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Fraud & Foolishness in the Art Market
By Bernard Ewell
Abbott PressCopyright © 2014 Bernard Ewell
All rights reserved.
What People Don't Know About the Art Market
I have been telling nice people over four decades that artwork they own and are proud of is fake, and their investment is worthless. Fortunately, they always believe me, probably because I then explain all of the clues that led me to that certainty. Sometimes they have lost a great deal of money that they were counting on to educate their children or cushion their retirements.
If there were a major domestic and international market trading in securities, investments, or frequently extremely valuable personal property, wouldn't you expect it would either be regulated by a government agency, such as the Securities and Exchange Commission, or at the least, its repetitive unethical and often criminal activities would be the target of a congressional investigation? Somehow, the art market has avoided scrutiny. There are some professional associations of artists, dealers, and appraisers, but there is nothing that can reasonably be called regulation. Many thousands of people—possibly including you—will become victims of the art market this year.
Albert and Sylvia, a Much-Too-Typical Story
When I approached the sprawling, one-story ranch house in an affluent neighborhood, I knew little other than that that I was to look at a collection of about thirty-five pieces of artwork in a walk-through consultation and appraise those that the owners and I agreed justified the process. We were all in for a surprise.
The door was opened by a pleasant couple in their early forties—he a dentist and she a schoolteacher. Albert led the way as we toured the house and the art collection, and he and Sylvia kept up a running commentary about each piece and the artists. Mostly they had expensively framed color prints attributed to some of the best-known artists of the twentieth century, plus a few watercolors and four oils.
Albert told me, "Sylvia got us started when she showed me an article in a magazine that said collecting limited-edition prints by the great artists was a good way to invest without having to pay the huge prices of original paintings by the same artists. It made sense, because after all, we could add to our collection at any time, and it would just build and build, and the values would keep going up."
Sylvia stepped in and said that they had talked about how much they could budget for their new investments and how they had found an art gallery in a nearby upscale shopping area that sold just what the article had talked about—limited-edition prints by the great artists, especially Joan Miro, Salvador Dali, and Marc Chagall. These were names they didn't know when they started, but the dealer was really good about educating them and showing them how the values had continually risen.
They also read some exhibition catalogues and books about the artists so they could better understand why Marc Chagall had a blue cow floating over a church and Salvador Dali had a picture of a bowl of fruit that, when you looked at it a second time, magically turned into a marble portrait bust. That, they thought, was especially cool, and it was one of their purchases that they'd had framed so they could show visitors to their home the neat trick. That's also why they framed and hung right over the fireplace Dali's picture of Abraham Lincoln that was also the backside of a nude, who, they had learned, was the artist's wife and muse, Gala Dali.
The more they bought, the more they learned and the more fun they had. After a while, they had a lot to tell friends, and they became known in their group as knowledgeable about art. It was even something they found they could do on vacation. When they went to San Francisco for a dental convention, they visited several galleries near Ghirardelli Square and Fisherman's Wharf.
They bought an Erte silkscreen of a statuesque woman in a killer gown and a bronze by Erte of an almost identical figure, but the dress was a different color. They had also purchased a big, beautiful book with pictures of not only their artwork, but also pictures of the lavish birthday party the gallery's New York branch had given the artist when he turned ninety. "He's actually the Baron Romaine de Tirtoff, you know." Albert went on to tell me a lot more about him. They seemed very proud to be able to speak with such knowledge and authority with a well-known art appraiser. It would be fun to tell their friends about my visit and, in a few weeks, exhibit my appraisal report. I had shown them a sample report, and they were excited that they'd have so much information about their collection and the official guarantee of its value.
There was also a nice California coastal scene in oil that they had bought on a trip to Carmel, an Andy Warhol print they purchased on Madison Avenue when they visited their eldest son, a freshman at Columbia University; several landscapes of Texas bluebonnets in the spring; and a watercolor of a bronco rider defying gravity and good sense.
I've always especially enjoyed clients who knew about their art and were involved with it daily. Albert and Sylvia were such collectors, but they were also something else. They were the victims of the greatest art fraud of all time, and it was going to be my job to encourage them to enjoy their collection but not expect it to ever be worth what they had paid, let alone to appreciate in value.
This was something I was called upon to do frequently, but in this assignment, I also faced parents who intended to sell their artwork at the right time to fund their kids' college educations. Instead of saving the money, they'd invested in what they were assured over and over were safe and very good investments that outstripped the stock market appreciation every year.
My appraisal report eventually demonstrated that most of the art pieces they had bought with such excitement and expectations were either fakes with forged signatures (especially the Chagalls, Mirós, and Dalís) or were worth only a fraction of what Albert and Sylvia had paid for them—sad, but very, very common.
They, like almost everyone else who buys art, were purchasing in a market they knew very little about. They were about to learn a lot—including that the art dealers they had trusted were merrily leading them along while taking what amounted to a great deal of money, none of which the buyers would ever recoup.
What Gives Art Value?
The simple and best-known answer to this question, of course, is that art has value if someone is willing to pay for it. That is true of everything that changes hands commercially. Many commodities have value because they are needed by someone. When a market is created, it becomes subject to all of the basic laws of economics, and more than anything else, the level of value—the prices paid—is established by the law of supply and demand. When a cavewoman discovered that her neighbor had three men in her family group while she had no one to hunt or protect her own family, she found something the neighbor would want in exchange for one of the men. The man was needed and so became a commodity, and a market was temporarily established.
Not all commodities have markets that are established through need. Many are established through desire. It can be argued that no one really needs fresh-cut flowers; yet flower markets thrive in almost every country that has an economy above the lowest subsistence level.
In general, the arts fall into the desire-driven sector of the economy, even though many strong and compelling arguments have been made that art is necessary to the living of a fulfilled life. Most of us find this is true but are not surprised when art is the first sector of our culture to come under the knife at the time of economic downturn and budget cuts. Nowhere has this been more apparent—or tragic—than in American education. Studio classes, art history and appreciation, and creativity training are largely a memory in most schools. The disturbing effects of this cultural shift are, I believe, apparent throughout society.
The art market will be addressed in this book primarily in terms of the visual arts—painting, sculpture, printmaking, etc. This is a market that is, as will be seen, every bit as affected by the laws of economics as any other, but to a far greater degree is driven and ruled by many layers of perception. When necessity does not drive desire for a commodity, then it is up to the sellers to create and manipulate the perceptions that will support and legitimize the desire and the purchase. That, more than any other consideration, is what gives art monetary value and supports the jewelry, couture, and luxury-car markets.
Everyone knows that there is a massive quantity of diamonds in the world; the market perception of scarcity was totally the creation of the DeBeers Consortium. Even so, we still parrot the sales line that "a diamond is forever" and feel guilt if we cannot mark the most special occasions with a bit of sparkle.
On a 60 Minutes segment broadcast on April Fool's Day in 2012, Morley Safer visited a major art fair in Miami to reconsider a topic he had reported on several years earlier: why contemporary art has value. He noted that there was a terrific and apparently inexplicable boom in the prices being asked and paid for contemporary art—or, as he said, "art about stuff and stuff about art." None of it looked like what people traditionally expect art to look like but did qualify as conceptual art. He pointed out that "as the stock market fizzles, the art market sizzles." After talking to curators, dealers, and collectors, he seemed no closer to an explanation for the astronomical prices. Clearly, the only answer is perception, which is the result of branding—the branding of artists, dealers, museums, and even collectors.
This perception is transferable too. If you have several pieces of artwork by a currently hot artist and a guest in your home does not instantly recognize them—and the taste, knowledge, and wealth you know they represent—you can educate them so that they go away and tell others about your impressive art collection. The phenomenon of conspicuous consumption has been with us since the dawn of civilization. That's what palaces, gold-plated armor, diamond necklaces, and expensive cars are all about. It was not until the publication in 1899 of Thorstein Veblan's The Theory of the Leisure Class that it was given a name, however. Nonetheless, ownership of art has always been a symbol of wealth and suggested taste, sophistication, and superior values.
Of course, some art owners don't quite understand this and are forever prisoners of who they have always been. A client of mine in Scottsdale, Arizona, comes to mind. He made a fortune as the king of marketing-your-product-and-yourself seminars. He actually made more money on the videotapes and books sold than on admission. He took me on a tour of his fantastic mansion (with the gold Mercedes in the garage) and pointed out his extensive collection of artwork. I might have been impressed with his suggested taste, sophistication, and superior values if he had not told me what he had paid for every object.
In Art, Perception Is Everything
Since it is almost impossible to quantify art or evaluate it using the empirical tools with which we measure so many other things, all reasonable opinions about a work of art are equally valid. While I might bring more knowledge and experience to the process of evaluating the technical success of a piece in an exhibition than might another viewer, in the end, to like or not to like is a totally individual decision. That's why the Romans declared, "De gustibus non disputandem est" Tastes (and lusts) are not disputable. Tastes are based on many things: experience, knowledge and certainly a whole bundle of perceptions.
There are always discussions and arguments about what is art and what is not. People walk into a gallery or exhibition, take a look at the display, and walk back out saying, "If that's art, I'll eat my hat." Another viewer will be intrigued or moved by the same works and have no trouble thinking of them as art.
Is it valid to glue tea cups and saucers to a canvas and call it art? Is it valid to immerse a crucifix in a beaker of urine and call it art? Is it valid to project a video of a chicken on a dusty village street being hit by a truck and call it art? How about a stuffed tiger shark that costs twelve million dollars? Is it even valid to take a photograph of a flower, print it out from a computer, touch it up with acrylic paint and call it art? Is it valid to answer all of these questions with a paraphrase of the tired old Shakespearian phrase: "art is in the eye of the beholder"?
My own personal and professional answer is that in art, anything is valid—except misrepresentation. In other words, I don't care what artists identify as their work of art, as long as they are honest about what their intention was, what they have done to create it, and what they believe its value (monetary or otherwise) is.
This is just an extension of my motto:
If a person has integrity, nothing else matters. If a person does not have integrity, nothing else matters.
When I walk into the Whitney Museum Biennial exhibition in New York, I know that I'm in for a couple of hours of challenge, and I will not be prepared for much of it because I have not done the work required to be "up to speed" with the latest conceptual art. Some of the concepts I won't get because my knowledge, experience, and perceptions have not evolved to that level yet. In many areas, they never will, because I am not interested enough to make the effort. On the other hand, if the curators, working in conjunction with the artists, have done a good job of introducing the concepts and explaining how the artist has developed them and what his intentions are, then I'm available to make the effort to catch up. I'll work on developing my ability to perceive all the information the artist, through his work, can give me.
In a market so dependent upon perceptions, it is especially important for a consumer to develop a level of knowledge and understanding that permits purchases to be made through a balance of emotional response to an artwork and the ability to evaluate the value being received for the money paid. Kirsten Ward, a physician and psychologist, notes that art has the greatest impact when it makes the thinking part of the brain talk to the feeling part.
When one enters the art market at any level without this degree of sophistication, one becomes fair game for the market's agents, who stand ready to create the purchase-motivating perceptions the client lacks. That is, giving an art viewer all the reasons why this subjective artwork must become a part of that person's future. It's salesmanship. We expect it in the automobile showroom, but in the art market it seems that few people listen to gallery salesmanship as such. In effect, they use the statements and representations offered as blocks in building the edifice of reason that will justify the purchase. The great danger, however, is that the salesmanship may actually be delivered by a con man or woman and the collector will not find out for years, if ever, that the art purchased does not carry the value and monetary-appreciation expectations promised at the point of sale.
Another way to look at it is as the increasingly pervasive process of branding. The role of the art dealer has evolved over the past 150 years and, in large measure, whether selling in the primary (first time) market or the secondary (resale) market, the dealer's role is to assure a prospective buyer that an artwork is highly desirable as an acquisition. In both markets, the price of art is governed by supply, demand, and marketing. Branding is a critical technique in marketing.
In his fascinating book about the economics of the contemporary art market titled The $12 Million Stuffed Shark, Don Thompson observes, "In the world of contemporary art, branding can substitute for critical judgment " He is writing here about the upper levels of the international market, where people with tremendous amounts of money buy art at astronomical prices that actually represent only a few days' income to them.
Excerpted from ARTFUL DODGERS by Bernard Ewell. Copyright © 2014 Bernard Ewell. Excerpted by permission of Abbott Press.
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