Annie Leibovitz, subprime borrower

By Felix Salmon
July 30, 2009
John Cook has the 17-page complaint which Art Capital Group has lodged against Annie Leibovitz, and it makes for compelling reading, even though the really juicy stuff -- the commissions that ACG has decided to pay itself on the sale of Leibovitz's photographs and real estate -- have been redacted.

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Gawker’s John Cook has the 17-page complaint which Art Capital Group has lodged against Annie Leibovitz, and it makes for compelling reading, even though the really juicy stuff — the commissions that ACG has decided to pay itself on the sale of Leibovitz’s photographs and real estate — have been redacted.

In a nutshell, Leibovitz borrowed $24 million from ACG, at what on its face looked like a reasonably attractive interest rate. (It was 275bp lower than the $22 million line of credit which it replaced.) But in doing so, she allowed ACG to go ahead and sell the rights to every photograph she has ever taken — and every photograph she’s going to take through at least 2011 — as well as her homes in Manhattan and Rhinebeck. When ACG makes those sales, it first pays itself a commission on them, and then it repays itself the money it’s owed. Only then does Leibovitz get any money left over. As a result, ACG’s total profits on this deal are likely to be substantially larger than its headline interest rate might indicate.

Leibovitz, however, isn’t playing ball. She’s not allowing real-estate agents into her homes so they can be sold, and she’s even signed an agreement with Getty Images allowing them — and not ACG — to represent her for “a special multi-assignment collaboration”. Hence the lawsuit.

Here’s ACG, in its complaint:

Defendants have stated that they will not cooperate with Plaintiff in any sale of the Fine Art Collateral, which is nonsensical given that Plaintiff obtained an appraisal for certain of the Fine Art Collateral which exceeds the loan amount and, if sold at that amount, would not only allow Defendants to satisfy their loan and other obligations to Plaintiff and its affiliate, but also allow Leibovitz to earn a profit, and to obtain financial comfort and financial stability going forward.

The implication here is that ACG can sell the Leibovitz photography rights for a sum well in excess of $24 million, pay itself commission, pay off the loan, pay off the “other obligations”, and still have enough left over to keep Leibovitz in “financial comfort and financial stability”. Her homes wouldn’t even need to be sold at all.

And the alternative? Well, there really isn’t an alternative. Even if Leibovitz had the cashflow to service the loan, which is doubtful, it comes due in September, and she certainly doesn’t have the money to repay the loan. And she can’t borrow the money from anybody else, because ACG has a lien on all her real-estate and intellectual property.

Leibovitz clearly isn’t happy with this state of affairs, but she’s got herself into it, and now she has no choice but to go through with ACG’s scheme to sell off all her intellectual property. I’d advise her to start cooperating, since that’s her only chance of keeping her houses. On the other hand, Leibovitz does have some leverage over ACG:

“The agreement with her was that we’d they’d go out and sell it for more than $24 million,” says a source close to Art Capital. “And now, she’s not making herself available. Any likely buyer would say, ‘Gee, can I meet with Annie?’ I don’t think anyone would buy it if they don’t feel they have a cooperative seller.”

Which leaves ACG in a difficult position: they have something very valuable, but Leibovitz is making it impossible for them to monetize it. I’m not clear what purpose a very public lawsuit against Leibovitz serves in this context. And I’m definitely not clear why they’re talking to Gawker. But at this point it’s obvious that things are going to be very ugly between the two sides for the foreseeable future.

Update: So this is interesting. ACG’s flack, Montieth Illingworth, just pointed out to me that the quote I had from Gawker was incorrect: if you go to the page now, it clearly says “they’d go out and sell it” rather than “we’d go out and sell it”. But of course I just copy-and-pasted: originally, the word in the quote was “we’d”. It seems that Cook has changed his quote, without noting anywhere in the post that it has been changed. What’s going on?

I believe Illingworth when he tells me that neither of ACG’s principals, Ian Peck and Baird Ryan, spoke to Cook, so the quote can’t have come from either of them. Which leaves I think three possibilities:

  1. The quote came from Illingworth, which is how he was able to have it changed so easily: maybe Cook broke a verbal agreement about quotes being on background or attributable to ACG. Illingworth did talk to Cook before the piece came out, but is adamant that the quote didn’t come from him.
  2. The quote is genuine, and came from one of ACG’s advisers — a banker or lawyer, most likely — who reflexively used the word “we” but who was certainly not authorized to talk on ACG’s behalf. When Illingworth complained to Cook about the quote making it sound as though Peck or Ryan were talking to Gawker, Cook changed it.
  3. Cook made an honest mistake, and wrote “we’d” where his source had said “they’d”, and realized his mistake after Illingworth called, and quickly corrected it.

The main thing I don’t like here is the way in which Gawker changed their item after it was published, with no indication that they had done so. Blogs make errors all the time, and then correct them, publicly. They don’t go back and erase their steps, trying to make it seem that there never was an error in the first place. Or, at least, they shouldn’t.

Update 2: Annie Leibovitz has released a formal statement:

The claims in the lawsuit are false and untrue. This is part of Art Capital’s continued harassment and attention-getting efforts. There has been tension and dispute since the beginning. Annie is in the same shoes as many other people involved with Art Capital. For now, her attention remains on her photography and on continuing to organize her finances.


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Has anyone ever actually used the word “cooperative” when describing her?

Posted by Sterling | Report as abusive

I’m really confused as to why she entered into this arrangement in the first place. Why on earth did she not just default on whatever debt forced her into this arrangement?

Posted by Eagle | Report as abusive

Eagle- I think she entered into the arrangement because ACG managed to sweet talk her into it, plus it was for 24 million, 2 million more than the line it replaced. But ACG – who must have been aware than A.L. is Batsh*t Crazy, underestimated exactly how Batsh*t Crazy she was. They are now finding out! Good Luck ACG!

Posted by will | Report as abusive

Both parties are spoiled brats: ACG for thinking they had free money, and AL for being.. well, herself.

Loaning someone money requires knowledge of their character as well as the collateral? Shocking!

I’m seeing good times with a bankruptcy judge. Good times!

Posted by Unsympathetic | Report as abusive

Felix – To me this is fascinating, and truly confusing. A.L. is almost exclusively and ad photographer (with the exception of the VF shoots she does), and is in the company of about 4/5 other photographers (Steven Klein, Steve Meisel, etc.)that can pull down day rates of ~$100K. Assuming she makes about $5MM/year just on her ad shoots, how is it that she can’t service this debt? How did this even get this far?

Posted by John | Report as abusive

What exactly does Annie Leibovitz need $24m of debt for?

Posted by Ginger Yellow | Report as abusive

Felix, why don’t you take a look at what Art Capital Group really is? I don’t want to bring the lawyers down on you, but everyone in the art world knows that the guys who run this thing are a bunch of shysters, who have been involved in crooked deals before. They’d be in jail if the investigators hadn’t been so busy foiling Madoff’s ponzi scheme, heh heh.

Posted by walter | Report as abusive

Is this just another one of those deals that securitize intellectual property rights? There’s a huge tax benefit (immediate income is transformed into deferred income with taxes pushed into the future) and the stream of future cash flow is turned into a fat lump-sum today. I assume that the real estate is in there as some kind of emergency backstop, perhaps because there’s probably not a lot of precedent for securitizing photo rights. This is very commonly done in the music biz.


Thanks Aaron…hadn’t thought about it that way, but it certainly starts to make more sense.

Posted by John | Report as abusive

Felix, would love the answer to Gingeryellow’s questions, which none of the news reports have addressed: What does a private individual, busy at work and busy at home with three children, need $24 m. for? And why did she not hire a competent studio manager to organize her finances?

Posted by Julia | Report as abusive