Art World Fraud

ART WORLD FRAUD

In 2004, Ely Sakhai pled guilty to fraud charges, having pocketed more than $25 million with his scam, run out of his New York City galleries. Sakhai bought originals, such as Marc Chagall's "La Nappe Mauve" at a Christie's London auction. Three years later, he sold a forgery for $200,000 more than he paid for the original and five years after that sold the original at Christie's in New York for $340,000.
In 2000, San Francisco art broker Nancy Chaffin pled guilty to charges of swindling wealthy friends, including the granddaughter of brokerage founder Dean Witter, out of hundreds of thousands of dollars in phony art deals, in which buyers would pay for art or antiques that she never delivered. Chaffin was convicted of grand theft and sentenced to a year in prison and 10 years probation.
In 1998, New York City art dealer James J. Holmes was accused of keeping the proceeds from the sale of others' artwork. He pled guilty and was sentenced to nearly four years in prison and ordered to pay $400,000 in restitution.
In December, 2006, a San Francisco prosecutor charged art dealers Nancy and Thomas Wandlass with felony grand theft, fraud and conspiracy in conjunction with consignment deals. The case is still pending and the Wandlasses have pleaded not guilty to the charges.

In the cases above, our firm did a quick background search and discovered that three of the four individuals had judgments or liens on their records prior to their arrests that might have been "red flags" for the people who dealt with them. An in-depth background investigation would have no doubt revealed much more.

Unfortunately, the art world can be a magnet for cheats, robbers and unethical hustlers of every type from clumsy amateurs to master thieves and millionaire entrepreneurs. A French insurance company estimates that the illicit trade in art, including forgeries and other scams, totals about $10 billion a year. What can reputable art dealers and collectors do to protect themselves from con artists who prey upon those who deal and invest in fine art? Even though an individual selling or working in the Art World may appear to be knowledgeable, successful and charming, we believe caution is the best policy. As private investigators who have long had a personal connection to the art world, we recommend the following precautions:

Perform background checks on any dealer or broker you have never worked with before entering into a consignment or any other type of services agreement.
Perform in-depth background checks on dealers or brokers you have never done business with who have art work you wish to acquire for your clients.
Use the Art Loss Register to minimize the legal and financial risks associated with stolen art.

For the cost of a thorough background check, one can avoid losing much, much more as a victim of either a con artist or someone who can't deliver what they promise.

Today, significant steps are being made within law enforcement and the private sector to attempt to solve art crimes after they have been committed. We applaud those efforts. But we believe that the key to stemming the tide of fraud in the art world is preventing fraud in the first place.

Our firm can provide background checks on individuals and companies that can help dealers and collectors, as well as artists avoid doing business with individuals who may not be trustworthy.