Fighting fraud with ‘the Indiana Jones’ of the art market
Special Agent Christopher Mckeogh of the FBI made a flying visit to London last week, to address a summit for art market professionals. Described by his hosts, the online auction and gallery aggregator Invaluable, as “the Indiana Jones” of the art market, Mckeogh had more of a harmless Clark Kent look about him, in his floppy hair, grey suit and collegiate tie; but he meant business. As I whipped out my iphone to photograph him taking the stand, a firm hand grasped my shoulder advising me: “Not this one; not even his screen of bullet points.”
So, as he embarked on a rapid run-down of the kind of crime he was interested in – theft, fraud, forgery, Nazi loot, and money laundering – it was down to pen and notepad. The FBI estimates that four to six billion dollars of artwork is stolen worldwide every year, but only a small percentage of that is recovered. Since 2004, the Bureau has recovered some 14,850 items with a value of over $165million (£128million). In the Seventies, for instance, several dozen works by the American abstract expressionist painter Robert Motherwell went missing after being put in storage. Last year, one of the paintings (worth $350,000) was recovered, but Mckeogh is still looking for the rest. This is the main reason he was in London – to encourage art professionals to keep their eyes peeled (inconsistencies like labels printed back to front, or letters without a postcode in the address are key indicators). Among the works still unaccounted for is a cache of paintings by Chagall, Léger and others that was fraudulently obtained and sold during the last decade by the New York dealer Ezra Chowaiki. Chowaiki would sell shares in paintings many times over, and sold pictures he never paid for. The approximate value of the paintings was $30 million. Last September Chowaiki was sentenced to 18 months, but five of the 25 works have not been traced.
A bigger problem than theft is fakes, said Mckeogh. Between 2004 and 2016, art dealer Eric Spoutz is estimated to have sold hundreds of fakes of artists such as Jackson Pollock, Joan Mitchell and Willem de Kooning. Using different aliases, he sold through galleries, auction rooms and online via ebay, providing fake documentation each time. But by the time he was caught (police investigating complaints finally nailed him on the provenance documentation which they proved he falsely fabricated) and sentenced to 41 months’ imprisonment, in 2017, only 40 of the fakes had been identified.
In many cases, identification is not the end of the problem. At the summit, James Kelly, formerly a manager in Damien Hirst’s business empire, told Mckeogh that he had spotted numerous fake Hirsts on the market and had them removed from sale. In France, demonstrable fakes can be destroyed, but not in England, where the police can keep examples of evidence, but have a limit. Mckeogh said that in America he had to return fakes because they couldn’t keep them all. But they did have them on record at least. The fake Hirsts were not even stamped to say that they were fakes and so could feasibly be recirculated in the market.
In the same vein, a painting of a First World War battlefield with a shotdown aeroplane was sold in 2015 at a Cheshire auction for more than £200,000 as an original 1918 work by Paul Nash. It was never paid for, because the buyer was alerted to the fact that it could be a fake. They also had a scientific test done, which revealed that certain materials were not in use at the time the painting was purportedly done. So it was returned to the seller. But, again, it could pop up for sale again anywhere at any time.
Also at the summit were representatives from the Art Loss Register, a resource with about 500,000 stolen works of art on its database, which dealers and auction rooms regularly use to cross-check items sent for sale. But its database of fakes is only in its infancy, with some 10,000 examples registered. Director Julian Radcliffe said fakes were more problematic than thefts, because they were less easy to identify.
Both he and Mckeogh agreed that the crime that is most on the rise in the art world is money-laundering. Last month, Jean-claude Juncker, the President of the European Commission, came under pressure from members of the European Parliament to tighten regulations at the Luxembourg Freeport which, the letter said, had “been alleged to be a fertile ground for money laundering and tax evasion”.
At present, owners can store works for unlimited periods of time in Freeports, providing a tax-free, secret, high-security storage that allows dealers to trade within their walls, avoiding customs or sales tax and collectors to store work anonymously under the name of shell companies, making the movement of money difficult to detect. It’s a relatively new concept for art crime investigators, but potentially huge – there was, says Mckeogh, between 15 and 19 billion dollars of art-secured lending in 2016.
The FBI estimates that four to six billion dollars of artwork is stolen worldwide every year