From the WSJ Opinion Archives
LEISURE & ARTS
Artless Dodgers
Everyone pays for dealers' tax scams.
NEW YORK--Scandals sell newspapers. So do the doings of the rich. As for art, many are baffled by it, and most especially so when it becomes very expensive. Hans Christian Andersen's fable about the emperor who wears no clothes is still widely believed to apply to much of what is known as "the art world." When you add to this heady brew accusations of wrongdoing, it becomes the irresistible stuff of rumor, gossip and juicy copy. It also draws the attention of prosecutors, who are always interested in cases that have the potential of career-building headlines.
That is one set of reasons why the current sales-tax scandals involving millionaire collectors shipping empty crates to out-of-state addresses have gotten and will continue to get public attention beyond their actual merits. Earlier this month, ImClone Systems Inc. founder Samuel Waksal pleaded guilty to fraud and conspiracy in connection with evading tax on $15 million of contemporary art he had purchased from Manhattan dealer Larry Gagosian. Ex-Tyco International Ltd. CEO L. Dennis Kozlowski was indicted on a similar charge last year.
And last week it was reported that the government is suing Mr. Gagosian and a group of investors in federal court in New York for $26.5 million, accusing them of trading artworks through a holding company set up to avoid paying sales taxes. Just as the exposure of price fixing by Christie's and Sotheby's drew media attention far beyond its financial importance, so these events are receiving and will continue to receive intense public attention. Had either the auction houses or Mr. Gagosian dealt in plumbing supplies rather than art, their stories might never have made it to the 6 o'clock news.
To be sure, the art world has its share of dubious characters with questionable ethics. Almost 30 years ago Frank Lloyd, owner of the Marlborough Gallery, which handled the estate of Abstract Expressionist painter Mark Rothko, was convicted of enriching himself at the expense of Rothko's heirs.
The tragedy of such actions is that in the end they affect everybody. Art dealing is a business based on trust. People who buy and sell art--whether or not they consider themselves collectors--must have confidence in the person they are doing business with. When one dealer is seen to be dishonest, the public is likely to conclude that most dealers are shady, just as the recent scandals surrounding Enron, Tyco and a few other corporations have affected investor confidence across the board.
In point of fact, the art world can pride itself on the enormous number of honest, dedicated individuals who devote their lives to art for art's sake. They can be found among artists and critics, teachers and curators, and yes, they predominate among dealers.
Outsiders tend to think selling art involves nothing more than trading high-end objects for excessive amounts of money. But they forget that gallery owners continually take risks with unknown, untried talent, and develop artists' careers, as did, for example, Leo Castelli and Ileana Sonnabend when they first showed the now famous Pop artists in the late 1950s. Sidney Janis, Pierre Matisse and their colleagues introduced the European modern masters during the postwar years and simultaneously sponsored the rising American Abstract Expressionists. In a tradition going back to the grand Old Master dealers such as Lord Duveen at the beginning of the 20th century to today's dealers in contemporary art, they continue to educate generations of collectors and help American museums build their collections. In the process they have made these institutions the envy of the world.
As for the current scandal, the phenomenon of shipping empty crates to evade sales taxes is an old one. I recall a similar scandal that swept through the world of furriers, jewelers and art galleries some decades ago. It is a problem ethical art dealers are confronted with when intransigent, bullying buyers simply refuse to pay the tax and insist on artworks or even empty crates being shipped out of state. Many a time an art dealer finds himself faced with a choice between saying no to the willful collector and losing that sale to a another dealer or going along and having to absorb the sales tax himself, thus cutting deeply into the already modest profit.
In my own experience as a dealer, the only argument that could be successfully raised in response to such importuning was to point out that that sort of dishonesty cuts both ways: Someone who would bilk the government can hardly be expected to deal honorably with his clients. I am reminded of the 18th-century French writer Charles de Montesquieu who notably said that all nations have the governments they deserve. Likewise, it is probably true that all collectors have the art dealers they deserve.
For most in the art world, art is more than a living--it is a calling. Unfortunately, there are a few who see it as a field ripe for the plucking. It is they who provide the scandal and the headlines when they are caught. But it is everyone who pays the price.
Mr. Emmerich is a retired dealer and past president of the Art Dealers Association of America.
