Thursday, March 27, 2008

'Due Diligence' is just a "ruse"

How can we trust a 'Due Diligence' database company that dissembles when approached by a client to check the provenance of a work of art?

The UK-based antiques trade newspaper, Antiques Trade Gazette (ATG), recently reported the case of art dealer Michael Marks, who has been ordered by a judge to return to their rightful owner two paintings by the late Indian modernist Francis Newton Souza (1924-2002), stolen some years ago and which Mr Marks believed he had subsequently bought in good faith through trade sources.

High Court judge Mr Justice Tugenhadt ruled that Mr Marks had failed to keep a reliable audit trail for the works Head Of A Portuguese Navigator and Chalice With Host by Souza and ruled that they should therefore be returned to Dubai-based collector Aziz Kurtha from whom they were originally stolen.

Having bought the works, and intending to sell them on at a tidy profit, Mr Marks checked with the Art Loss Register to ensure that the works were not listed as stolen. This process is known as 'Due Diligence', although what subsequently occurred explains why that term has become something of a laughable concept in the art trade and beyond. According to the ATG, Mr Marks paid a search fee to the Art Loss Register in order to check the title of the works and "was told there was no problem." The ATG article continues:

"But the High Court revealed that the ALR knew the works to be the subject of a claim by Dr Kurtha and deliberately misled Mr Marks. ALR chairman Julian Radcliffe explained to Antiques Trade Gazette that this was part of a ruse to keep lines of communication open with Mr Marks. The judgment stated that Mr Radcliffe went as far as telling Mr Marks that he had a client who would be interested in buying the paintings from him. Mr Radcliffe further explained that this was all part of bid to recover the works by persuading Mr Marks to bring them into the ALR offices."

A "ruse"? Is this, perhaps, a variation of the ruse that brought the stolen Bakwin Cézanne Bouilloire et fruits (above left) to market in 1999 (US$29.3m/£18.1m at Sotheby's, of which the ALR took a not insignificant percentage)?

On successful recovery of a work, the ALR charges a fee based on the current value of the items at the time of recovery — 20% plus VAT for items worth less than £50,000 ($100,000), and 15% plus VAT for items in excess of £50,000 ($100,000). Souza's record price at auction (at India's Saffronart in 2005) is $1.4m, (or around £700,000) for Lovers (above right), with two further works having sold at Christie's and Sotheby's New York in 2006 for $1.3m.

Am I missing something here, or is there not a conflict of interest where a company offering 'Due Diligence' checks also stands to profit when the recovered item comes back to market (which is the most efficient method of price discovery, as the 1999 sale of the Cézanne made clear.) The fact that Mr Justice Tugenhadt admonished the ALR for being economical with the actualité, perhaps confirms that all is not right with this process.

Isn't it time the auction houses and insurance companies that support such dubious instruments of 'art recovery' woke up to the fact that "ruses" of this kind do nothing to improve the public relations profile of the art trade? With prices in the art market at stratospheric levels and antiquities looting having a catastrophic effect on the future of archaeology, the need for integrity among trade-funded Due Diligence organisations is more critical than ever.

If a dealer cannot lodge a bona fide inquiry with the leading provenance-checking database (for a fee!) without running the risk of having the wool pulled over his eyes, what future for the already endangered concept of Due Diligence? But then with everyone, including the art recovery companies standing to profit from art theft in some way when stolen works finally make it to market, such revelations are perhaps hardly surprising.


David Gill said...

Who are the main shareholders for the Art Loss Register (ALR)?

Tom Flynn said...

You'd need to consult Companies House for up to date information on that question but it used to be Aon, AXA Art (previously AXA Nordstern), 3i, Sotheby's, Christie's, Bonhams, IFAR (International Foundation for Art Research), BADA (British Antique Dealers' Association) and perhaps one or two others. I gather from my contacts that 3i and Aon both sold their shares ssome years ago to Julian Radcliffe, whose own stake I believe gives him the casting boardroom vote.
Hope this helps

tksalvo said...

Julian Radcliffe deserves his OBE, and the ALR is doing a sterling job. After all, as far as I am aware, staff at the ALR come and go, but none has ever leaked the highly confidential information they possess resulting in crims benefitting from the ALR's activities. If the ALR legally make money from rewards, so be it, and if they need to be watched carefully by dealers - well then they join the ranks of luminaries of the trade like Sotheby's and Christie's who will seize and impound suspect consignments and hand them all over to the police.

It seems to me there are a number of issues which need resolving.
1. The law on rewards: why was Michael Marks not given a share of the reward money. Our experience has been that where there are rewards duplicity inevitably creeps in. Solution: ditch rewards.
2. If we do not want the ALR to do what it does, who should do it? Personally, I would be more worried if Julian was not in charge than if he is (unless a former MI6 man took over). The ALR is an organisation that, no matter in whose ownership it was placed, could very easily and quickly go off the rails. Julian is very open friendly and focused but also unlikely to change his practices - the ALR model could be very hard to change. Solution: have more agencies storing theft info and charging a flat fee, like Trace (now abandoned) used to do.
3. The storage and circulation of information about theft of art and antiques is sometimes open and acts as a public deterrent to crime, and sometimes it is restricted for operational reasons normally by the police. How can dealers in secondhand goods know whether something is stolen of they cannot access information about stolen goods? Solution: make every theft database open.

Sorry to drivel on. I will stop now, but thanks to you Marks and the ATG for bringing this into the open.

Tom Flynn said...

Thanks Thornton,
Can't say I agree with everything you say, but clearly there's still room for positive change.

Ken Bouche said...

First, I just ran across your blog and at the risk of being a sycophant, it is great, nice job. Sorry for the late post on this topic, but I just wanted to make you aware of a free, open database of stolen art, that covers both the UK and U.S. In the spirit of full disclosure, I am a VP with Trace and while I wont jump into the ALR bashing, the problems outlined in your blog don’t and can’t happen with Trace. We are not in the recovery business, we do not collect fees, rewards, or bounties for the identification (or recovery) of stolen art. We simply identify it to the searcher and arm them with the information needed to make a good decision. We will notify the police agency that entered the item that was identified to help them do there job of catching the thief. You can register and search Trace one item at a time for free, or you can subscribe and have searched done in an automated fashion, verified by our experts, like many of the UK’s finer auction houses already do. Additionally, at (Trace’s parent company) collectors can create free on-line portfolios of their art, antiques, and property. makes it easy to store this info for free online. If the worst happens, you’ll have exactly what police and insurance need. Again, thanks for the great blog.

Ken Bouche