In This Issue brushstrokes | September 2016 TopNews Gagosian Busted! $4.2 Settlement for Uncollected Sales Tax Save the Date: Collector’s Forum in Los Angeles on October 20, 2016 Newsworthy Koons Battles His Staff Hot Coffee Poured on Infringement Suit Paint and Switch? The $100 Million Picasso Custody Battle Resolved! Artworthy Stolen Masterpieces Recovered Warning to Banksy: Stay out of Malaysia – the Prime Minister Has No Sense of Humor MoreNews A Famous Artist in Denial of His Secret Criminal Past or a Case of Mistaken Identity? Mystery Solved. The Top 10 Auction Houses Based on the Blouin Art Sales Highest-Grossing Artists of 2015 September 2016 Gagosian Busted! $4.2 Million Settlement for Uncollected Sales Tax Save the Date: Collector’s Forum in Los Angeles on October 20, 2016 Reporting on All Facets of the Art World | TopNews brushstrokes Über-dealer Gagosian Gallery Inc. is to pay $4.2 million to settle charges that it failed to collect and remit sales tax on art sold and shipped out of state. The actions against Gagosian are part of an ongoing campaign by New York Attorney General Eric T. Schneiderman (we reported on earlier actions in the last issue of Brushstrokes). There were a number of different issues in this case, but the one that is sure to take many dealers and collectors by surprise and expose them to potential liability relates to the use of private art transport companies, a common practice in interstate art purchases. For example, a collector buys a piece of art and engages their favorite art transport company to crate and ship the artwork. The problem is that using such companies instead of common carriers can cause a sales tax to become due. The theory of liability is that the private art transport company is an agent of the collector, and therefore the art is considered transferred to the collector when the art transport company (its agent) takes possession, and since that is in state, a sales tax is therefore due. The settlement agreement between the state and Gagosian (“Assurance of Discontinuance”) spells out a mechanism for how one can use a private company and still avoid a sales tax. The technique has very specific steps that must be followed. Even though, for now, this aggressive approach toward sales tax is limited to New York, other states may adopt the same method (Why not? It means generating more tax revenue for them.) So we recommend using the New York scheme for all out-of-state art transactions. At its Los Angeles office, Venable will host a forum for the sophisticated collector. The forum will begin at 6:00 pm with cocktails before and after the program. Topics will include: 1031 tax-free exchanges, sales and use taxes, estate planning, donations, advice on how to deal with auction houses, and how to determine what to buy, when to buy, and when to sell. The panel will comprise art specialist attorneys from Venable, one of the country’s top art collectors, one of Los Angeles’ leading art consultants, and a senior representative from Sotheby’s. Mark your calendars and save the date – more details will be forthcoming. For more information contact Leo Marquardt at LMarquardt@ Venable.com brushstrokes | September 2016 Newsworthy www.Venable.com It has been reported that a number of Jeff Koons’ fabricators were not happy with conditions at his studio and tried to unionize, and, in response, he fired them. The website artfcity.com reported that Koons laid off 14 night crew staffers at his Chelsea studio and one day crew member who is friendly with the night crew organizers. The website stated that details were scant, but they understood that anyone who was hired after June 1, 2016, was let go. He further reported that legal proceedings were currently under way, but when Art F City tried to reach the union or Koons’ representatives, they were not able to get any substantive statements from them. Stay tuned. Koons Battles His Staff Hot Coffee Poured on Infringement Suit Artworks that are substantially similar are infringements; however, artistic style is not protected. Where do you draw the line between substantial similarity and style depiction? Artist Maya Hayuk was on the losing side of that debate. Ms. Hayuk’s works have appeared in several museums and on various licensed products. Ms. Hayuk is known to be very aggressive in her attempts to protect her artwork from infringements or perceived infringements. She recently sued a coffee chain, claiming that its advertising campaign infringed on her copyrights of her artworks. The court dismissed her claims. Ms. Hayuk alleged in her complaint that in 2014 an advertising agency, 72andSunny, contacted her about the possibility of her providing art for a client’s promotional effort. She declined the solicitation. She then alleged that the ad agency and its client nevertheless used works that were essentially similar to hers on their website, in print, in video, on product packaging, and on in-store displays. She claimed that their use of multicolored works with similar graphics had imitated her multicolored strips works. In their successful motion to dismiss, the coffee chain claimed that Hayuk’s style, which is composed of bright colors, intersecting lines, and geometric shapes, is not protectable. The coffee chain successfully argued that the overall “total look and feel” of the works were not substantially similar when the protectable elements of the two designs were compared. The two sides urged the court to use different tests to determine substantial similarity. In the end, the court determined that Hayuk’s works included so many non-protectable geometric shapes, colors, and textures that the court adopted the stricter “discerning ordinary observer” test that the coffee chain requested. In that test, the non-protectable elements are removed before a comparison is made between the images at issue. Applying the test, the court found that the advertisements were not similar to the “total concept and feel” of protectable elements of Hayuk’s artworks. It also found “dominant dissimilarities in the specific aesthetic choices” made and did not find the similarities needed to hold the coffee retailer liable. As a prevailing party, the coffee chain has the ability to seek attorney fees. Let us see if they do. brushstrokes | September 2016 www.Venable.com Actor and art patron Alec Baldwin is embroiled in a dispute with gallery owner Mary Boone and artist Ross Bleckner over the acquisition of one of the artist’s works. Mr. Baldwin, reports the New York Times, was enamored with Bleckner’s work titled Sea and Mirror. Unfortunately for Mr. Baldwin, the piece had already been purchased by another collector. Mr. Baldwin beseeched Mary Boone, who was representing the artist, to see if she could acquire the piece from the current owner. According to Baldwin, eventually Boone said she could, at a premium price of $190,000, including a commission to her (the piece had originally sold for $121,000), deliver the painting to Mr. Baldwin. However, after acquiring the work and upon closer examination, Mr. Baldwin thought that it was not the piece he wanted, but a similar one. The $100 Million Picasso Custody Battle Resolved! Paint and Switch? Newsworthy For those of you who have been following the international dispute over multiple sales of the same sculpture, you should know that the matter has been settled. The sculpture at issue was the 1931 Buste de Femme (Marie-Thérèse). This matter Sea and Mirror 1996 (original) He claims to have e-mails showing the artist and dealer led him to believe that it was the same piece. It came out later that in fact it was a different piece. Upon finding out that he did not have the work he yearned for years to own, he became quite upset. The dealer and artist, now through their counsel, admit it was a look-alike created by Bleckner that was sold to Baldwin, but claim that Baldwin should somehow have known it was not the original piece he had been seeking, but a look-alike. Mr. Baldwin strenuously denies any knowledge or even a hint from the gallery that it was a different piece. In the strange twists and turns of the art world, however, it seems Mr. Baldwin believes his grudge is against the dealer Mary Boone, not the artist. He wrote Boone, “I’m less worried about you, Mary, as you are more of an armadillo and I’m sure you have been blasting your way out of corners like this on more than one occasion.” Boone responded, “I am not an Armadillo…” At the same time Baldwin continues to support the artist, as his foundation helps to underwrite an exhibition this summer on Long Island that featured Bleckner’s paintings. Baldwin currently owns five other works by the artist. Will Baldwin get his painting? Stay tuned for the outcome. Sea and Mirror (version currently owned by Baldwin) was being litigated in France, Switzerland, and the United States all at the same time. At issue was what appeared to be the sale of the sculpture to two different buyers. Initially, London-based agents Pelham Europe negotiated to buy the sculpture for $47 million on behalf of the Qatari royal family. It appears that there was a family dispute, and the Picassos did not follow through on the transaction with the Qatari royal family, but instead agreed to sell the sculpture to art dealer Larry Gagosian for more than $100 million. Gagosian then sold the work to billionaire Leon Black for an unknown sales price. In classic settlement language, the parties entered a joint statement saying they were “pleased” to have reached “a good faith global settlement” resolving the dispute. It appears that Leon Black will end up owning the sculpture. brushstrokes | September 2016 Artworthy Stolen Masterpieces Recovered Italian authorities reported last month that they had recovered 17 masterpieces, including works by Rubens and Tintoretto, which had been stolen from the Castelvecchio Museum in Verona, Italy last year. The works were valued at approximately $16 million. Twelve persons were arrested as suspects related to the theft. They were allegedly members of a Moldovan gang that carried out the heist. The question, what do thieves do with them? often comes up with regard to high-profile stolen artworks. They are too well known to be sold through galleries and auction houses on the open market. So if they cannot be sold, what becomes of them? Numerous reports indicate that many of the thieves who steal these masterpieces really do not understand the art market and get very frustrated by their inability to sell the pieces. Sometimes they try to get rewards from the insurance company. Other times, they enter the underworld as a form of currency in a barter system where they go from one criminal enterprise to another, in the hope that someday the holder will be able to use them to launder other illegal cash funds. However, in many instances, the stolen works are never recovered; rather they are destroyed because there is simply no market for them. In this case, however, the authorities believe that this was one of the rare occurrences (even though the movies make it seem like it is very common) of a “stolen on order” theft, a heist where specific individuals behind the theft want the pieces for their own collection. The kingpin in this robbery was allegedly of Chechen origin. The robbery took place during the evening at the changing of the guard after the museum was closed, but prior to the security system being switched on for the night. The security guard on duty had been tied up by the thieves. An interesting twist was that the security guard was arrested as a suspect for being in cahoots with the other thieves. Warning to Banksy: Stay out of Malaysia – the Prime Minister Has No Sense of Humor Banksy-like images started appearing in Kuala Lumpur, Malaysia, depicting Prime Minister Najib Razak as a sinister-looking clown. The pictures were put up as part of an artistic protest regarding allegations of massive corruption by the government. Depictions of the artist, Fahmi Reza, went viral, and posters and stickers appeared in public places throughout the city. The government, lacking a sense of humor and a First Amendment, had Reza arrested and charged under Malaysia’s Communication and Multimedia laws, which prohibit dissemination of online content deemed to “annoy, abuse, threaten, or harass” others. He faces a one-year prison sentence and a $12,200 fine. Reza pleaded not guilty. His attorney said, “This is essentially criminalizing free expression,” and now the lawyer is being investigated for sedition. One might think that the prime minister, who is battling accusations that billions of dollars were stolen from a state-owned development fund that he oversees, has better things to do than persecute an artist. To paraphrase: the paintbrush is mightier than the sword. So perhaps the prime minister does have reason to fear stencils, spray paint, and the arts. brushstrokes | September 2016 MoreNews www.Venable.com A Famous Artist in Denial of His Secret Criminal Past or a Case of Mistaken Identity? Mystery Solved. In the culmination of a dispute that has been dragging on for five years, highly successful Scottish artist Peter Doig began his testimony in Chicago on August 8, 2016, with the aim of proving that he did not paint a desert landscape that was painted by a former prison inmate named Pete Doige. According to the plaintiffs in the case, being the current owner of the piece and the art dealer assisting him in the sale, the painting, which was purchased for a mere $100 forty years ago, could now be worth $10 million. Doig’s refusal to authenticate the painting caused it to be pulled from a sale at a Chicago auction house. Continued . . . MoreNews brushstrokes | September 2016 Continued . . . The co-plaintiff in the case, Robert Fletcher, who is a former corrections officer at Thunder Bay Correctional Center in Ontario, Canada, claims that he bought the landscape, which is signed “Pete Doige ’76,” from a young Peter Doig, whom he had met while Doig was allegedly an inmate at Thunder Bay. Fletcher claims that he had purchased the painting from the fledgling artist, who was incarcerated because of an LSD charge, to discourage him from returning to selling drugs. He asserts that he had even acted as Doig’s parole officer, assisting him in securing a job after prison. Although he had been living in Canada roughly between 1966 and 1979 and admits to having tried LSD, Doig denies that he was ever an inmate at the corrections facility and said that at the time the painting would have been created, he was in his teens and still living with his parents. In court papers, he stated, “If I had painted that painting when I was 16, I would admit it,” and further said that he did not begin to paint on canvas until late 1979, the same year that he relocated to London to study art. If Doig fails to prove that he did not create the painting, he faces the possibility of paying at least $5 million in damages to the plaintiffs and will be forced to authenticate the painting. Furthermore, should the judge side with the plaintiffs, there is concern in the art world that authentication of artworks can be left to the discretion of a judge and jury rather than to the living artist. How does the market react when an artwork is not deemed authentic by an artist and critics, but is deemed authentic by a judge? If the judge rules the artwork authentic, will it be saleable in the open market, and, if so, at what price? It brings to mind the Calder mobile case (Greenberg Gallery, Inc. v. Bauman), in which a leading expert claimed an artwork was not authentic, but the judge, based on other expert testimony, determined it was authentic. Even with the ruling authenticating the piece, they were unable to sell the mobile: the market had rejected the piece. UPDATE: The verdict is in! To the plaintiff’s chagrin, on August 23, 2016, the judge found Peter Doig not responsible for the creation of the painting. He also stated that the unknown Pete Edward Doige, now deceased, “almost certainly” painted it. During the week-long bench trial, the sister of Pete Edward Doige took the stand to confirm that her brother, who had in fact served time at Thunder Bay Correctional Center, was responsible for creating the painting. In a statement provided by his attorney, Doig stated that “the deceased artist’s family and my family and friends have suffered mightily. That the plaintiffs in this case have shamelessly tried to deny another artist his legacy for money is despicable.” Although there were gaps in Doig’s story about where he was during the years in question, the judge pointed out that Plaintiff Fletcher’s “errors in recollection were far more severe.” During the deposition, the former corrections officer had said that the prisoner Doige was 21 years old at the time of his arrest. He later gave a younger age when he found out that the Scottish artist was born at a later date. He also pointed to the picture of Pete Edward Doige as a 21-year-old student at Lakehead University as the man he bought the painting from. A comparison of the ID picture and a high school yearbook photo of Pete Doig from the same year showed that the two were, in the judge’s words, “plainly different.” Doig’s attorney stated in an interview, “Artists should be grateful to Peter Doig for having the ethical and financial fortitude to fight tirelessly to ensure that justice prevailed in today’s verdict.” A Famous Artist in Denial of His Secret Criminal Past or a Case of Mistaken Identity? Mystery Solved. The Top 10 Auction Houses Based on the Blouin Art Sales brushstrokes | September 2016 www.Venable.com MoreNews The top 10 auction houses, based on sales of fine and decorative art, are: 1. Christie’s 2. Sotheby’s 3. Poly International Auction 4. Phillips 5. China Guardian 6. Bonhams 7. Xiling Yinshe Auction 8. Dorteum 9. Artcurial 10. Seoul Auction Other U.S.-based auction houses in the top 25 included Heritage Auction at number 15, with Swann Auction Galleries coming in at 21, and Coeur d’Alene Art Auction closing out the top 25 at number 25. Highest-Grossing Artists of 2015 On the following pages is a chart of the highest-grossing artists at auction houses in 2015. Quite a few since 2014 have jumped up in sales. The artist whose work exhibited the greatest advance in gross sales rank since 2014 is Russian artist Kazimir Malevich, moving up from rank 343 in 2014 to rank 22 in 2015 with the sale of his work Mystic Suprematism (Black Cross on Red Oval). Other artists who have shown large advances in sales rank are Amedeo Modigliani (rank 45 to 4), Lucian Freud (rank 56 to 16), Wu Guanzhong (rank 68 to 18), and Chaim Soutine (rank 113 to 24). The top three ranking artists in 2015, Pablo Picasso, Andy Warhol, and Claude Monet, respectively, have consistently stayed in the top 5 in sales since 1970.