Art Crime and its Prevention: A Handbook for Collectors and Art Professionals
208
Art Crime and its Prevention: A Handbook for Collectors and Art Professionals
208eBook
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Product Details
| ISBN-13: | 9781848221925 |
|---|---|
| Publisher: | Ashgate Publishing, Limited |
| Publication date: | 07/29/2016 |
| Sold by: | Barnes & Noble |
| Format: | eBook |
| Pages: | 208 |
| File size: | 1 MB |
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Art Crime and its Prevention
By Arthur Tompkins
Lund Humphries
Copyright © 2016 Arthur TompkinsAll rights reserved.
ISBN: 978-1-84822-192-5
CHAPTER 1
THE ART WORLD COMPLIANT VICTIM?
Tom Flynn
What is 'the art world'? The philosopher Arthur Danto has suggested that the art world 'stands in relation to the real world in something like the relationship in which the City of God stands to the Earthly City'. In this formulation the art world assumes a quality of unreality, of detachment from everyday life, its objects somehow resisting conventional economic assignments of value and utility. 'Certain objects, like certain individuals, enjoy a double citizenship,' Danto writes, citing Andy Warhol's Brillo Boxes as a case in point by noting that 'the Brillo box of the art world may be just the Brillo box of the real one, separated and united by the is of identification.'
The 'is of identification' is itself a product of the codes and conventions created, understood and shared by the complex network of interdependent, social and institutional relationships of which 'the art world' is comprised. However, instead of conceiving of the art world as a single, unified city or planet, we might consider it a composite of different celestial bodies like the solar system. The dictionary offers a range of definitions of 'the world', from 'the earth as a planet, especially including its inhabitants', to 'a complex united whole regarded as resembling the universe', and even 'any star or planet, especially one that might be inhabited'.
Such cosmic notions are helpful for an understanding of the diverse creative activities, private and professional institutions, commercial structures, social codes, symbolic practices, and yes, occasionally unethical and illegal behaviours, that make up what is commonly termed 'the art world'. We might extend the planetary metaphor even further by visualising the art world as a kind of orrery. Invented by Enlightenment scientists, orreries were designed to represent the orbital movement of each planet relative to the sun. Like the orrery, the art market is also a product of the eighteenth-century Enlightenment, when the social role of the artist gradually completed its transition from that of the artisan. This was also the period when the patronage/commissioning system that had previously dominated the art market steadily began to give way to the commercial activities of agents and dealers. The various planets of an eighteenth-century orrery were set in motion by a clockwork mechanism, whereas the 'planetary bodies' forming our notional art-world orrery – auctioneers, dealers, museums, curators, collectors, speculators, bankers, critics – are driven by the interaction of two seemingly antithetical forces: aesthetics and economics. While they have sometimes been considered hostile to each other, it is the creative tension generated by these two discrete but overlapping 'logics' that results in the myriad outputs of 'the art world' and the creative industries that enrich our lives.
For some art buyers, the aesthetic qualities of a work of art will always take primacy over the economic benefits of ownership, while for those with a more investment-focused motivation the work's economic profile will be of principal concern. It would be wrong, however, to assume that those of the former persuasion care nothing for the economic aspect of the art they purchase, as would be the assumption that all investment-orientated buyers are blind to art's aesthetic qualities. It is the overlapping boundary between these categories that makes the art world so challenging and sociologically intriguing.
Primary and secondary markets
One of the critical outputs generated by the interlocking systems of aesthetics and economics is the assignment of value and price to objects in the market.
The art market is broadly separated into two sectors known as the primary and secondary markets. The 'primary market' concerns objects newly created by the artist or craftsperson that have never been previously transacted. In the art market this has traditionally been the sector controlled principally by art dealers. Dealers (or gallerists as they are usually termed in the North American market) seek to identify and represent artists whose work they feel has aesthetic value and thus a modicum of commercial potential. To this primary level of aesthetic selection dealers add a range of promotional and commercial services, including exhibiting the work in a gallery or at art fairs (and more recently via a range of digital platforms). The aim of these strategies is to disseminate knowledge of the artist and the work to collectors, critics, curators, academics and other interested professionals – the occupants, as it were, of the 'field of cultural production' – in order to build belief in, and prestige around, the artist and the work. As well as lending moral support, encouragement and friendship, some dealers occasionally add a further financial commitment to their artists by offering regular monthly stipends or more occasional forms of monetary assistance. Critical to this approach, however, is the cultivation by primary market dealers of a disinterested approach to the economic dimension of what they do. Through a disavowal of the profit-orientated motive, dealers seek to foreground their prestigious, symbolic function within the dense social matrix of art-world individuals and institutions – which includes other dealers, auction houses, critics, collectors, museums, galleries, the education system, the media, and so on.
While dealers play an important role in promoting otherwise unknown or unrecognised artists to a wider public, this process comes with a certain amount of financial risk. It can take time for a young or emerging artist to develop his or her creative 'voice', requiring artist and dealer to build a meaningful, long-term relationship based on trust, mutual respect and shared aspirations. In order to offset the financial outlay that such arrangements entail, many primary market dealers engage with the 'secondary market', that is to say by buying and selling works that have been transacted on one or more previous occasions. One of the principal arenas for the secondary market is the auction houses.
In the European historical tradition, auction houses developed as agents for the seller, taking a small commission from the vendor on the hammer price. In the mid-1970s, however, as the market expanded and competition intensified, the bigger UK auction houses of Christie's and Sotheby's took the radical step of extending their commission structure to include a 'buyer's premium'. Under this arrangement (fiercely opposed by the UK trade at the time of its introduction in May 1975), the buyer of a lot is required to pay a commission to the auction house, levied as a percentage of the hammer price. Auctioneers were now benefiting financially from both parties in the transaction. This is still viewed by many as a conflict of interest that obscures the boundary between the roles of agent and principal.
The traditional function of the auction houses has changed in other ways as well. In 2008, Sotheby's took the unprecedented step of offering at auction a consignment of works by the British artist Damien Hirst, in which every object came fresh from the artist's studio, none having previously been transacted. Not only was this widely viewed as the auction houses moving into the primary market territory previously governed by dealers; it also represented a shift in the economic status of the artist. Living artists traditionally rely on their dealer as their main route to market, but Hirst chose to bypass his two main UK and American dealers and instead consigned directly to the open market via the auction block.
Auction business is currently undergoing a radical transformation as the market globalises, competition increases and ever greater levels of wealth are generated. These factors have had the effect of bringing the auction houses into closer alignment with banks, wealth managers, hedge funds, and other investment vehicles. The bigger auction houses might now be seen as discreet brokerages in which blue-chip art assets are deployed as exotic tools in ever more opaque financial transactions.
High prices
Mentions of 'the art market' in the mainstream media invariably refer to the rarefied zone of activity in which, almost every year, eight- and even nine-figure sums change hands for rare works, sometimes at public auction, but increasingly by private treaties forged behind closed doors away from journalistic scrutiny. In the last three or four years, reportedly, a painting by Cézanne has sold for $250 million; a work by Gauguin for $300 million; a Picasso for $179 million; and two sculptures by Giacometti together totalling $205 million. In other words, just shy of a billion dollars has been forked out by three or four separate individuals for just five works of art. Tellingly, the two highest priced of these sales were conducted privately and the exact sums never officially confirmed, suggesting that the prices paid might have been even higher. What effect such part-private/part-public transactions have on the creation of value within the broader market and how the market is perceived by outsiders, including the criminal classes, is yet to be properly explored.
All of the transactions mentioned above were paid by collectors enriched by the profits from either liquid petroleum (Qatar) or hedge funds (New York). This wealth factor explains the recent growth of interest in art collecting not only among Middle Eastern collectors and North American investment managers, but also among the newly enriched in Russia, China and, increasingly, South America. It is only a matter of time before the African and Indian art markets begin to engage at the top level as their economies accelerate and the wealthiest in those continents seek fashionable ways to communicate their material success. Inevitably, perhaps, as ever greater wealth is invested in art, so the art object comes to be seen as a kind of currency, a 'store of value', symbolising the market's economic infrastructure.
The historical record confirms that wherever wealth has been generated, art markets, or variants of them, have flourished. This was observable in Renaissance Florence in the fifteenth century; in sixteenth-century Antwerp; in Amsterdam in the mid-seventeenth century; in London in the eighteenth century; in Paris in the nineteenth century; and in New York in the post-war period. Following the end of Soviet-style communism in 1989 and the subsequent spread of market capitalism concomitant with globalisation, wealth generation in the world's emerging economies reached unprecedented levels. The World Wealth Report informs us that 920,000 new millionaires were created globally in 2014, as High Net Worth Individuals (HNWIs) 'grew in both number and wealth to 14.6 million and US$56.4 trillion, respectively'.
As the number of wealthy individuals increases in the developing world, so art markets are growing accordingly. This trend has been most marked in the Asian economies, with the Chinese art market in particular seeing exponential expansion over the last decade. However, the widely reported cases of malfeasance in the Chinese market – including bribery, money laundering, the abuse of the auction process and the endemic culture of faking and unauthorised replication of works of art – prompt us to bring a level of scepticism to the rosy picture presented by some economists and research analysts. Until standards in professional practice improve, the Chinese art market will be impeded by such irregularities, which falsify price, increase risk and discourage participation.
For better or for worse, the art market is subject to a range of characteristics and conditions that set it apart from more conventional markets and cultural realms. These might be summarised as:
• the uniqueness of the art object as a non-fungible, non-augmentable 'asset'
• the emotional, social and symbolic dimension of art consumption
• a lack of transparency in commercial transactions
• an asymmetry or disequilibrium of information between participants
• a susceptibility to various forms of insider trading
• the illiquidity of art as a 'commodity' (it is expensive to transact and generates no cash flows)
• cultural differences over such concepts as originality and authenticity.
Privacy and confidentiality
Because many art transactions are conducted beneath a veil of secrecy, it is nigh on impossible to make anything approaching an accurate quantitative estimate of the market's true size. Confidentiality has been a characteristic of art commerce since the Italian Renaissance and can be ascribed to the unique nature of the art object as a thing subject to the vagaries both of economics and aesthetic judgment. From that peculiar conjunction is born the market price, the disclosure of which is often hindered by the imperatives of private investment. In passing on their enormous wealth, the early members of the Medici family of Florentine bankers and art patrons were sensitive to how their sumptuary activities might be perceived by the broader populace and advised their heirs to avoid litigation and not to attract attention. A full five hundred years later, a similar fear of publicity troubled the New York department store owner and art collector Benjamin Altman, who expressed concern that customers might make a connection between his high-end art collecting and the price of goods in his retail stores.
Today, much of the art trade remains highly confidential, indeed secretive, particularly in the higher-priced sectors of the market where art consultants and advisers act as agents on behalf of the world's wealthiest families and individuals, ensuring them high levels of privacy and anonymity. Nor is it only private collectors who run shy of publicity. In the past decade alone the market has witnessed an increase in the transactions conducted by the bigger auction houses in the form of private treaty sales rather than by public auction. These developments add a further level of obscurity to an already opaque market, hindering the efficient collecting of price data and militating against an accurate overview of market size.
Another, not unrelated issue is the dual role now undertaken by the major multinational auction houses in acting as both agent and principal in a transaction. This happens when the auction house offers a guaranteed price to a vendor in order to secure a consignment. If the work fails to sell on the appointed day, the vendor is still paid the guaranteed sum and the auction house becomes the de facto owner of the work. When first introduced in 1956, guarantees were underwritten by the auction house. More recently that risk has been transferred to third parties incentivised by an attractive share of the 'upside' – the differential between the guaranteed price and the final hammer price (if it exceeds the guarantee). This has led to allegations of a potential conflict of interest, with some commentators seeing it as a form of insider trading given that the terms of the guarantee are kept confidential between the third-party guarantor and the auctioneer. While such practices are not technically illegal, they are nevertheless widely viewed as unethical and contribute to a perception that as the art auction market moves ever closer to the financial markets so its business practices require tighter regulation.
Looking more closely at the art world today it is hard to avoid the conclusion that markets for art have entered a new era. Globalisation, unprecedented wealth generation, the internet and related social networking technologies, geopolitical upheavals, the increasing power of the banking profession: these and other factors have helped bring about a structural change in how art is traded, how art is collected, how art is understood and perceived. Inevitably, perhaps, these changes have also attracted the attention of a criminal tendency opportunistically attuned to the informalities that constitute both the market's strengths and weaknesses. Most of the professional inhabitants of the art world would argue that its opacity, its informal social networks, relative lack of regulation, disequilibrium of information, and confidentiality are essential to its survival and to its apparent success in withstanding the vicissitudes of the global recession. Interestingly, but hardly surprisingly, the calls for stricter regulation of the art market tend to come from external commentators rather than from professional art market insiders. One would hardly expect the New York hedge fund manager Daniel Loeb, who has fought tough battles to become a powerful shareholder in Sotheby's, to argue for tighter regulation. His interest in Sotheby's is driven by a conviction that the company could be more profitable for its shareholders and that it can only be so if it more efficiently exploits the art market's existing trading conditions rather than acquiescing over tighter controls. Loeb and his colleagues want the art market to preserve its difference, not move closer to the conventionally regulated markets.
(Continues...)
Excerpted from Art Crime and its Prevention by Arthur Tompkins. Copyright © 2016 Arthur Tompkins. Excerpted by permission of Lund Humphries.
All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.
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Table of Contents
Contents
Foreword Noah Charney,Introduction and Acknowledgements Arthur Tompkins,
1 Villains and the Art Market,
1 The Art World: Compliant Victim? Tom Flynn,
2 Go research an Art Thief: The Importance of Empirical Research on Art Theft Marc Balcells,
3 Methods of Profit: Rewards, Ransoms and Buy-Backs – Knowing the Rules of Engagement Toby Bull,
4 Art, Anxiety and the Online Marketplace Colette Loll,
5 Art Crime Law Louisa Gommans,
6 International Art Crime Law Arthur Tompkins,
2 Collections and Crimes,
7 Legacy and Longevity: Protection of Objects from our Past for our Future Penelope Jackson,
8 Security for Protection of Art: Strategy, Tactics, Technology and Making New Paths Dick Drent,
9 Art Crime and Law Enforcement: Villains, Thieves and Scoundrels Virginia Curry,
10 Insurance and Art Crime Dorit Straus,
11 Looting and Theft in Colonial-Era Aotearoa/New Zealand Ngarino Ellis,
3 Art and Conflict,
12 Art in War Arthur Tompkins,
13 Looting and Antiquities Laurie Rush,
14 Intentional Destruction of Cultural Property Alexander Gillespie,
Where To From Here? Arthur Tompkins,
Notes,
Select Bibliography,
Selected Websites,