Appraising Appraisals in an Evolving Art Market

Transcription

1 Appraising Appraisals in an Evolving Art Market Vivian L. Ebersman AXA Art Americas Corporation October 10, 2018

2 AXA Art Americas Corporation Part of the Global AXA Group of Companies What AXA Art insures: Fine Art Photography Jewelry and Watch Collections Rare Books and Manuscripts Antique Furniture and Rugs Stamps and Coins Musical Instruments Antique and Collectible Firearms Vintage and Collectible Wines Silverware and Pewter Vintage Automobiles Anything collected which can be sold in a secondary market

3 AXA Art Americas Corporation Director Art Expertise Represent AXA Art at conferences and art fairs Develop and maintain relationships with museums, corporate and private collectors Identify industry experts and maintain professional relationships Collaborate with AXA Art underwriters and claims specialists Special projects

4 AXA Art Americas Corporation We view our relationship with appraisers as an essential partnership to maintain the integrity of the marketplace Professional appraisals adhere to USPAP Standards Rules 7-1, 7-2, 7-4, 8 and follow the due diligence guidelines defined in Advisory Opinion 24. The vast majority of appraisals we receive reflect USPAP professional standards

5 The Global Fine Art Market Expanding marketplace of collectors, dealers, auctions, art fairs, online transactions Number of transactions and sales volume reflect concurrent global macroeconomic conditions Entry of new players from every continent drive demand Dealers offer in demand works to established collectors Increased demand for scholarship and scientific analysis to establish provenance and authenticity of works

6 The Global Fine Art Market - Stakeholders Collectors Museums Dealers Scholars Researchers Appraisers Conservators Insurance Brokers and Underwriters Art Attorneys Artist Foundations Forensic Scientists

7 The Global Fine Art Market Global Sales Art Economics (2018) (B$)

8 How Accurate Are Sales Data Global Market What s the Global Art Market Really Worth? Depends Who You Ask? Scott Reyburn, New York Times, March 23, 2017 Art Basel/UBS report 2017 (Dr. Clare McAndrew) Art Basel/UBS report 2016 (Dr.Clare McAndrew) TEFAF report 2016 (Dr. Rachel Pownall) $63.7 billion $56.6 billion $45 billion

9 How Accurate Are Sales Data Auction Sales Art Price/Art Market Monitor Artron of China report H $8.45 billion Art Price/Art Market Monitor Artron of China report 2017 $14.90 billion Art Price/Art Market Monitor Artron of China report 2016 $12.45 billion Art Basel/UBS report 2016 (Dr.Clare McAndrew) $22.10 billion TEFAF report 2016 (Dr. Rachel Pownall) $16.90 billion Source: Scott Rayburn, What s the Global Art Market Really Worth?, New York Times March 23, 2017

10 The Global Auction Market - Summary Between 1998 and 2017, total global art auction turnover rose from $2.7 billion to $14.9 billion. This exceptional growth was largely driven by transaction volumes (up 456%); however the value scale has also considerably changed with the all-time world record for an artwork on the secondary market rising from $71 million in 1998 to $450.3 million in Thierry Ehrmann, 2017, Art Price

11 The Global Fine Art Market Final Thoughts Marketplace is expanding Higher prices increase incentives for fraud Up to date realistic valuations are essential in this environment

12 Recent Record Prices at Auction In the past several months several record prices for major artists were broken Not all artists or genres made record advances It is important to keep abreast of evolving markets Let s look at some recent record prices at the high end of the market

13 Leonardo da Vinci Salvador Mundi Circa 1500 Oil on panel 25 7/8 x 18 in. (65.7 x 45.7 cm.) Christies New York, Nov $450,312,500 (record for artist) Previous 1958 Cook Collection Auction Estate auction $10, Private Sotheby s sale to Yves Bouvier for reported $75 to $90,000, Yves Bouvier to Dmitri Rybolovlev $127,500,000

14 Qi Baishi 12 Landscape Screens Ink and watercolor (1925) $140,800,000 (record for artist) Poly Beijing Auctions December 17, 2017

15 Jean-Michel Basquiat - Untitled Signed, inscribed NYC and dated 82 on reverse Acrylic, spray paint and oil stick on canvas x 68.1 in.(183.2 x 173 cm.) Sotheby s New York,May 18, 2017 $110,487,500 (record for artist) Previous $57,285,000 Christie s New York, May 10, 2016 Untitled 1982

16 Kazimir Malevich Suprematist Composition Oil on canvas 34 7/8 x 28 in. (88.7 x 71.1 cm.) 1916 Christie s New York May 15, 2018 $85,812,500 (record for artist) Previous Same work, $60,002,500 November 2008

17 Claude Monet Nymphéas en fleur Stamped with signature Claude Monet (Lugt 1819b); on reverse Nymphéas en fleur stamped on reverse Oil on canvas 63 x 70 7/8 in. (160.3 x 180 cm.) circa Christie s New York May 8, 2018 $84,687,500 (record for artist) Previous $81,447,504 Christie s New York 2016 Meule

18 Henri Matisse Obalisque couchée aux magnolias Signed Henri Matisse (lower right) Oil on canvas 23 ¾ x 31 7/8 in. (60.5 x 81.1 cm.) 1923 Christies New York May 8, 2018 $80,750,000 (record for artist) Previous $45,926,068 Les Concous, tapis bleu et rose (1911) February 2009

19 Constantin Brancusi La jeune fille sophistiquée Signed, dated and inscribed C Brancusi Paris Polished bronze with artist carved marble base Height with base 31 ½ in. (80 cm.) Height without base 21 ¾ in. (55.1 cm.) Conceived 1928 cast 1932; unique Christie s New York May 15, 2018 $71,000,000 (record for artist) Previous - $57,367,500, La muse endormie, May 2017

20 Fernand Léger Contraste de formes Signed and dated F. Léger (1913) (on the reverse) Oil on burlap 36 3/8 x 28 7/8 in. (92.4 x 73.2 cm.) $70,062,496 (record for artist) Christie s, New York November 13, 2017 Previous - $39,241,000 La femme en bleu ( ) Sotheby s, May 7, 2008

21 Market Lacks Transparency Extremely limited information on sales by: Galleries Advisors Private transaction Online sales Widespread use of Non-Disclosure Agreements prohibit sharing of scientific research and results of forensic examinations Modern science is based on publication and peer review Reluctance to share information on identified forgeries Litigation expenses have forced foundations to end authentication services

22 Lack of Transparency Damages Market Credibility In 2009 I attended a debate at the Rockefeller University in New York City on the proposition the art market is less ethical than the stock market The audience voted the stock market to be more ethical This was after the market crash

23 College Art Association Fills the Void Standards and Guidelines, Authentications and Attributions, October 2009 Recommended practices...art historians render opinions only on artworks within their competence (and) in conjunction with other scholars and conservators who can form a consensus as to the authenticity or attribution of an artwork art historians rely on specialists employing technologically sophisticated analytical techniques for the material analysis of objects Art historical documentation, stylistic connoisseurship and technical or scientific analysis which complement each other and are the three necessary aspects of best practices for authentication and attribution

24 The Court of Arbitration for Art A judicial body dedicated to resolving disputes privately and efficiently Launched in June 2018 at the Hague, Netherlands Joint venture by the Netherlands Arbitration Institute and the nonprofit Authentication in Art Addresses disputes of art fraud, contracts, restitution, authenticity and ownership Appoints neutral experts in specialist areas

25 Types of Appraisals Received by AXA Art Replacement (insurance) Fair Market Value (estate, donations) Fair Market Value (used to collateralize loan) Loss of Value Exhibition Loans

26 Professional Appraisals Statement of purpose and objective of appraisal, disclaimers and assumptions Full description of each item: Artist or maker Title Dimension Media Year of execution Edition size where applicable (IRS) information on frame and back of canvas Clear image of work

27 Professional Appraisals Inspection of work Condition Provenance Exhibition history Literature including catalogue raisonné information Relevant comparables establishing valuation conclusion Footnotes with references where relevant Bibliography

28 Valuation Guidelines Do not use the highest value of an auction price for a comparable of an atypical work Use only current sales data not projected future values Be cognizant of what are the considered the artists most desired work or the work that is deemed best Fitz Henry Lane (Fitz Hugh Lane) Monet Picasso Frankenthaler Basquiat Valuation based on the inherent quality of the item Importance of looking carefully at the actual work of art

29 Approval Process - The Underwriter UW receives application and appraisal from broker UW examines loss history, previous insurance, information about location of collection, safety of collection, previous losses, any bankruptcies of the client When info not complete, asks broker for additional information Appraisal and other collection info sent to art expert when submission is verified and required documents received

30 Approval Process - The Art Expert Review collection and collector Review completeness of information Review provenance Review title Authentication Is catalogue raisonné information cited If no catalogue raisonné or not included, what is source Are comparables appropriate Is valuation consistent with current market

31 Approval Process - The Art Expert Has the appraiser physically examined the work Disclose if photograph is basis of appraisal Provide date of photograph Photographs are inherently editorial and may be altered Provide multiple views with relevant details Research and validate provenance and scholarship Final review policy submissions Approve / return for additional information /reject submission

32 Red Flags Require Closer Scrutiny Client in California, broker in Mass, artwork in a vault in Texas Last minute rush No invoices No proof of title Not in catalogue raisonné or in one that is suspect eg. Picasso must be in Zervos Artist in question is one who is known to have many forgeries

33 Red Flags Require Closer Scrutiny Requests for further information ignored or submission sent elsewhere Provenance is suspicious or totally lacking Frequent requests for increases in value with skimpy documentation Items purchased at auction under one artist label and requests for insurance with another Moral Hazard A term used by underwriters to describe a subjective hazard that tends to increase the risk of loss

34 By creating your appraisals to the highest standards you provide value to stakeholders and integrity to the marketplace.

35 Authentication: A key component of appraisals Establish object is an autograph work Distinguish between work by the artist s hand created in the artist s workshop under his supervision in the circle of by a follower in the manner of created later Authentication is a key factor in establishing the market value of an artwork Poor or inaccurate authentications affect all stakeholders by undermining the credibility of the market

36 Authentication Approaches Connoisseurship Art historical documentation Scientific and technical analysis

37 Connoisseurship The interpretation of an artist s unique stylistic characteristics based on an in depth knowledge of the artist s entire output. Careful examination of object in raking light The intuitive component is what happens during the first few seconds that an expert stands in front of a painting. Rachel Kaminsky, Thwaytes v Sotheby s, 2015, 83 Malcolm Gladwell, Blink The Power of Thinking Without Thinking, 2005

38 Bernard Berenson ( ) The Connoisseur Familiar with the object Insightful stylistic analysis Photographic memory Large network of scholars, collectors, institutions and dealers David Levine, Bernard Berenson, Graphite on paper, 1966

39 Scholarship and Art Historical Documentation Information in Catalogues Raisonnés Contemporary biographies Archival documentation Inclusion in historical inventories Transaction documents Provenance documents

40 Scientific and Technical Analysis Forensic testing Pigments Support Binding material Examination in nonvisible wavelengths Infrared X-ray Ultraviolet

41 Scientific and Technical Analysis Dendrochronology Establish date of wooden objects or components Carbon 14 Tests date ranges of organic materials Thermo luminescence Provides dates for certain types of inorganic materials

42 Authentication Authentication affects value of object Authentication is predicated on appropriate due diligence Connoisseurship Scholarship Forensic science Three examples Leonardo, Profile portrait of young woman Knoedler, forgeries by Pei-Shen Qian Caravaggio, Cardsharps and Sotheby s

43 Case Study - Profile Head of Young Woman Black, red and white chalks with ink and gouache on velum laid down on oak Dimension: 13 x 9 Date: in dispute Literature: ARTnews January 2010 The Art Newspaper February 2010 New Yorker July 2010

44 Case Study - Connoisseurs/Scholars Disagree Profile Head of Young Woman - Leonardo (?) Scientific analysis inconclusive or incomplete No documentation earlier than 1997 Multiple attributions

45 Case Study - Profile Head of Young Woman Attributed by first documented owner, Giannino Marchino, to Domenico Ghirlandajo Christie s January 30 lot 402 attributed to early 19 th century artist of German School purchased by Kate Ganz for $21, Private sale to Peter Silverman for less than $25, Silverman sent drawing to Swiss Federal Institute of Technology for radiocarbon dating Test results date vellum to Sent to Martin Kemp after research and examination attributes drawing to Leonardo and renames it La Bella Principessa

46 Case Study - Profile Head of Young Woman Support attribution to Leonardo: Peter Silverman Lumiere Technology Martin Kemp Peter Paul Biro Nicholas Turner Alessandro Vezzosi Mina Gregori Carlo Pedretti

47 Case Study - Profile Head of Young Woman Martin Kemp identified the drawing as a missing sheet from a 15th-century volume linked to Leonardo's great patron, the Duke of Milan, Ludovico Sforza.

48 Case Study - Profile Head of Young Woman Do not support attribution to Leonardo: Everett Fahy Pietro Marani Martin Clayton Klaus Schroeder Carmen Bambach Nicholas Penny Tom Hoving

49 Compared to Authenticated Leonardo Drawing Leonardo, Drawing Profile of Young Woman c , Windsor Castle (left)

50 Compared to Authenticated Leonardo Drawing Leonardo profile drawing of Isabelle d Este, Louvre Museum

51 Alternate Attribution Julius Schnorr von Carolsfeld ( ) Nazarene Brotherhood of Painters Attribution by Fred Kline, Santa Fe, New Mexico

52 Alternate Attribution - Comparison Julius Schnorr von Carolsfeld

53 The Controversy Continues November 30, 2015 Artnet reported British forger, Shaun Greenhaigh, claims authorship of drawing No definitive attribution at this time If Leonardo attribution stands new valuation could reach $100,000,000

54 Case Study - Forgeries and Due Diligence Knoedler Gallery and its Clients Due diligence is an obligation imposed on an individual requiring the exercise of a reasonable standard of care while performing professional duties. Did the gallery and its director exercise due diligence selling works not in catalogues raisonnés and with questionable provenance? What due diligence is appropriate for buyers of works of art?

55 Case Study - Forgeries and Due Diligence Glafira Rosales Scheme Glafira Rosales sold 40 paintings to Knoedler Gallery & 23 paintings to Julian Weissman an independent dealer. The paintings initially were represented to belong to an anonymous Mexican collector. Ms. Rosales later claimed the paintings were part of the David Herbert collection offered for sale following his death.

56 Case Study - Forgeries and Due Diligence The 63 paintings were represented to be works of well-known post-war artists including: Willem de Kooning Franz Klein Lee Krasner Jackson Pollock Barnett Newman Robert Motherwell Sam Francis Richard Diebenkorn Mark Rothko Clifford Still

57 Case Study - Forgeries and Due Diligence Pierre Lagrange, a London hedge fund millionaire, sent an to the Knoedler Gallery disclosing the results of forensic tests of a Jackson Pollock painting, Untitled, Mr. Lagrange had purchased the painting from the Knoedler Gallery in 2007 for $17,000,000. Forensic tests had revealed that the drip painting contained yellow pigment, YP174, not commercially available until 1970, 14 years after the death of the artist. James Martin of Orion Analytical, LLC, conducted the tests.

58 Case Study - Forgeries and Due Diligence There had been questions raised previously about other paintings consigned to the Knoedler Gallery by Ms. Rosales Jack Levy purchased the Jackson Pollock painting, Untitled, Mr. Levy made his purchase contingent on vetting by IFAR. In late 2003 IFAR said they could not be certain the painting was by Pollock. IFAR concluded despite extensive research they could not substantiate any of the limited provenance provided or confirm that the paint samples tested contained only pigments in existence during the artist s lifetime.

59 Falsely Attributed to Jackson Pollock Sold to Pierre Lagrange Untitled, 1950 Oil, enamel, and aluminum paint on masonite mounted on wood 15 x 28 ½ inches Signed lower right

60 Falsely Attributed to Jackson Pollock Sold to Jack Levy Untitled, 1949 Oil and enamel on canvas mounted on masonite 18 x 23 inches Signed and dated lower center

61 Case Study - Forgeries and Due Diligence 2005 Eugene Thaw, the leading Pollock expert, doubted the authenticity of two Rosales Pollocks Jack Flam, President of Daedalus Foundation, became uneasy by the growing number of previously unknown works being attributed to Robert Motherwell. Flam found that the Richard Diebenkorn estate, Willem de Kooning Foundation, the Barnet Newman Foundation had similar concerns.

62 Case Study - Forgeries and Due Diligence 2008 Three Barnett Newman experts concurred that a Newman from Knoedler on display at the Beyeler Foundation in Switzerland was fake The Gallery was under investigation by FBI. December 2011 Knoedler Gallery closed with lawsuits pending.

63 Case Study - Forgeries and Due Diligence September 2013 US Attorney announced Glafira Rosales accepted guilty plea to conspiracy to sell fakes, money laundering and several tax violations. Spanish art dealer Jose Carlos Bergantinos Diaz recruited artist Pei-Shen Qian to create the forgeries. Mr. Bergantinos Diaz prepared canvases and added the artist signatures. He was arrested in Seville, Spain with his brother. Both brothers are being held in Spain awaiting extradition to the United States. Artist Pei-Shen Qian is presumed to be living in China and has not been not detained. Qian recently had a show in China of his original work.

64 Knoedler Lessons Learned Failures in Due Diligence Failure to pursue obvious red flags Unknown seller No paper trail for any paintings All works new to market Failure to reject improbable provenance Works offered at below market value Suspect method of payment Discounted IFAR findings

65 Forgeries and Misattributions (There are) estimates that up to one third of artworks circulating on the market are forgeries Nina Neuhaus, Art Authentication, 2014, p.59, n.1. Famous Forgers of the 20 th & 21 st centuries include: Han van Meegeren ( ) Elmyr de Hory ( ) Eric Hebborn ( ) John Myatt and John Drew Mark Landis (b.1955) Ely Sakhai (b.1952) John Re (b.1960) Wolfgang Beltracchi / (Wolfgang Fischer (b.1951) Pei-Shen Qian (.b1940) Shaun Greenhaigh (.b 1950)

66 The New York Times 2018

67 Correction by Conservation Rembrandt van Rijn Study of an elderly woman in a white cap oil on panel Circa 1640 H 21 in.; W 14.8 in. / H 53.3 cm.; W 37.5 cm. Sotheby's New York: Thursday, January 26, 2006,Lot Estimate 3,000,000-4,000,000 USD Sold For 4,272,000 USD Premium

68 Case Study - Sotheby s, Caravaggio & Due Diligence Mr. Lancelot Thwaytes v Sotheby s High Court of Justice, Chancery Division hearings October-November 2014 Lancelot William Thwaytes sold The Cardsharps at Sotheby's in 2006 for 46,000 after being advised it was by a follower of the Caravaggio.

69 Case Study - Sotheby s, Caravaggio & Due Diligence Mr Thwaytes attempted to sue Sotheby's of London for giving him negligent advice after the new owner, Sir Denis Mahon, a Caravaggio scholar, announced that the painting was autograph. Following the death of Sir Denis the painting went on loan to the Museum of the order of St. John at Clerkenwell in London. It is currently insured for over 10 million pounds.

70 Case Study - Sotheby s, Caravaggio & Due Diligence Judgment handed down by Mrs. Justice Rose 16 January, 2015 The court ruled that Sotheby s fulfilled its due diligence obligations denying damages to Mr. Thwaytes and ordering the plaintiff to pay 1,800,000 of Sotheby s 3,750,000 in litigation expenses within 14 days of the ruling.

71 Case Study - Sotheby s, Caravaggio & Due Diligence The decision was based on the court s determination that Sotheby s had conducted their normal standard of care in evaluating the work, relying on the connoisseurship and expertise of their highly qualified specialists in the Old Masters department, who reasonably come to the view that the quality of the painting was not sufficiently high to indicate that it might be by Caravaggio.

72 Case Study - Sotheby s, Caravaggio & Due Diligence Caravaggio ( ) The Cardsharps,1595 The Kimbell Museum 37 1/16 in. x 51 9/16 in. Caravaggio ( ) The Cardsharps,1595 sold by Lancelot William Thwaytes 42 1/16 in. x 52 in.

73 Case Study - Sotheby s, Caravaggio & Due Diligence Caravaggio ( ) The Cardsharps,1595 Oil on canvas 37 1/16 x 51 9/16 in.

74 Case Study - Sotheby s, Caravaggio & Due Diligence sold by Lancelot William Thwaytes This painting auctioned by Sotheby's in 2006 was attributed to a follower of Caravaggio in. x 52 in.

75 Authentication and the Appraiser USPAP does not mention authentication IRS publication 561, Determining the value of donated property P.4 Authenticity The authenticity of the donated work must be determined by the appraiser Reference John R. Cahill Esq. Understanding Due Diligence, Including Matters of Authenticity, Appraising Art: The Definitive Guide to Apprising the fine and Decorative Arts, New York, nd, pp

76 USPAP Standard 7-1 In developing a personal property appraisal, an appraiser must: (a) be aware of, understand, and correctly employ those recognized methods and techniques that are necessary to produce a credible appraisal (b) not commit a substantial error or omission or commission that significantly affects an appraisal (c) not render appraisal services in a careless of negligent manner, such as by making a series of errors that, although individually might not significantly affect the results of an appraisal, in the aggregate affect the credibility of those results

77 3 Flawed and 1 Distinguished Appraisals Case A Case B Case C Leslie Koot, A Portrait by Modigliani

78 Leslie Koot, A Portrait by Modigliani Excerpt Authentication - Science, Scholarship and Sleuthing, AXA Art, privately published, March Problem: to establish the value of a portrait by Modigliani not mentioned in the Ceroni Catalogue Raisonné Solution: Diligent Scholarship, Provenance Research and Connoisseurship As a result Ms. Koot was invited to join the advisory board of the Modigliani Project headed by noted Modigliani specialist Dr. Kenneth Wayne

79 Final Thoughts Key components of appraisals for insurance coverage physical examination of works confirmation of provenance credible authentication Due Diligence protects all stakeholders in the fine art market Appraisers, scholars, authenticators and forensic scientists are crucial to maintaining confidence in the market

80 Appraising Appraisals in an Evolving Art Market Vivian L. Ebersman AXA Art Americas Corporation October 10, 2018 Thank You