Stephen Blumberg was arrested on December 11, 1997 by Des Moines, Iowa
police on a charge of 3rd degree burglary after been apprehended
stealing "brass knobs, brass ceiling lights and wood trim" from a
vacant apartment building. He was using the alias of "Mike Charles
Nelson" at the time.
I am indebted to the John Beamer, U. S. Attorney General, in Des
Moines for this information.
Eileen E. Brady
Editor
Focus on Security
115 N. Grant Street
Moscow, ID 83843
E-mail: brady@wsu.edu
(208) 883-0817
IRS experts target artful dodgers
By Daniel Golden, Globe Staff, 12/15/97
Twice a year, 25 art experts gather secretly in the nation's capital
to appraise valuable paintings and sculptures left at the deaths of
private collectors.
Their mission: to prevent estate tax evasion.
The Commissioner's Art Advisory Panel, as they are known, is the
Internal Revenue Service's bulwark against families that try to
dodge estate taxes by undervaluing their art collections. Its
re-valuations of everything from Impressionist paintings to pop art
bring in millions of dollars a year in federal taxes - and frustrate
families that would rather hang onto their art than donate it to a
museum. Not all of these families descend from aristocrats and
robber barons who patronized art early in this century. With the rise
in art values in recent decades, and the widespread enthusiasm for
collecting among the World War II generation now dying off, even the
middle classes are inheriting fine art and the estate taxes on it. To
lower taxes, some families reluctantly give away art. ''I know people
who have very valuable paintings, but they don't have a lot of
cash,'' says Boston estate attorney Hanson Reynolds. ''The taxes
would wipe out their estate. They'd like to see the art pass to their
children, but it won't happen.'' More determined collectors play
valuation games. Monitoring of art worth less than $20,000 is
haphazard. The IRS requires an appraisal by a qualified person on any
property worth more than $3,000. But, according to Karen Keane of the
Skinner auction house in Boston, executors of estates often hire
inexperienced appraisers who may not recognize valuable art. ''They
get people in there who don't know what they're doing,'' Keane says.
Since 1968, the advisory panel has reviewed all taxpayer claims on
art worth more than $20,000. Last year, it re-evaluated 171 works
that collectors had appraised at a total of $15.2 million. It found
they were worth substantially more - $31.1 million. Since the top
estate tax rate is 55 percent, the taxes on the $15.9 million
difference in valuations could exceed $8 million. IRS officials said
some families have tried to reduce estates by disparaging their own
collections - claiming, for instance, that an authentic Old Master
was painted by his ''school'' or followers. To reduce assets for
income or estate tax purposes, collectors don't just undervalue the
art they want to keep; they inflate the value of art they give to
museums. In 1996, the advisory panel recommended lowering the values
of 95 charitable gifts from $8.8 million claimed by taxpayers to $4.6
million. At their meetings, panel members are given photos of the
art and recent auction prices of similar items. They are not told who
owns it or its appraised value so they can be objective. Theodore
Stebbins, curator of American paintings at the Boston Museum of Fine
Arts, used to serve on the panel. He recalls that it once set the
market value of a painting by 20th century American artist Edward
Hopper at $2 million. Afterward, he says, two people who had
inherited the painting confronted him angrily. They had valued it at
only $300,000.
DANIEL GOLDEN
This story ran on page A10 of the Boston Globe on 12/15/97.
Restoring looted art
The possibility that plundered art is on display at the Museum of
Fine Arts dismally marks the influence of greed. But behind this
troubling allegation is a chance for smart, practical responses.
Globe reporters Walter V. Robinson and John Yemma broke the news that
a new permanent gallery at the MFA includes pre-Columbian artifacts
that archeologists and Guatemalan officials say were looted and
illegally exported. The origin of artifacts from Mali is also being
questioned. Museum officials say the works were acquired legally. The
truth is hidden at the heart of a global looting maze.
Wearily outraged archeologists describe the big picture. The trade
in looted art is as torturous as the drug market. Looters ignore
countries' laws, irreparably destroy sites, and collude with
collectors. Single objects turn up, but stripped from their
archeological setting they have lost much of their historic and
scientific value. The archeologists, nonetheless, have a tempered
optimism about what can be done. Museums can be agents for change.
Their exhibits can bring possibly looted objects to the public's
attention, creating an opportunity to investigate acquisition
challenges and settle ownership disputes. That doesn't mean shipping
every Botticelli back to Italy. Instead, it should lead to the kind
of partnerships suggested by Susan K. McIntosh of Rice University in
Houston. Museums and countries could forge mutually beneficial
relationships that could cut out looters and unscrupulous middlemen,
she says. Guatemala is among the countries eager to enact
sophisticated management of their cultural heritage. In partnerships,
nations could lend their artifacts in exchange for technical support
from museums or foundations. It is one win-win way to help countries
that don't have the resources to care properly for their artifacts.
Education is another tool, says Patricia Hart Mangan, a professor of
anthropology at Mount Holyoke College in South Hadley. Looters are
often local citizens. Archeological training can teach the
importance of preserving single objects and entire excavation sites.
Museums and other cultural institutions can help by being a conduit
for curriculums. Archeologists working at excavation sites can hold
information sessions about their work. Such efforts are a small way
of educating people away from looting. And a trained populace can
help archeologists gather information. Guatemala and El Salvador are
two countries that understand the need for such training. Mark
McMenamin, a professor of geology at Mount Holyoke, suggests setting
up a registry that would document where and when artifacts were
found. Even if objects were sold, lost, or destroyed, vital
scientific records would be preserved by such a registry. The
information would help fill in the global archeological picture. In
addition to stemming looting, museums can help with the huge demand
for protecting yet-to-be-excavated sites. Many of these are well
known, making them ripe for protection. And some might even be held
in reserve until archeological techniques and tools have developed to
the point where they will be less damaging to sites and artifacts. A
changing international scene - more protective laws and countries'
heightened archeological awareness - means that museums and cultural
institutions have to undergo changes in how they do business.
Constructive change on the international scene will mean sacrifices.
Internal museum acquisition policies will have to made stronger,
with greater scrutiny as to provenance. Emphasis should shift from
owning an artifact to safeguarding its larger cultural context. And
ownership challenges from countries of origin will have to be
thoroughly investigated in order to encourage widespread
cooperation. American museums have a weak record on looted art. But
assigning blame should take a back seat to the scientifically
precious work of unearthing artifacts' pasts. What's needed is a
thoughtful course of action that can be a model for the future.
This story ran on page A38 of the Boston Globe on 12/12/97. c
Copyright 1997 Globe Newspaper Company.
Smuggled art clampdown by Sotheby's
BY DALYA ALBERGE AND DANIEL MCGRORY
SOTHEBY'S is to tighten up its sale procedures to make sure they are
"clean as a whistle" after an inquiry into allegations that it was
involved in smuggling art treasures. The auction house also said
that it would not handle anything if there was any suspicion that it
might have been looted abroad. The new code of conduct was announced
at an emergency staff meeting last night at the end of an $11 million
investigation set up after The Times and an undercover team from
Channel 4 reported that staff had been rigging auctions and illegally
exporting works of art. The inquiry found up to 20 cases in which
Sotheby's staff may have broken foreign laws, but no one has been
disciplined. A director suspended in February has been reinstated.
Diana Brooks, Sotheby's chief executive, denied that the report was
a whitewash and said: "It's been a very painful process. Our changes
are not a reflection of anything we found wrong, but more making
certain that everything is clean as a whistle."
Feb 6: art scandal was revealed in The Times:
She said the report's findings would remain confidential, but
admitted to a number of shortcomings in the company's operations -
including staff training and record-keeping, which she described as
absolutely inadequate. The inquiry began after Roeland Kollewijn,
Sotheby's Old Masters expert in Milan, was filmed arranging to
smuggle an 18th-century portrait to London. Within days, Mr Kollewijn
had resigned and George Gordon, a director of the London Old Masters
department, was suspended. He has now been reinstated. Mrs Brooks
insisted yesterday that the Kollewijn affair was an isolated case,
although the inquiry did find evidence of wrongdoing by "a handful of
staff". Sotheby's refused to say how many or name the works of art
involved. The inquiry - carried out by two law firms from New York
and London under the chairmanship of the Sotheby's non-executive
director Max Fisher - examined 8,000 transactions representing almost
all of the past year's sales of Old Master paintings, jewellery and
antiquities with cross-border issues. It also took advice from 45
outside experts and interviewed more than 200 staff in confidence. Mr
Kollewijn faces legal procedures in Italy and did not give evidence;
nor did Peter Watson, whose book launched the undercover
investigation. Mr Watson said he was surprised not to have been
invited to do so, while Sotheby's said it had made strenuous efforts
to persuade him to speak. Mrs Brooks said: "As much as I hate to
admit it, I think he did us a service. He jump-started the process."
Henry King, senior partner with the New York firm Davis Polk &
Wardwell, said that they had found evidence of "some deviation" from
the company's policy that employees should not break any country's
laws in "less than 20 cases". He was satisfied that individuals had
acted from ignorance and said no one should be sacked. Mrs Brooks
said that the new code of practice meant the company had already
turned away up to £10 million of business, including Pre-Columbian
artefacts and Old Master paintings. But that was balanced by the
chance to restore Sotheby's credibility. "The dramatic change is
that if any employee has actual knowledge that a work has been
illegally exported from any country - not just those that we do
business with - then, regardless of US or EC law, we will not sell
it. We are the only auction business to state this." Sotheby's has
also introduced a more detailed warranty on contracts in which the
owner states that the property was legally exported and imported. The
move was welcomed by critics of auction house practices, including
Sir Hugh Leggatt, the former museums and galleries commissioner, who
described it as a great step forward that should have been introduced
years ago. Neil Brodie, co-ordinator of the illicit antiquities
research centre at the McDonald Institute for Archaeological Research
at Cambridge, said: "I would like to hope other auction houses and
dealers would follow their example."
Art trade to see vast changes after Sotheby's inquiry
THE £6.5 million investigation into allegations that Sotheby's
smuggled works of art will not result in any member of staff losing
their job. But the company claims the conclusions will radically
alter the way it does business. It had commissioned two independent
law firms to conduct an internal review, handing over thousands of
pages of records to be analysed in an investigation that lasted ten
months. Davis Polk & Wardwell in New York and Slaughter and May in
London examined more than 8,000 transactions during 1996, interviewed
more than 200 employees and produced findings that will have
far-reaching implications for the art trade. Changes in the code of
conduct means it will always announce in the saleroom when an item
has not found a buyer. Despite the thoroughness of the investigation,
the review copies released to The Times and members of Sotheby's
staff extended to only eight pages. At first glance, the contents
seemed couched in vague terms, praising for example the staff's
co-operation and noting how accusations about smuggling in the media
had been "troubling". There was, in fact, a split within Sotheby's
over whether the full findings should be published. "Blame the
lawyers for that decision," Henry King, a senior partner with Davis
Polk & Wardwell of New York, told The Times. However, the
recommendations and observations were far more decisive and drastic
than anyone had expected. Sotheby's will not sell anything with a
dubious provenance and staff will be educated in international law.
The lawyers found: "Resources that had been devoted to education,
training and compliance issues were inadequate, given the complexity
of the business and the international legal environment in which the
company operates around the world today." The auction house has
appointed a worldwide "compliance director" and is developing a
compliance department "to oversee and implement internal rules and
procedures" and ensure that all employees are adequately trained in
the rules. The review noted the confusion over some countries having
legal restrictions over any art or antiques, not just to material
that could be classified as cultural heritage, while others adopt a
licensing approach. Self-imposed strictures about handling imported
works of art goes further than the company's legal responsibilities.
Diana Brooks, Sotheby's chief executive, said that America does not
recognise the export laws of countries other than Mexico, Peru and
Canada, meaning that it is not illegal to sell objects that were
illegally exported from their country of origin. In taking this
unprecedented decision, they were setting an example that she expects
other auction houses and dealers to follow. The review suggests that
most of the accusations made by Peter Watson in the Dispatches
programme and his book refer to incidents that occurred many years
ago. The Channel 4 undercover film involving the 18th-century
Italian Old Master was made in 1996. Mrs Brooks insisted that this
was "a one-off incident". The review notes how specific policies and
controls needed to be strengthened and Sotheby's is tightening up its
entire code of conduct. It has, for example, introduced a more
detailed warranty on contracts in which the owner reassures it that
the property was legally exported and legally imported. "Chandelier
bids" - in which an auctioneer pretends to take non-existent bids to
create a buzz of interest - will no longer be possible.
Expert Peter Watson, who made the allegations against Sotheby's, says
he still has reservations
The report is welcome, but some questions are left hanging.
In the wake of the two Dispatches programmes earlier this year, and
publication of my book, Sotheby's Inside Story, which together
exposed several acts of wrongdoing inside the auction house, I lost
several friends in the art world. I had anticipated something of the
sort, but the reason was interesting. People didn't dispute the
unsavoury facts of the exposé; rather they implied that some insiders
had known all along that such practices went on were indeed
widespread, that many foreign laws are rightly regarded as a joke,
and that attention should not be drawn to these matters. The reaction
to the programmes, and the serialisation of the book in The Times,
provoked headlines in more than 50 countries. That the London art
world differs so much in its reaction from everyone else reflects
partly on its misplaced sense of priorities and partly on its
arrogance. In fairness to Sotheby's, although this same brand of
arrogance had led some of its employees down questionable paths that
our investigations highlighted, the report thankfully does not adopt
that tone. The problem with the report, however, apart from its
banal corporate-speak, is that the committee that produced it is far
from independent. It was chaired by Max Fisher, vice-chairman of
Sotheby's Holdings Inc, and an old buddy of Alfred Taubman, Sotheby's
chairman and majority shareholder. That being the case, and despite
the welcome introduction of a Compliance Department, to ensure that
foreign laws are obeyed, certain hard questions remain.
1. The lawyers, Slaughter & May and Davis Polk & Wardwell, who helped
the review committee, never interviewed me or anyone else associated
with the programmes or the book. They sent a number of faxes but
never followed through properly. Yet they know, because we told them,
that we have other documents, showing other wrongdoing, that we never
had the time or funds to corroborate. The art world is a
sophisticated world, and Sotheby's is a sophisticated company run by
worldly people. They well know that there are various levels of
proof, that we published only what could be safely published, but
that there are many more "grey areas" that should be looked into.
2. The attorney who is to head the new Compliance Department is the
very woman who sat in on my interview with Felicity Nicholson, then
head of antiquities and, when the interview turned to wrongdoing in
Ms Nicholson's department, raised the issue of Ms Nicholson having
another appointment. Viewers of the programme may recall that I then
telephoned Ms Nicholson a short while later, from outside the
Sotheby's building, to find that she was already back in her office.
This attorney thus has some way to go before she convinces me she is
the right choice for this job.
3. Sotheby's claims that Roeland Kollewijn, who organised for us the
smuggling of an Old Master from Italy, operated alone, despite the
fact that we had 55 pages of documents showing that this has been
happening since 1981 at least. Sotheby's ignoring them again calls
into question the thoroughness of the "independent" committee.
4. Most important, however, are Sotheby's activities in relation to
antiquities. Since the programmes appeared I have joined the McDonald
Institute for Archaeological Research at Cambridge and have looked
into the world of looted antiquities in more detail. I have been
appalled at the plunder.
The company has already closed two antiquities departments in
London. Yet it still sells antiquities in New York where, last
summer, fully 71 per cent of the lots were unprovenanced. The company
has made it known privately that it intends to take a much more
stringent attitude in selling goods of doubtful origin. The only
conclusion to that line of reasoning is that it must stop selling the
70-90 per cent of antiquities, ethnographical and pre-Columbian
objects that are unprovenanced. If Sotheby's really grasps this issue
it will have taken a massive step towards cleaning up the art trade
and will truly justify the otherwise rhetorical final words of the
letter Diane Brooks sent yesterday to all employees, namely her
"commitment to take a leadership role on ethical and legal
practices".
Italian 'smuggling' dossier sent to Scotland Yard
BY DANIEL MCGRORY AND DALYA ALBERGE
ITALIAN police investigating allegations that art treasures were
smuggled to Britain for auction have now sent a 300-page dossier to
Scotland Yard. Their 11-month inquiry is believed to reveal the
concern in Italy about the increasing number of art works illegally
taken to London and European cities for sale. An undercover operation
earlier this year, revealed in The Times and by Channel 4's
Dispatches, traced how a Sotheby's Old Masters expert in Milan
deliberately helped to evade export laws to get an 18th-century
portrait for sale in London. At the same time police in India are
investigating the theft of antiquities after an exposé of how auction
houses encouraged the looting of national treasures. Sotheby's last
night insisted that all its staff would give full co-operation to
continuing police inquiries. As well as the international allegations
against them, Peter Watson, a British journalist who first exposed
the smuggling, also claims that Sotheby's - the world's oldest and
biggest auctioneers - rigged its London sales. In February, Sotheby's
suspended senior staff after an undercover operation showed that
Roeland Kollewijn - the Old Masters expert in Milan - arranging for a
painting by Giuseppe Nogari to be smuggled into Sotheby's London
office. A hidden camera carried by an woman investigator from
Dispatches filmed Mr Kollewijn helping to move the work by the
Italian painter. Mr Kollewijn was shown making a series of damaging
admissions acknowledging that it was illegal for the portrait - Old
Woman with a Cup - to leave Italy. Sotheby's expert is seen coaching
the woman, who claims she has inherited a sizeable collection of
paintings in Italy, on how to smuggle these works to England. He
boasts to the woman how Italy gets "rather upset about losing works
of art. It's more or less the only natural resource they have ...
they don't have oil or whatever so they are very strict." He says
such practices are "happening all the time". Investigators from the
Dispatches programme also alleged that Sotheby's auctioned Indian
antiquities smuggled to Britain. Last night Diana Brooks, Sotheby's
chief executive, said the auction house had sent a 25-page letter
pointing out factual inaccuracies in Mr Watson's exposé. She said it
had not had a reply. Sotheby's initial reaction after the television
documentary was broadcast was to condemn as "despicable" the
undercover scam. It said that Mr Kollewijn was first suspended after
admitting "in a most gentlemanly way" that he had "transgressed". He
later resigned after admitting that he had broken company rules and
Italian law. Sotheby's refused to say yesterday whether Mr Kollewijn
had received any compensation or severance pay. One source said: "His
life and his career are ruined." In the film at the London end of
the "sting" operation, George Gordon, Sotheby's Old Masters expert,
is seen taking delivery of the painting on May 27 last year. Mr
Gordon was suspended during the inquiry but was later reinstated. The
company said the inquiry "totally exonerated" him, and added that no
disciplinary action was to be taken against any employee following
the inquiry.
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