Confidence Killers?

Mark Rothko Stuart Davis Warhols Send Sotheby’s Soaring Busa Paintings Pilfered from Son’s Home Shattering Stereotypes From Raging Bulls to Miserable Drips New York Sales Preview Rothko Returns to Russia

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After his New York gallery collapsed, in 2007, Larry Salander claimed that his troubles were rooted in noble intentions. Accused of shopping artworks he apparently had no right to sell, in some cases offering the same piece to multiple people, and never compensating the real owners, the dealer presented his downfall as the consequence of an ambitious campaign to build a market for historically important artists — a high-minded reaction to what he purportedly saw as the manipulated, overheated contemporary-art market. "Even if all the allegations were true — and they aren’t — I still did 579 shows that I’m very proud of," he says.

Salander may be the most recent, but he’s certainly not the only elite dealer to sully his reputation with actions that appeared to be fueled by avarice. The 1970s saw one of the art world’s longest and most complex criminal trials, during which the illegal dealings of a major New York dealer were exposed. Frank Lloyd, the now-deceased founder of the Marlborough Gallery, and the three executors of the Mark Rothko estate were accused of obtaining hundreds of the artist’s paintings for much less than their market value and under terms disadvantageous to the estate. Equally notorious was the illegal price-fixing deal between Sotheby’s and Christie’s in the 1990s. Sotheby’s CEO Diana Brooks struck a deal with the government and agreed to testify against A. Alfred Taubman, the former Sotheby’s chairman, who she and Christopher Davidge accused of conspiring with Sir Anthony Tennant, former chairman of Christie’s, to fix sellers’ commissions.

In 2001, the private dealer Michel Cohen pulled off what was then dubbed the biggest art fraud ever when he allegedly failed to deliver either paintings or proceeds from transactions he brokered to the parties involved, including the collector-dealer Ernst Beyeler, the respected gallerists William Beadleston and Richard Gray and Sotheby’s. The charming Frenchman is thought to be hiding out in Rio, still owing nearly $100 million. More recently, the antiques market has been reeling from the news that one of its most respected names, John Hobbs, has been accused by his furniture restorer of selling fakes. The New York Times has also reported that John’s brother, Carlton Hobbs, is also suspected of selling fakes; both have denied the allegations.

But despite all the hand-wringing and calls for increased regulation that appear in the press when scandals are revealed, their impact is often as profound as a case of hiccups. "The way business is done in the art world has not essentially changed. It is still about people, still about trust and still about building relationships," says Michael Findlay, a director of Acquavella Galleries, in New York.

Here are five reasons that the industry’s informal dealings are likely to remain the same.

1. Bernard Madoff makes Larry Salander look small-time.
In October 2007, Salander’s Upper East Side gallery buckled under accusations of fraud, for which, at press time, a grand jury was considering criminal charges. Among those the dealer allegedly burned were Triumph Apparel Corporation chairman Donald Schupak, the actor Robert De Niro and the hedge-fund titan Roy Lennox, who accused him of operating a Ponzi scheme. But for all the news of Salander’s implosion, "the depth of scandal in the art world is nothing compared with that in the financial world," notes Iain Robertson, the head of art-business studies at Sotheby’s Institute of Art. The financial sector has produced a veritable rogues’ gallery, the most recent entrant being the disgraced money manager Bernard Madoff, whose alleged $50 billion scam victimized a number of arts organizations and high-end collectors, including the Miami businessman Norman Braman. In contrast, such malefactions by art-business professionals have been rare. "While dealings in the art world are done for the most part in an extremely informal way, 95 percent of the time there is no problem," says the art-market scholar Olav Velthuis. And if something should go wrong, collectors expect that a gallery is going to make good with them no matter what.