Opinion

Felix Salmon

Annals of art world skullduggery, Larry Gagosian edition

By Felix Salmon
March 28, 2012
art

Randy Kennedy has a good overview of the litigation going on between Jan Cowles, a prominent art collector, and Larry Gagosian, the world’s most prominent art dealer. He doesn’t provide or link to any of the primary documents, however, which can be found here, and they’re where all the fun is.

In a nutshell, Jan’s no-good son Charles got desperate for cash, and so sold her Lichtenstein through Gagosian without her knowledge or consent. What’s more, his desperation was so obvious to Gagosian that he wound up getting spectacularly ripped off: while Gagosian had initially promised him $2.5 million for the piece, the final payment to Cowles was just $1 million. Meanwhile, another version of the piece, which is an edition of eight, sold at Christie’s in 2010 for $4.9 million.

A lot of attention is focusing on the smoking email from Gagosian director Deborah McLeod, who was based in Gagosian’s Beverly Hills outpost, to the collector who ultimately bought the work, Tom Dean. “Seller now in terrible straits and needs cash,” she wrote. “Are you interested in making a cruel and offensive offer? Come on, want to try?”

Eventually, Dean came back with an offer of $2 million, with generous terms allowing him to avoid paying most of the price for six months. McLeod then talked to Gagosian personally, and told Dean that the deal was on:

Larry says the $2 mm will fly only for immediate payment, so he will buy it. If he succeeds in buying it for 2mm, he will do the 6 month payout for you.

This is quite funny, in hindsight, because of course Larry didn’t buy the piece for $2 million at all. He sold the piece for $2 million; he bought it for just $1 million.

With all of the focus on the emails, however, it’s important not to lose sight of all the revelations in the original complaint, including the extremely serious allegation that Gagosian lied about the condition of the piece in order to justify its very low sale price. The complaint also accuses Gagosian of essentially stealing the work from Jan Cowles:

Although Gagosian knew the Lichtenstein Work belonged to Mrs. Cowles, and not Charles, Gagosian made no effort to contact her, or her attorney-in-fact, Lester Marks, to obtain either any authority to remove the work from the apartment or to offer the work for sale to any third party. Nevertheless, on or about October 10, 2008, Charles purported to consign the Lichtenstein Work to Gagosian. Gagosian took delivery of the work from Mrs. Cowles’s apartment, and listed it as a consignment with the understanding that it would not be sold for less than $3 million, with Charles to receive no less than $2.5 million.

This is all extremely reminiscent of the way in which Anthony Marhsall allegedly sold a Childe Hassam belonging to his mother, Brooke Astor; you’d think that Gagosian would be a bit more cautious about such deals after the Astor case got so much negative publicity.

But what’s absolutely clear here, no matter who wins the legal case, is that the opacity, skullduggery, and information asymmetry in the art world should put off anybody who ever thinks they’re dealing fair and square with a prominent dealer. Charles Cowes was an art dealer in his own right — an art-world insider — and even he ended up getting ripped off by Gagosian.

I’ve heard a few stories, over the years, of what happens when collectors who own art try to sell that art through a gallery. In the first instance, the gallery is always very bullish, and promises to sell it for a high price at a modest commission. But then it somehow never sells, and the consignor becomes increasingly desperate, and eventually accepts a sum of money from the gallery which is a mere fraction of the amount originally mooted. It’s a standard m.o. in the gallery world: never sell anything too quickly, and wait instead for the seller’s need for cash to be as urgent as possible. That minimizes the amount the gallery needs to pay the seller, and therefore maximizes the amount the gallery can keep for itself.

Which is yet another reason why art is not an investment. You might have a good idea what a piece is worth, but you’re unlikely to ever be able to realize that kind of sum. Not unless you don’t need the money — and if you don’t need the money, you won’t want to sell it in the first place.

Comments
6 comments so far | RSS Comments RSS

Why doesn’t the art world use a simple broker model and pay Gagosian a percentage of the sale price? This is totally bizarre.

Posted by JuvenalRedd | Report as abusive
 

@JR,

Well there are the auction houses, but then there’s a bit of publicity when you use them in their traditional role. They publish catalogues, advertise online.

Not desirable when the works are (allegedly) stolen ! Dealing through a respected dealer could be a good way to shift the stuff, if that dealer is prepared to go along with it. You would pay the cost of “laundering” the property, the dealer puts his reputation on the line in return. Ie “faces” the transaction.

I buy art, but I write off the value of each piece I buy to zero on the day that I buy it. I think art can be an investment – if the investor is a shrewd and influential insider (which I am not). I just like art.

But even the shrewdy should never expose themselves to be a forced seller. That way ruin lies – in art, equities, property….with different levels of haircuts applying according to illiquidity and market transparency.

Posted by kbd | Report as abusive
 

And on the other side auction houses rip off buyers. Nice little racket!

Posted by AngryInCali | Report as abusive
 

Everyone maximises their own profit !

I am not in the Old Master’s league, which will excite at auction. At my gutter level, when I buy at auction I’m competing with the dealers for sure, but once they get their hands on it, the price doubles (at minimum). So if you know what you want, and know what you have, and are willing to pay, it’s great.

I love sculpture. But it’s hugely expensive in the primary market (for reasons that I understand). I have a couple of works bought at auction which cost me combined less than USD 1,000, and which in a gallery would cost USD 50,000 (which I couldn’t justify).

Difference is that (while I love the artists, and these works) there is no established market for them. These artists aren’t big enough names. LIke most art they produce, these works are probably never going to be worth much. But I love them. This is how I can afford them.

I wouldn’t buy at auction just because it felt it was “cheap”, since I’m not an investor. But with patience, when it doesn’t involve the feeding frenzy of a “name” artist, there are bargains to be had for something you love. But you have to be ready to be the underbidder, and not get caught up in the excitement.

I think that the racket exists at the more rarified layers. And who cares !

Posted by kbd | Report as abusive
 

The really, truly stunning aspect of this whole affair, is that someone of Gogosian’s vast wealth would stoop to bilking a client out of a measly $1Mil. That’s a serious Whiskey Tango Foxtrot.

One senses from the caustic tone of the email quoted, that Gogosian and McLeod indulged themselves in burning a rival collector simply for the sake of doing so.

It’s all very small beer for folks supposedly so societally exalted.

Posted by EricVincent | Report as abusive
 

@EricVincent

Maybe it’s an addiction to the deal that explains Gagosian’s vast wealth ? You can see this in many walks of life, including finance. It is an addiction, and those with it will probably never kick it.

Also, bear in mind what happens in public auctions. I get catalogues, if I’m interested I pop along to the viewings. There’s usually a few items “withdrawn from sale”. And that’s quite often because of ownership disputes. It’s endemic.

Posted by kbd | Report as abusive
 

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