Fraud in the Gallery


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No scandal in recent years has hung over the art market as heavily as the Knoedler & Company forgery case.

At its heart lies a mystery. Was Knoedler, the distinguished old gallery that sold more than 30 fake paintings said to be by Pollock, de Kooning and other titans of Abstract Expressionism, in on the scam? Or were the gallery and its longtime director, Ann Freedman, cruelly hoodwinked along with collectors who together paid around $63 million for the bogus works? The puzzle may soon start to unravel: The first trial to arise from the sales, in a lawsuit involving the 2004 purchase of a fraudulent Rothko, is soon to open in United States District Court in Manhattan. A parade of witnesses from the art world are to testify, just possibly including Glafira Rosales, the former Long Island dealer who, for 15 years, consigned fakes to Knoedler, passing them off as masterworks from a mysterious collection based in Zurich and Mexico City. All of them had actually been painted by a Chinese immigrant in Queens.

“It’s a unique opportunity for a public hearing of the machinations of the art world, which are usually very discreet,” said Nicholas M. O’Donnell, an art lawyer in Boston. Central to the trial will be the testimony of Ms. Freedman, the art expert who was Knoedler’s director in 2011, when the 165-year-old gallery abruptly closed in advance of what turned out to be an avalanche of lawsuits. Among the likely witnesses is Domenico De Sole, chairman of Sotheby’s, who with his family paid $8.3 million for the fake Rothko, “Untitled, 1956,” a painting featuring large red and black rectangles. It turned out to be one of the fakes that investigators say Ms. Rosales supplied to Knoedler, bargaining that the gallery’s reputation and the traditional opacity of art market transactions would mask the fraud. In 2013 Ms. Rosales pleaded guilty to numerous criminal charges arising from the scam.

At stake in the first trial is a suit filed by the De Soles in which they are seeking $25 million in damages from Ms. Freedman, Knoedler and the gallery’s holding company. Though lawyers expect Ms. Rosales to be called to testify at the trial, they said that she would probably cite her Fifth Amendment right not to do so because she is still awaiting sentencing in the criminal case. The De Soles argue that Ms. Freedman knew that the Rosales works were counterfeit or consciously ignored obvious signs of fraud for her own personal gain. “It really comes down to knowledge,” said Steven R. Schindler, a lawyer who represents two art experts listed as witnesses in the suit. “There will be circumstantial evidence about what she knew and when, and the jury will have to decide whether or not she knew these were fakes, and that the buyer was justified in relying on whatever representation she made.”  Collectors say Ms. Freedman should have realized the paintings were fake because, among other things, they lacked documentation, the stories about their provenance shifted, and Ms. Rosales was selling them at far-below-market prices. (She paid Ms. Rosales $950,000 for the fake Rothko, a fraction of the ultimate $8.3 million sale price.) Ms. Rosales said the paintings had been inherited by the son of a private collector who bought them directly from the artists.

Ms. Freedman has said that she tried to discover the identity of the collector, but that Ms. Rosales would not divulge it. The De Soles say Ms. Freedman told them that she knew the collector’s identity but had to keep it confidential. “The evidence will show definitively that only Ann Freedman knew about all of the red flags,” said Gregory A. Clarick, the lawyer for the De Soles, “and the red flags signaled clear as day that the works were fake.” Ms. Freedman counters that she was so convinced the paintings were real that she acquired three for herself, and that what later were viewed as warning signs were there for others to see, too. She says a number of experts also vouched for their authenticity. Testimony from those experts about what they told her is to be part of the trial, which is expected to last about a month.

“If the world is tricked, if the world believed, why is Ann Freedman being singled out?” said Luke Nikas, her lawyer. “They went through some of the most prominent hands in the art world, and passed before some of the most expert eyes.” If Mr. Nikas is right, the trial may end up becoming not just a dispute over a single sale from 2004 but also an examination of the extent to which experts can reliably determine authenticity, even as art is increasingly treated like currency. “With all the money that has poured into the market since then,” Mr. O’Donnell said, “these questions have become even more important.”

Among those expected to appear are Christopher Rothko, the son of the painter; James Martin, a materials expert and one of the first people to declare the works to be fakes; James Coddington, chief conservator at the Museum of Modern Art; Laili Nasr, a curator at the National Gallery of Art in Washington; other victims of Ms. Rosales; and art appraisers and forensic accountants. David Anfam, an art historian and Rothko expert whom Ms. Freedman cited as one of the people whose judgment about the painting she had relied on, is also scheduled to testify. Her lawyers say that Mr. Anfam was enthusiastic in his endorsement of the Rosales paintings. Testifying in a deposition, however, Mr. Anfam seemed to take issue with Ms. Freedman’s characterization, saying that he “never formally authenticated” any of the Rosales works.

Amelia K. Brancov, an art market lawyer, said, “It is going to be a question of what were the experts asked to do and what were they told about the background of the paintings.” In a Federal District Court ruling in October, explaining why the trial would be allowed to proceed, Judge Paul G. Gardephe said that there was “ample circumstantial evidence demonstrating that Freedman acted with fraudulent intent and understood that the Rosales paintings were not authentic.” Judge Gardephe concluded that Ms. Freedman had exaggerated the significance of what the experts had told her about the authenticity of the works. Nonetheless, now that the case is at trial, several lawyers said it could be difficult to prove to a jury that she knowingly committed fraud. “It is really hard to make a convincing case about what someone else thought,” Mr. O’Donnell said. In arguing that she believed in their authenticity, Ms. Freedman is expected to point out that she exhibited the works publicly around the world and owned several of them. (She swapped a Diebenkorn she owned for a so-called Rothko; bought a fake Motherwell for $15,000; and bought a bogus Pollock for $280,000, even though the artist’s signature was misspelled “Pollok.” Judge Gardephe concluded that the exhibiting of the works created “a facade of credibility,” and that Ms. Freedman used personal ownership as a “promotional device.” Ms. Freedman will have to explain why she continued selling the Rosales paintings even when problems were flagged. In 2003, for example, the nonprofit International Foundation for Art Research declined to vouch for a painting said to be a Pollock, leading Ms. Freedman to repay $2 million to a collector who had bought it two years earlier. Mr. Nikas, however, said Ms. Freedman had shown the foundation’s report to other experts, who judged it irrelevant. In all, the scandal has bred 10 lawsuits. Five were settled out of court, and another four are unlikely to go to trial for a year at least, lawyers say.