the time of sale. Further, as a buyer you are entitled to any peripheral documentation which quantifies authenticity (i.e. a Certificate of Authenticity, letters of authenticity, appraisals, etc.), condition, value, restoration, international clearance and the like which may exist pertinent to your acquisition.
Oftentimes, the bill of sale or purchase order serves as the certification of an authentic work if the artist is living, the gallery is contracted to work with the artist or the artist has chosen not to issue such certificates In such cases, you may wish to contact the artist or a local expert to determine whether or not the work is genuine. (It is not always in your interest to contact your local art dealer for this determination though as they may or may not have a vested or political interest in whether or not you purchase art from alternate sources).
The proliferation of serialized or limited edition works of art (lithographs, serigraphs, sculptures, documents and signatures) necessitates a need for some form of quantifying document which states the total edition size, the publisher and dates of issue. This certificate has become paramount in determining authorized items from unauthorized items, real from fake and delineations within an artist or celebrity’s oeuvre. While parameters of certificates of authenticity are a lengthy column unto itself, understand that certifications should be arms-length, third party evaluations of the item issued by a publisher, printer, foundry or independent expert on the artist. Galleries should not issue their own authenticity certificates for works published by others, as it is an obvious conflict of interest. Further, your legal ownership of a item is only consummated upon transfer of the original certificate of authenticity as this possession states that the work is paid in full to seller, gallery and other third-parties who may have interest in the work. So always make certain it is obtained, it is correct and it is safely stored.
If you have purchased a limited edition and not received the original certificate with your purchase, it may simply be a matter of contacting the gallery and asking for it. Oftentimes, galleries will keep certifications in separate places in order to protect themselves from theft, fire, flood, etc. However, this document should be readily accessible to the gallery and turned over within a reasonable amount of time. If it is lost, stolen or damaged, galleries can ask for replacements from the publisher provided the work has been purchased and paid for by the gallery. Alternatively, you can also seek outside advise from an expert on the artist or period.

I also recommend artists and consignors consulting a fine art attorney familiar with idiosyncrasies in Art Law pertaining to the state you live in or are releasing your items to. Legal Art is an organization which empowers artists and consignors by offering affordable legal council before, during and after a representation contract or consignment agreement. Their services are highly recommended by professionals in the field as having ethically and judiciously applied their knowledge to the betterment of the Art community as a whole. Kathleen C. Carignan, Esq. is a Miami-based attorney with Legal Art who may provide direction as to who to speak with about any questions particular to your case. (Kathleen@legalartmiami.org- www.legalartmiami.org) Other organizations throughout the United States provide similar services and can be located through a simple GOOGLE search of your area.

In sum total… There is no fool-proof way to avoid being “Salandered”, any more than there is to prevent the onset of “Madoffism”. However, simple steps you take to protect yourself, your assets and your capital can offer small comforts in knowing who, what, when and where of your art investments. This, in turn with pay true “dividends” as you move forward.

NOTICE: I am not an attorney, nor do I claim to be one. This blog is written in to provide common-sense advice for buyers and sellers of fine art, NOT Legal advice. For legal advice, contact an attorney.

A friend recently asked me, “Do you think Art will save the world as Dostoyevsky said?”

While pondering the answer to this query, my mind flooded with visions of a Superman carrying paintbrushes, a smock and modeling clay saving us from annihilation at the hands of a villainous fiend whose plot is to turn the world into a drab, colorless, amorphous mass. While preposterous, the truth is that art has dictated our history as much as it has been a barometer of it. Artists provide a distilled view of the world. It is up to us, as viewers, to digest it and either absorb, process, or reject it.

How many of us will forget the Sheppard Fairey’s propaganda-styled poster simply entitled “HOPE” which defined much of this past election cycle? “HOPE” was an intriguing counterpoint to living in an Orwellian Masterpiece. In the 1940’s Rosie the Riveter urged “We Can Do It”… and we did. Uncle Sam posters stated, “I Want You”… and we lined up. Sheppard Fairey urged “Hope”… and we had it.

As to Dostoyevsky’s dictum, I believe “Beauty will save the world” is the popularized version of his phrasing in The Idiot, in which the character Prince Myshkin is shown a portrait of a young woman. He notes, “Beauty like that is strength… One could turn the world upside down with beauty like that”.
Whether Art’s role in the formation of ideals and our perception of beauty can provide a basis for us to actually “turn the world upside down” is for smarter people than I to decide. What I will say is this, Art is not merely symptomatic, it is the collective voice of our zeitgeist both as leaders and as reactionaries. And by “Artists”, I do not merely include those who can place paint on a brush and apply it to a canvas in a pleasing way. “Artist” embraces writers, satirists, poets, sculptors, actors, designers, architects, dancers, photographers, musicians, and thinkers who continually push the envelope outward regardless of public perception. These artists reinvigorate thought and stimulate change to “save” ourselves from ourselves.
In literature, Upton Sinclair’s seminal muckraking masterpiece “The Jungle” changed the meat packing industry and established the Food and Drug Administration because an outraged public demanded that Teddy Roosevelt establish standards and regulations for public consumption. Alexander Solzhenitsyn’s “One Day in the Life of Ivan Desnisovich” was a horrifying indictment of Russian internment camps which changed the ways in which Western Intellectuals contextualized the Soviet record of human rights violations. While each book was compacted and digestible by the masses, each achieved incredible sea-changes in the ways in which people thought, behaved, lived and breathed.

The Works Progress Administration (WPA) was one of the salves Franklin Delano Roosevelt instituted as part of the New Deal to lead the United States out of the Great Depression. A great portion of the WPA was made up of projects geared at shoring up national identity and pride, just as the banks, institutions and government were rethinking the rules of governance. Artists such as Mark Rothko, Paul Cadmus, Aaron Bohrod, Childe Hessam, Jack Levine, Thomas Hart Benton, Raphael Soyer, Grant Wood and Karl Zerbe formed a cadre whose works (inspired by the recent renaissance of Italian masters by Diego Rivera, David Alfaro Sequeiros, Jose Clemente Orozco and others), created public and private works which redefined the age and persevere to this day as some of the early 20th century’s most quintessential images.

Art was used to foment fear during the run-up to World War II, whether through Leni Riefenstahl’s Nazi propaganda film “Triumph of the Will”, “Loose Lips Sink Ships” posters, or ads urging us to “Buy War Bonds”. Even the notably light-hearted illustrator Dr. Seuss (Theodore Geisel) expressed biting political commentary on the United States’ isolationist position in the years leading up to the Japanese invasion of Pearl Harbor. After the war, George Segal’s “Holocaust” figures elicited images far too horrible to imagine. Vacant absentness stood sentinel in a world still numb with fear.

Pablo Picasso’s very personal and seminal masterpiece “Guernica” was borne out of the bombing of the small Basque town on April 26, 1937. While apolitical, Picasso’s Paris studio was not immune to intrusion by the Gestapo. When asked by a Nazi officer about the work,”Did you do that?”, he replied simply, “No, you did.”
Years later, in 1974, gallerist Tony Shafrazi spray painted “KILL LIES ALL” on the surface of Guernica in response to Nixon’s commutation of the sentence of William Calley for his involvement in the My Lai Massacre. When asked in 1980 about the incident, Shafrazi noted “I wanted to bring the art absolutely up to date, to retrieve it from Art History and give it life”.

Pop Art was borne out of our post-war obsession with mass-produced commodities and prompted a sea-change in the way that collectors, thought of, purchased and invested in Art, as well as changed the way artist marketed, branded and editioned themselves. Andy Warhol’s Campbell’s Soup Cans and Roy Lichtenstein’s comic book-styled panels epitomized and personified our consumer-oriented milieu. No longer was Fine Art confined to the wealthy. This new thought process opened a whole new buyer-class to the world of fine arts which, in turn, brought a broader focus to the arts as a whole. In turn, perception-based speculation turned fine art into a commoditized asset which was bought and sold with the idea of making money. Rarity, speculation and innovation became as prominent of motivators as image quality and talent.
Whether or not commercialization has marginalized art or brought it to the masses is a hotly debated and divisive subject. Whether or not either scenario is a good or bad for art itself is also a topic of debate. British graffiti artist Banksy has reinvigorated the “outsider” art scene while remaining relatively anonymous. His clandestined, controversial (and often hysterical) works keep him comfortably behind the curtain, despite their popularity and commercial success. Other artists, poets, musicians and writers who become commercially successful are often derided as having “sold out”, but new blood enters the market seeking to become “discovered” all the same. In every generation there are a handful of individuals who alter our perceptions so greatly that we turn our world upside down because we simply cannot justify the status quo any longer…. we call them Artists.

Will Beauty save the world?… Perhaps…. considering the counterpoint is “Ugliness will doom it