Federal Investigation into the Knoedler aftermath

A work once exhibited as a Jackson Pollock
A work once exhibited as a Jackson Pollock

Last week Federal prosecutors in Manhatten revealed more details of the sad demise of the Knoedler gallery. In particular the work of two Spanish brothers and the forger Pei Shen QianThough Knoedler is not mentioned by name, that must be the gallery referred to in the indictment as “Gallery 1”. The indictment contains a long list of art crimes including: wire fraud, money laundering, conspiracy to defraud the IRS, tax fraud, false statements, and conspiracy to commit wire fraud and money laundering. The indictment was unsealed after two of the men in the indictment were arrested in Spain. As reported in the NYT:

The art dealer, Jose Carlos Bergantiños Diaz, who has been sought for many months, was arrested by the Spanish police on Friday at a luxury hotel in downtown Seville, according to the official, who is with the Spanish Interior Ministry in Madrid. He asked for anonymity because he was not authorized to speak publicly.

Mr. Bergantiños’s brother, Jesus Angel Bergantiños Diaz, was also arrested, according to another person with knowledge of the case, who spoke on the condition of anonymity because no charges have been announced in the case. It was not immediately clear whether the United States will seek his extradition as well, but some $33 million netted from the scheme was transferred to bank accounts in his name in Spain.

The Spanish Interior Ministry official said that Jose Carlos Bergantiños Diaz, who had an anxiety attack after his arrest and was briefly hospitalized, was being held by the police in Seville. But he is likely to be transferred to Madrid in the coming days, the official said, where he will appear before a judge pending an expected extradition request from the United States.

The indictment itself alleges:

By knowingly and falsely claiming that the Fake Works were painted by these famous artists, Jose Carlos Bergantinos Diaz, Jesus Angel Bergantinos Diaz, Qian, and Rosales were able to trick purchasers and prospective purchasers into paying tens of millions of dollars in total for many of the Fake Works which, as the defendants and Rosales well knew, were essentially worthless, as the defendants well knew, the Fake Works were created not by famous artists, but by Qian, with guidance from Jose Carlos Bergantinos Diaz, Jesus Angel Bergantinos Diaz, and Rosales. Jose Carlos Bergantinos Diaz, Jesus Angel Bergantinos Diaz, and Rosales also created and refined at least two false provenances (i.e., historical ownership records) for particular Fake Works in order to dupe purchasers into believing that those Fake Works were painted by particular famous artists, instead of by Qian. The defendants earned more than $33 million from the scheme to create and sell the Fake Works. To conceal the illegal nature and origin of the proceeds from the scheme, Jose Carlos Bergantinos Diaz and Jesus Angel Bergantinos Diaz, the defendants, and Rosales worked together to launder the proceeds by transferring the proceeds through foreign and domestic bank accounts that they controlled. In addition, as set forth below, to increase the amount of proceeds he kept from the unlawful scheme, Jose Carlos Bergantinos Diaz, the defendant, unlawfully impeded and obstructed the Internal Revenue Service (‘IRS’) by hiding millions of dollars in his unlawful income from the IRS and by knowingly failing to report the existence of the foreign bank accounts that he controlled or maintained an interest in, as required by law.

You can fool some of the art market, but not the IRS. The tale of the Knoedler is a sad one, it was a storied gallery that had a hand in creating the collections of countless American art museums. I was reminded of this a couple weekends ago when we visited the MFA Houston’s special exhibition of John Singer Sargent, which brings together the Brooklyn and Boston collections of Sargent’s wartercolors. The Knoedler was able to sell one exhibition wholesale to Brooklyn in 1909 and then to Boston in 1912. One imagines the Knoedler was not using a serial forger in 1909, but it was this storied history which perhaps allowed buyers of art to avoid asking uncomfortable questions. If such a storied gallery can make so many egregious ethical and legal lapses, what about other galleries. How can we trust with absolute certainty the authenticity of any work? One may almost feel like Lord Byron in describing the Palace and Prison on each hand as he stood on the Bridge of Sighs.

John Singer Sargent, The Bridge of Sighs, c. 1903–04, translucent and opaque watercolor with graphite and red-pigmented underdrawing, Brooklyn Museum, purchased by Special Subscription.
John Singer Sargent, The Bridge of Sighs, c. 1903–04, Brooklyn Museum.
  1. United States v. Diaz et al., 14 Crim217, Sealed Indictment  (S.D.N.Y. 2014).
  2. Julia Halperin, Everything You Ever Wanted to Know About the Knoedler Forgery Debacle But Were Afraid to Ask, Artinfo (2011), http://www.blouinartinfo.com/news/story/753301/everything-you-ever-wanted-to-know-about-the-knoedler-forgery.
  3. William K. Rashbaum, Key Suspect in Art Scheme Is Under Arrest in Spain, N.Y. Times, April 20, 2014, http://www.nytimes.com/2014/04/21/nyregion/suspected-player-in-art-scams-is-arrested-in-spain.html?_r=0.

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