Art Collectors, Beware: Even Steve Martin Got Sold an $850,000 Forgery
Legal battles, flipping and fakes roil the art world
This story first appeared in the Dec. 12 issue of The Hollywood Reporter magazine.
The art market is soaring at an epic rate, with last year's record auctions propelling contemporary art sales to $2 billion. Yet there's little transactional transparency or external scrutiny. "A lot about it is not regulated to the extent that various financial markets are," says Thomas Galbraith, managing director of auctions at online site Paddle 8. Adds Todd Levin, director of Levin Art Group, a private advisory company: "It's the Wild West. This is precisely why people hire art advisers — to offer objective expertise and operate solely on behalf of their own best interests." What collectors need to know:
1. Hot artists whose work is getting flipped fast can cool rapidly
It is not uncommon to see artwork made two or three years ago hit the auction block. Emblematic of this trend is artist Oscar Murillo, whose collectors include Orlando Bloom. Last year, Murillo's Untitled Drawings off the Wall — bought in 2011 for $7,000 — sold for $401,000 at a Phillips auction. Still, "just because a young artist is hot doesn't mean their careers are sustained in perpetuity," cautions Michael Plummer, a principal in art advisory company Artvest Partners. A painting by 20-something art darling Lucien Smith in 2013 went for nearly $400,000, but this year, another Smith failed to find a bidder at Phillips (it later was sold privately).
2. Resale royalties may become a fact of life
Two years ago, painter Mark Grotjahn settled a lawsuit with former UPN president Dean Valentine, one of his biggest patrons, for $153,255 over resale royalties. The suit stemmed from the rarely enforced California Resale Royalty Act that entitles an artist to a 5 percent cut for work sold for more than $1,000. Meanwhile, artists Chuck Close and Laddie John Dill, together with the estate of sculptor Robert Graham (whose widow is Anjelica Huston), spearheaded a class action suit against Sotheby's, Christie's and eBay over the act. A judge found the California law violated the U.S. Constitution, as it sought to govern interstate commerce, but an appeals court is scheduled to rehear the case Dec. 15. Further, a federal resale royalty bill is currently before Congress.
3. Authentication can be elusive
In February, a group of Keith Haring collectors sued the Keith Haring Foundation for $40 million after it rejected the authenticity of more than 60 works the owners said were genuine. Two years ago, the Andy Warhol Art Authentication Board shut down amid similar tumult. No longer willing to risk facing lawsuits, several artists' foundations (Basquiat's and Roy Lichtenstein's among them) have disbanded their authentication committees. Lack of authentication can mean the death knell for a work without a rock-solid provenance. "It makes some works virtually unsalable," says Plummer.
4. Forgeries can fool even veterans
Even the most discerning collector can get conned. In 2004, actor Steve Martin purchased a 1915 Heinrich Campendonk from a Paris gallery for $850,000 and had an expert authenticate it. After Martin sold it two years later (at a loss), the painting was discovered to be the work of a massive forgery ring that pulled in $48 million off fake Max Ernsts and others. As Martin told The New York Times, "The fakers were quite clever in that they gave it a long provenance and they faked labels." Advises Plummer, "One way collectors can protect themselves is to work with a dealer they trust that has a track record."