Time and Tide Make Us Mercenaries All

Does Stolen Property Ruin Everything?

By MICHAEL MCCULLOUGH          January 10, 2018

It is easy enough for me to say that theft continues to be a problem for those who buy and sell artwork. One might question the art market’s historical indifference to the victims of theft, but the more useful question would be, Is there a better way to prevent the trade in stolen artwork?

New York law on the topic is both established and chaotic. I choose an exemplary quotation from a legal brief filed by the New York District Attorney’s Office, or “DANY” for short, in a recent case:

“New York law prevents a purchaser of any kind from acquiring good title from a thief…. a good faith purchaser of an artwork has the burden of proving that the work was not stolen.”

That is, by and large, a good summary of the law, though it is by no means an exhaustive one.

In October of last year, DANY obtained a search warrant to seize a Persian Limestone Relief that once resided in Persepolis, an ancient city that was the ceremonial capital of the Achaemenid Empire, currently situated in Iran. Leaving aside any tentative judgments about New York State protecting the property interests of the Iranian Government, the warrant was based upon criminal laws that allow a court to hold property thought to be stolen until a criminal case is filed against a person related to the theft. Oddly, DANY alleged no improper conduct against the owners of the Relief and no criminal charges were expected to be brought against anyone connected to the Relief. Why, then, was the artwork seized?

The simple facts of the case are these. The Relief was donated to the Montreal Museum of Fine Art in 1951 and was on display there until it was stolen from the museum in September 2011. The Relief was insured by AXA and the museum was paid for its loss. The Royal Canadian Mounted Police recovered the Relief in Edmonton, Canada- a location not well known for the harboring of stolen artwork- and eventually returned it to the museum in January 2014. Thereafter, AXA took possession of the Relief, as it was then the owner after having paid the insurance claim, and sold it to Rupert Wace Ancient Art in London, England. Wace then sold a half interest in the sculpture to Sam Fogg. In October 2017, Wace shipped the Relief from London to New York for display at the TEFAF NY art fair. Federal law required Wace to obtain a license from the U.S. Office of Foreign Assets Control because of the US trade embargo against Iran, subject to exception for fine art, which he did obtain.

On October 27, 2017, Matthew Bogdanos of DANY visited the TEFAF NY fair with a warrant and three agents to seize the Relief because it was allegedly stolen from Persepolis in the mid-1930’s and was to be returned to Iran. True, an eighty-year-old theft sounds like a cold case, but the stolen property laws, in the first instance, don’t discriminate against old thefts. Think of the Nazi-looting between 1933-1945 and the legitimate need for claimants to retrieve their property despite the passage of time.

And New York law would have no problem with the Government of Iran bringing a lawsuit in the New York courts to recover its property. The question here was whether DANY could use the criminal laws to seize the Relief and return it to Iran. The owners of the Relief thought not. AXA, Wace, and Fogg filed papers with the court arguing that, absent the filing of criminal charges, the court should retain possession of the Relief until the question of its ownership could be resolved in a civil lawsuit that AXA had filed in Montreal days after the seizure.

Not surprising, the judge agreed with the owners. Judge Jackson said that the court had no power to allow DANY to return the Relief to Iran because there was no criminal prosecution of the owners. In consequence of this, DANY was ordered to retain custody of the Relief pending a determination its rightful ownership in the Montreal court, in which AXA is arguing, among other things, there is no proof that the Relief was stolen from Iran.

Going forward, DANY cannot seize and forfeit allegedly stolen artwork in the absence of a criminal prosecution, a ruling that invites future declaratory judgment title actions against foreign governments where the is no criminal intent of the current owners.

My firm made similar arguments in another case brought last year against DANY regarding the seizure of a Marble Archaic Bull’s Head that was allegedly stolen from Government of Lebanon. The Bull’s Head was purchased by our clients, William and Lynda Beierwaltes from Robyn Symes in 1996. Michael Steinhardt purchased the Bull’s Head from the Beierwalteses in 2010 and, shortly thereafter, loaned it to the Metropolitan Museum of Art. Here, one would expect a similar outcome to the Relief, but for the fact that DANY alleged that the Beierwalteses were in the business of buying and selling antiquities, an important allegation because New York law creates a presumption that people in the business of buying, selling, or dealing in property can be charged with criminal possession of stolen property “if [he or she] obtained it without having ascertained by reasonable inquiry that the person from whom he [or she] obtained it had a legal right to possess it.” This charge was leveled against the Beierwalteses because their bankruptcy attorney- in an obscure 2014 bankruptcy disclosure statement- said that the Beierwalteses “primary business for much of their adult lives has been the acquisition, management and sale of an extremely extensive and valuable body of art works … [in] … a category of art known as antiquities.” Deterred, the Beierwalteses dropped their claim to the Bull’s Head.

This criminal presumption means that anyone in the business of buying and selling artwork can be charged with a crime and their artwork can be seized and forfeited, if they did not make a “reasonable inquiry” of the seller’s lawful ownership of the object. In New York, at least, a person in the art business is required to make a reasonable inquiry into the ownership history of the artwork being acquired. While the law does not define “reasonable inquiry” and New York courts haven’t addressed the definition in the context of the sale of artwork, courts have done so in other fields: business owners have failed to make a reasonable inquiry by acquiring goods under suspicious circumstances, by failing to inquire as to the ownership of the property being purchased, and by failing to create internal documentation of the purchases.

I revert to my original question to say that while the duty to inquiry about the ownership of an artwork is a sensible one, some thought should be given to what amounts to a reasonable response. Put another way, there are various degrees in quality of information and sources in the international art market; we should be working to create a regulatory scheme to establish what is reasonable and what is not. Even more important is the need to provide art buyers and sellers a platform to vet undocumented artwork. An owner’s publication of an undocumented artwork in a public database should gain the owner some repose against claims after a sufficient period of public reflection, say seven years or so. Such publication should also remedy the owner’s failure to make a reasonable inquiry at the time of acquisition. Otherwise, there is great incentive for us to all become mercenaries without any regard to the loss of money, livelihood, and freedom of those who buy and sell artwork for a living.

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