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The underworld of art

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Abstract

Although crime in the market for fine arts has a long historical pedigree, the explosive growth of the market, and the conversion of art (along with collectible goods of all sorts) into speculative assets, that began or at least accelerated in the mid 1970s, focused increasing attention on the phenomenon. At the same time the issue of protecting cultural patrimony became a subject of greater contention between source and market countries, while common law and civil code jurisdictions struggled over how to reconcile approaches to regulation and enforcement. This paper highlights these issues with specific reference to the market for high-end paintings although its lessons are germane to all subdivisions of the collectibles market. It attempts to elucidate the main criminogenic factors—speculative shifts in demand, fraudulent supply, and illegal activity by various intermediary institutions ranging from dealers to appraisers to auction houses, while highlighting the role of collectors, museums, and financial institutions both as victims and active participants. Despite enduring myths about “organized crime,” illegal operations in the art market are the work overwhelmingly of insiders who alone have the technical knowledge and circle of intimates necessary to link an illicit supply with a demand that can range from the strictly legitimate, the legal but dubious, and the explicitly criminal. The critical lesson is that stolen, forged or smuggled material makes its way through much the same circles of intermediaries and ends up for the most part in the same locations and the same hands as artwork of legal origin.

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Notes

  1. The most comprehensive work on the seedy side of the art market is Conklin [1] but very insightful is the much older book by Middlemas [2]. For a more up-to-date European perspective dealing specifically with theft, see Massey [3]. For a recent updating and refining of some of the analysis and conclusions of Conklin’s work, see [4].

  2. [5]. This is the de facto professional memoir of the former director of the Metropolitan Museum of Fine Art.

  3. Middlemas, Double Market, 2–3

  4. Still eye-opening after a century is [7].

  5. On these trends, [8].

  6. The story is told by the person responsible for cataloguing the collection. See [9].

  7. There are two excellent works on this process: Williams [10] and more recently Epstein [11]

  8. Watson, Manet to Manhattan, 243

  9. New York Times 19/11/04. The most recent biography of the Duveens [12] has only a passing mention of this phenomenon.

  10. New York Times 19/11/04. Oddly, the most recent biography of the Duveens [12] has only a passing mention of this phenomenon. On Blunt see Isabel Vincent, “Soviet mole routed art to National Gallery” National Post 14/12/00.

  11. See, for example, [13], for the role of a Panama consol in smuggling looted Peruvian gold artifacts into the U.S.

  12. Secrest, Duveen, 95–98, 135

  13. The burgeoning literature on World War II, while dwelling heavily on “Holocaust art,” generally ignores this issue. For one exception see the works of Alford [14] and [15].

  14. See the laudatory sketch in the Frank [16].

  15. Of major works on the art market, Middlemas (in Double Market, passim), although writing at the very beginning of the art-investment boom) remains one of the few to fully understand the significance of this.

  16. In 2006 and on into 2007, both the London and New York markets set new records in a bidding frenzy for well known masterworks. (The Independent 22/6/06, 8/2/07, 17/5/07.)

  17. Observer 14/7/91; New York Times 23/4/91

  18. This is not just ancient history. According to an art expert in Rome cited by Green [17], “Look, there is no other way that a new American museum can build its collections. Any dealer who smuggles is providing a valuable, albeit illegal, service.”

  19. Thanks to Simon Mackenzie for drawing my attention to the tokenism that often prevails in the vettingprocess.

  20. Middlemas, Double, 14–6.

  21. This was dissected more than three decades ago in [18].

  22. In Canada a Cultural Property Review Board determines which institutions are eligible to receive donations; it also has the responsibility for certifying something as a bona fide piece of cultural property before it becomes eligible for tax write-offs. That seems a like a good safeguard except that seven of the ten members of the board are dealers, collectors or curators. In the U.S. a cultural donation is treated exactly like any other charitable gift; and the sole role of the advisory panel of the IRS (again made up of industry insiders) is to confirm certain appraisals if the IRS is in any doubt—i.e. if it expects they are inflated. Needless to say, since the committee is made up of dealers and museum directors, it is more likely to agree with a high appraisal. My thanks to Sarah el-Fashny for these points.

  23. Epstein, Dossier, 293–5

  24. On the mechanics of capital flight to Switzerland in this era, see [20]. On the emergence of art mutual-funds in Switzerland, see Middlemas, Double, 68

  25. David Cay Johnston “A Tax That’s Often Ignored Suddenly Attracts Attention” New York Times 5/6/02.

  26. New York Times 20/3/03; Wall Street Journal 7/3/03; New York Magazine 26/5/03; United States of America v. Lawrence Gagosian et al, United States District Court Southern District of New York 19/3/03; The Independent 2/11/07.

  27. See for example International Herald Tribune 12/12/92

  28. A point well made by Mackenzie “Criminal and Victim Profiles in Art Theft”

  29. “The fine art of stealing an old painting” Financial Times 4–5/2/95

  30. Cited in Boston Globe 20/12/99

  31. Business Insurance 29/1/96

  32. Newsweek 21/12/98. Los Angeles Times 23/11/98 See US Department of Justice, United States Attorney, Central District of California, Press Release No. 06–061, May 18, 2006, Press Release 07–014, Jan. 31, 2007. On the law firm that was probably the most successful in America in winning billions from giant corporations in shareholder class-action suits, see Robert Lenzer and Emily Lambert “Mr. Class Action” Forbes 16/2/04.

  33. Hoving, the former Met director, claims that in his decade and a half there he examined 50,000 items, both art and antiquities, of which about 40% were fake or so over restored or misattributed as to be tantamount to fakes. (False Impressions, 17)

  34. Hoving, False Impressions, 148.

  35. cf. Hoving, False Impressions, 86.

  36. See for example the disputes between Rembrandt experts over which are really his work. (The Independent 29/11/06)

  37. Hoving, False Impressions, 75

  38. Although there is something of a posthumous personality cult around the Van Meegeren story, a considerably less flattering portrayal can be found in Hoving, False Impressions, Chap 12.

  39. Hoving, False Impressions, 106–7

  40. His story is told by [21].

  41. Times (London) 16,17/11/07

  42. Anthony Haden-Guest “The Double-Dealer” New York Magazine 6/08/01, “The Great $50 Million Art Swindle” Forbes 02/06/01, “Art Scandal: Who Is the $50 Million Man?” Forbes 2/08/01 and “Art Scandal: Cohen’s Con Game” Forbes 2/12/01; Art Business News April 2004.

  43. Thanks to Simon MacKenzie for these examples, as rampant in the antiquities as in the paintings market.

  44. Thanks to Brandon Reti for research on auction houses.

  45. Thanks to Reviewer 1 of this paper for bringing this to my attention.

  46. The classic here is [23].

  47. Time 27/11/89; Conklin, Art Crime, 39–43, 100–7

  48. Far Eastern Economic Review 29/9/88; [24].

  49. Stein, Three Picassos, 8, 28, 57

  50. Christie Brown “Welcome, suckers!” Forbes 25/6/90

  51. Insurance Day 26/4/01

  52. “US and UK art lobbies muster to scupper UNIDROIT Convention” The Art Newspaper No. 51, Sept. 1995

  53. For an examination of these issues and assessment as to which approach seems to better suit the objectives of protecting art, see John H. Merryman “The Good Faith Acquisition of Stolen Art” Social Sciences Research Network 29/10/07.

  54. Middlemas, Double, 71

  55. There are hints about the possible role of American intelligence in McPhee [25].

  56. Forbes 3/9/90; [26]

  57. Daily Telegraph 13,22/2/99

  58. New York Times 19/6/96

  59. New York Times 18/7/99; The Independent 15/7/00

  60. New York Times 5/9/99

  61. Brodie et al, Stealing 48, 53; Middlemas, Double, 15–16

  62. A company that sold art-recovery services disagreed preferred a higher valuation of $6 billion, thereby puffing its potential earnings in the eyes of would-be shareholders and the importance of its assistance in the eyes of would-be clients. “Your Masterpiece is Missing” Time 25/11/91. The expression “fact by repetition” comes from Nikos Passas.

  63. I have compiled a list of dozens of 10% figures used not just by reporters but in official documents pertaining to underground and criminal activity.

  64. “After drugs and weapons, it is the third most lucrative international criminal operation.” The Independent 17/2/08.

  65. Cf. Simon Mackenzie “Criminal and Victim Profiles” who comments “Much of the ‘research’ that unveils this underground market in stolen artworks is in fact sensationalist journalism.”

  66. On this crucial point, see [27].

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Authors and Affiliations

  1. Department of Economics, McGill University, Montreal, Canada

    R. T. Naylor

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Correspondence to R. T. Naylor.

Additional information

Thanks to my ex-students Ceren Baysan, Sarah el-Fashny, Melissa Garcia-Lamarca, Laura Kirshner, Sean Hallisey, Stephanie Outerbridge and Brandon Reti for research on various legal and illegal aspects of the art market. Many thanks, too, to Simon Mackenzie, a true scholar in the field of dodgy art, for his comments and suggestions. And warm thanks to my personal art critics, especially Steven Naylor, Sarah Kamal and Leo Kaklamanos.

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Naylor, R.T. The underworld of art. Crime Law Soc Change 50, 263–291 (2008). https://doi.org/10.1007/s10611-008-9140-6

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