New York City’s Knoedler Gallery has reached a settlement with collector John Howard over the sale of a fake Willem de Kooning painting, the Art Newspaper reported on Thursday (3 December).

It is the latest chapter in a multi-millionaire dollar art forgery scandal surrounding the now defunct gallery, which first broke in 2011 and sent shockwaves throughout the art world.

Knoedler & Company was one of the most prestigious art dealerships in the US until it suddenly and permanently shut shop after 165 years in 2011. Around the time of its closure, the gallery had been dragged into the spotlight by a federal investigation into the sale of expert forgeries by elite New York art dealers. In a claim brought against nonprofit organisation the Dedalus Foundation, the former president of Knoedler, Ann Freedman, was accused of selling counterfeit Robert Motherwell paintings.

The accusation marked the beginning of an embarrassing onslaught of lawsuits brought against Knoedler for knowingly selling up to $60 million worth of fake Abstract Expressionist artworks to unsuspecting buyers. Among the forgeries were works by Jackson Pollock, Mark Rothko and Willem de Kooning.

Mr Howard’s case was one of ten filed against Knoedler and the fifth to have reached a settlement. Co-managing partner of private equity firm Irving Place Capital, he bought the fake de Kooning from the gallery in 2007 for $4 million. On the back of the discoveries of the federal inquiry, Mr Howard sued Knoedler, Ms Freedman and Knoedler’s parent comapny 8-31 Holdings Inc. for fraud in 2012 claiming more than $4.5 million in damages.

In 2013, Ms Freedman attempted to stave off the allegations made against her by pointing to that fact that she herself had purchased forged works for her own collections in the belief they were real:

“I am as shocked as everybody, more shocked, as I am the central victim,” she told an interviewer.

A trial had been scheduled for January 2016 but the parties informed the court on Wednesday (2 December) that they had settled. While the exact terms of the deal have been kept under wraps it will have inevitably come as a relief to both parties. Liability under the US federal RICO law (Racketeer Influenced and Corrupt Organizations Act) could have tripled the amount of damages payable to Mr Howard. For his part, Mr Howard faced the difficult task of convincing a jury that the defendants were guilty of fraud.

The forgeries sold by Knoedler purportedly derived from a private collector who purchased them direct from the artists’ studios and passed them onto his children. Knoedler refused to disclose the identity of the owner apparently because he wished to remain secret. Nonetheless it assured buyers that the owner was known to those in the gallery. In May 2013, the fog lifted when the person responsible for bringing the works to Knoedler, Long Island art dealer Glafira Rosales, was indicted by the US Government for various crimes including tax fraud and wire fraud from the sale of forged artworks. Ms Rosales is currently awaiting sentencing.

Mr Howard’s lawyer John Cahill wrote in 2014 that the forgery scandal should act as a warning to art buyers. He advised that although it may be accepted practice in the art market for galleries to safeguard the confidentiality of the seller it is vital that they actually know the identity of the consignor. In Knoedler’s case, the “private collector” to whom they referred was entirely fictitious.

The Howard settlement is a bittersweet victory for Knoedler. The sixth case brought against the gallery is still scheduled to go to trial on 25 January 2016. The claim is being brought by Domenico De Sole, Chairman of Sotheby’s Board of Directors, and his wife Eleanore. They are suing Knoedler over a fake Mark Rothko they purchased in 2004 for around $8.3 million. Ms Freedman’s lawyer Luke Nikas is confident about the forthcoming trial:

“We are pleased to have resolved the case with Howard, and we feel very good about the upcoming De Sole trial.”

For the De Soles, their lawyer Gregory Clarick is ready for a fight:

“We look forward to proving Knoedler’s and Freedman’s fraud at trial… We are confident that the jury will find that Freedman and Knoedler engaged in a decade long conspiracy to profit from the sale of fake paintings.”