For more than a dozen years the Upper East Side gallery Knoedler & Company was “substantially dependent” on profits it made from selling a mysterious collection of artwork that is at the center of a federal forgery investigation, former clients of this former gallery have charged in court papers.
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The analysis is based on financial records turned over as part of a lawsuit against the gallery filed by Domenico and Eleanore De Sole, who in 2004 paid $8.3 million for a painting attributed to Mark Rothko that they now say is a worthless fake.
The Rothko is one of approximately 40 works that Knoedler, which closed last year, obtained from Glafira Rosales, a little-known dealer whose collection of works attributed to Modernist masters has no documented provenance and is the subject of an F.B.I. investigation.
Between 1996 and 2008, the suit asserts, Knoedler earned approximately $60 million from works that Ms. Rosales provided on consignment or sold outright to the gallery and cleared $40 million in profits. In one year, 2002, for example, the complaint says the gallery’s entire profit — $5.6 million — was derived from the sale of Ms. Rosales’s works.
“Knoedler’s viability as a business was substantially — and, in some years, almost entirely — dependent on sales from the Rosales Collection,” the De Soles claimed last month in an amended version of the suit they filed this year.
While the forgery allegations are well known and have been the subject of three federal lawsuits against Knoedler, the recent filings expand the known number of Rosales artworks that were handled by the gallery, which was in business for 165 years, and assert that they played a pivotal role in the gallery’s success. After the F.B.I. issued subpoenas to the gallery in the fall of 2009, Michael Hammer, Knoedler’s owner, halted the sale of any Rosales works. Knoedler ended up losing money that year and in 2010, the court papers say.
Lawyers for the gallery and its former president Ann Freedman declined to discuss the accuracy of the De Soles’ financial analyses. But they suggested the level of profits is irrelevant if the artworks sold were the authentic and valuable works of acknowledged masters; the gallery and Ms. Freedman still insist on their authenticity.
“Labeling a work a forgery is an extreme step,” Luke Nikas, one of Ms. Freedman’s lawyers, said in an interview, “especially when substantial evidence of authenticity exists. Plaintiffs’ irresponsible lawsuits caused the very harm they complain of.”
Ms. Rosales’s lawyer has said that his client never knowingly defrauded anyone.
The size of the profits is significant, the De Soles contend, because they say the gallery should have realized that someone cannot buy undiscovered masterpieces for the prices Knoedler paid Ms. Rosales. For example, Knoedler paid her $950,000 in 2003 for the untitled Rothko that it sold the following year to the De Soles for a 773 percent markup.
John D. Howard, another former Knoedler customer who is suing, paid $3.5 million for a work said to be by Willem de Kooning (plus a $500,000 commission to an intermediary dealer), a 366 percent markup over the $750,000 that Knoedler had paid to Ms. Rosales just two days earlier. In his complaint Mr. Howard’s lawyer, John Cahill, described the $750,000 as “a price so low it virtually announced its dubious nature.”
(A third suit, over the authenticity of a $17 million painting attributed to Jackson Pollock, was settled this month in a confidential agreement.)
Of course buying cheap and selling high is every seller’s goal. And Ms. Freedman, few would dispute, is a good saleswoman. But several art dealers described the markups as unusual. Speaking generally Michael Findlay, a director of Acquavella Galleries in New York, said a price way below market should be a “red flag.”
“Why is it so cheap?” he said. “That’s a smell test.”
One reason for the low prices, though, is the lack of paperwork attesting to provenance. Ms. Freedman’s lawyers said that the payments to Ms. Rosales reflected the enormous risk Knoedler undertook as well as the substantial costs of researching, conserving and evaluating the newly uncovered art. That research confirmed the authenticity of the works, and thus their value, the lawyers said.
Ms. Rosales has said the bulk of the newly discovered masterworks came from an old family friend, an anonymous collector whom she has steadfastly refused to name. Files at Knoedler about him were labeled “Secret Santa.”
Ms. Rosales said the collector had inherited the works — about two dozen major pieces by artists like Franz Kline, Robert Motherwell, Pollock and de Kooning — from his father, a European émigré with homes in Switzerland and Mexico.
But the lawsuits state that over the years Ms. Rosales altered her account in several ways. For example, after saying the art was acquired in the 1950s with the help of Alfonso Ossorio, a painter and a friend of Pollock’s, she later identified a different middleman when an independent art panel called Mr. Ossorio’s involvement “inconceivable,” the papers report.
According to Ms. Freedman’s lawyers Ms. Rosales at one point told Ms. Freedman to stop pressing for more information about the unnamed collector, saying, “Don’t kill the goose that’s laying the golden egg.”
At the moment 14 works Ms. Rosales brought to market — 9 of which were handled by Knoedler — have been judged as fake by authenticating bodies.
A company called Orion Analytical also conducted forensic tests on at least five Rosales paintings and reported that materials on the canvasses were not available or were inconsistent with the dates on the works.
To counter the charges Ms. Freedman’s and Knoedler’s lawyers have collected affidavits from two experts who vouch for the authenticity of the art along with other evidence. For example, to rebut the idea that paint found on the Rosales Pollock work was not available in Pollock’s day, the lawyers cite a 1980 interview that Lee Krasner, Pollock’s widow, gave The Partisan Review in which she said that Pollock “at one point got DuPont to make up very special paints for him, and special thinners.”
Charles D. Schmerler, Knoedler’s lawyer, dismissed Orion’s conclusions: “Certain individuals appear to be creating a cottage industry out of attacking these paintings. There are no accepted scientific methods or standardized guidelines in this area.”
And as Ms. Freedman herself said in a recent e-mail, “These paintings were exhibited in museums around the world and heralded as masterworks.”
-By Patricia Cohen