“Whether we like it or not, art is used for tax avoidance and evasion,” said NYU economics professor Nouriel Roubini last year. “Plenty of people are using it for money laundering.”
What are Panama papers and what are their relevance to art?
The Panama Papers are a sprawling mass of secrets that have been released by the ICIJ. This sprawling mass of secrets amounts to 6.4 terabytes, or 11.5 million documents – the largest data leak in history.
It’s affected the pretty much in every single country on the planet. Among 143 politicians and their close circles implicated in using offshore tax havens – which though there are often entirely legitimate reasons for using, just as often there are less commendable reasons for using – are 12 national leaders. The UK’s Prime Minister David Cameron has found himself in some hot water over his father’s private investment fund (last year in Singapore Cameron was quoted as saying: “the corrupt, criminals and money launderers” take advantage of anonymous company structures. Which has in part, also lead to the London property boom, and so, for the majority; crisis) and Vladimir Putin appears to have syphoned off a big whack via Panama too.
The leak occurred as records were obtained from an anonymous source by the German newspaper Süddeutsche Zeitung, which shared them with the International Consortium of Investigative Journalists (ICIJ), who then shared them with a number of international partners; and that is how the secrets, all of them, got out.
Mossack Fonesca, the lawfirm implicated in the leaks, is based in Panama and is the fourth largest provider of offshore services in the world (acting on behalf of over 300,000 companies over the years), one of its roles for its clients is to build corporate structures that can be used to conceal assets; but now, all the details about these companies, their owners and their owners transactions, are in plain sight.
The leaked Panama Papers have caused waves of controversy around the globe from almost every sector, and the art market has not been left unscathed. With revelations about previously believed stolen paintings, fake auctions and hidden secrets. According to the ICIJ, “The firm’s records mention enough art to fill a small museum.”
In recent history, as art prices have grown, it seems, exponentially – in 2015, sales of art exceeded $63.8 billion according to Art Market Report, with the most expensive art seeing the biggest growth.
“The single best driver of the art market is accumulated wealth,” says Michael Moses of Beautiful Asset Advisors. “If high-end wealth is increasing at a faster rate than any other kind of wealth — which it is — these people have excess money to spend on art.” The problem with this booming art market is transactions are frequently obscured using offshore ‘shell’ companies, free trade zones, biased auctions, front men – and companies, and private sales. While this secrecy can be legally used to limit legal exposure and avoid publicity; art is easily transportable, often exorbitant and poorly regulated, and so authorities worry that it can be, and is, used as a cover for other things, including money laundering.
Who, and what, has been involved?
The first artwork in question is the Modigliani Seated Man With Cane (1918), which is being claimed by Philippe Maestracci, the grandson of Oscar Stettiner, a Jewish gallery owner who had his possessions seized (stolen) by the Nazis. The problem is, as the leaked papers have revealed, the painting is actually owned by a company controlled by a family of very powerful art dealers, the Nahmads, who have previously denied that they posses the work.
The ICIJ have reported that the Nahmads bought the painting at auction at Christies in London in 1996 for $2m. In 2008, the Nahmads attempted to sell the work at Sotheby’s New York with an estimate of $18m to $25m, but, there were no bids on the piece. (According to court papers, the piece had originally been sold to a U.S. navel officer in 1944 in a café for 25,000 francs.)
In 2011 Maestracci sued the Nahmads in U.S. federal court for the return of the Modigilani. The suit was withdrawn as the Nahamds said the painting was actually owned by a company called International Art Centre, and not them. The thing is, as the administrator of the Stettiner estate argued in court papers back in 2014, the International Art Centre is in fact an, “alter ego of David Nahmad and other Nahmad family members”. The leaked Mossack Fonesca papers reveal that is, indeed, the case: “the Nahmad family has controlled the Panama-based company International Art Center (IAC) for more than 20 years … David Nahmad, the family leader, has been the company’s sole owner since January 2014”, the ICIJ reports. It turns out the IAC was first set up by Mossack Fonesca for the Nahmads in 1995.
Richard Golub, David Nahmads’ lawyer said in response to this discovery, “Whoever owns IAC is irrelevant. The main thing is: what are the issues in the [ongoing] case, and can the plaintiff prove them?”
(David Nahmad’s son has hardly been except from controversy in the past, with his lavish life-style, buying up whole floors in the Trump Tower, and excessively gambling; which is what eventually led him in to hot water. In 2013 Helly Nahmad pleaded guilty to operating an illegal gambling business. Wiretaps in the case caught him discussing how his family art business could be used to hide money. “[S]ometimes a bank needs a justification for a wire, right?” he said, according to a conversation from March 2012, quoted in the government’s sentencing memorandum. “We can just say, Ohh, you are buying a painting. If they need justification, you know what I mean? You just be like, Oh yeah, I bought a, you know, Picasso drawing or something.” In the end, a judge sentenced him to a year and a day in prison, and he also agreed to forfeit $6.4 million and relinquish rights to a painting by Raoul Dufy.)
Other well-known art collectors with companies registered through Mossack Fonseca include Spain’s Thyssen-Bornemisza clan, Chinese entertainment magnate Wang Zhongjun and Picasso’s granddaughter, Marina Ruiz-Picasso.
Next on the list is, aptly, a Picasso, and Joe Lewis, now the owner of Tottenham Hotspurs and formerly the richest man in Britain. Who, it is worth remembering while reading this, at this point in time, was also the largest shareholder at Christie’s auction house.
It was New York 1997, and the Ganz family were selling the prodigious art collection they’d accumulated over many years and had cost them $2m to acquire. The night of the auction at Christie’s, the collection made a record $206.5m.
Lot 33 was Picasso’s now-infamous Women of Algiers (version O) and it sold for a record-breaking $31.9m (having sold for $7,000 40 years earlier) to a London dealer who was reportedly acting on behalf of an anonymous Middle Eastern client. This, was the moment that global art became a commodity, and a very powerful one. In addition to “O,” the Ganz auction featured versions “M,” “H,” and “K.” And who bought “H”? None other than David Nahamd, adding to what is regarded one of the largest collections of Picasso in private hands in the world.
But, where’s Joe Lewis in the picture? Hiding in the corner. What the leaked Mossack Fonesca papers reveal, is that the Picasso, and a number of the most valuable paintings sold that night (including other Picassos such La Rêve and Femme en Chemise) as part of the Ganz collection, had already been sold, 6 months before the auction. The company who’d purchased the works was Simsbury International Corp, which had been set up in Niue (a tiny island in the South Pacific) and administered by, of course, Mossack Fonesca.
Lewis has set up many offshore companies with Mossack Fonesca, and it turns out the man who was in control of Simsbury International Corp, was Joe Lewis; and the terms of the deal made, stipulated that the works owned by Simsbury International, would still be offered as part of the Ganz collection at Christies (of which remember, Lewis was the largest shareholder). If the pieces made more than $168m, Lewis and Spink & Son would share the difference. The lot went for $206m. Spink & Son was owned by Christies, of which, yes, Lewis was the largest shareholder – so in sum: Lewis would make lots of money.
Nothing illegal, just a little shady. But that’s the whole point of this.
The next art tale from Mossack Fonesca is that of a billionaire Russian trying to hide art from his ex-wife. Well, not really art; money. Dmitry Rybolvlev (who is now engaged in a legal battle with his former art advisor and Mossack Fonesca client, Yves Bouvier aka the “Freeport* King”, for overcharging him by a whopping, and specific, $1,049,465,009,) was a big player in the art market, splashing massive amounts of cash on famous artworks, in order to hide his money from his, at that point, wife, during their divorce proceedings. His investment haul included works by Picasso, Modigliani, Van Gogh, Rothko, Monet and Degas.
Xitrans Finance Ltd was created by Mossack Fonesca for Rybolvlev in 2002 and has been quoted as a “mini-Louvre” with its fine-art haul. In 2009 when the marriage broke down, this was the company used to move the luxury items out of Switzerland, to London and Singapore.
The last out of the 11 million(ish) stories, we’ll cover today is about the Greek shipping dynasty, the Goulandris, and their 83 missing paintings that amount to a whopping $3 billion. Ezra Chowaiki, a gallery owner who is helping to bankroll one of the legal claims, told ICIJ in an interview: “It could be the largest collection of missing paintings in history.”
The collection once belong to the Greek shipping tycoon Basil Goulandris – who it belongs to now is a bit of a mystery, as in 1994 Basil died of Parkinson’s disease and his widow, Elise, died in 2000. This was when their heirs learned that the couples enormous art collection had already been passed on, to a Panamanian company called Wilton Trading S.A..
According to Basil’s nephew, Peter J. Gouldandris, Basil sold the whole collection for the strangely low price of $31.7m to the Wilton Trading company.
However, even though the works had been sold to this company in 1985, the collection never left the couples possession and during this period the couple lent the artworks to museums and sold pieces to dealers listing the provenance of the paintings as their own, not Wilton Trading’s.
Anonymous companies set up by Mossack Fonesca in November 2004 began selling some of the Gouldandris’ paintings that Wilton Trading had retained. In 2005 another company, Heredia Holdings, signed an agreement with Sotheby’s to sell Les Comédiens by Marc Chagall. A third company, Talara Holdings, put another Chagall up for auction, this one Le Violoniste Bleu.
All four companies, which were registered just before the transactions and shuttered swiftly afterwards, had one thing in common – they all had the same owner.
Also in 2005, a Greek fashion magazine featured a Greek socialite, known in gossip columns as Doda Voridis, in her regal New York apartment with well-known masterpieces, including Pierre-Auguste Renoir’s The Seamstress, hanging around her. Doda’s real name is Marie, and Marie who died in December 2015, was the sister of Basil Goulandris.
The Seamstress would be the first breadcrumb on the trail back to Marie. On October 22 2004, Voridis had transferred all rights to the oil painting by Renoir to Talara Holdings; only a few weeks later, Talara holdings then transferred the painting back to Voridis.
Two law suits and a criminal investigation are underway in Lusanne, Switzerland, to try and determine the whereabouts and ownership of the Goulandris collection. Some of the paintings have certainly been sold, and with the help of Mossack Fonesca and a $20 million sales agreement, the seller’s identity might remain unknown. The agreement forbids revealing “the identity of the parties to this Agreement (including the identity of the Seller’s sole shareholder)” and “any information or documentation pertaining to the Provenance of the Work and the chain of title.”
However, the rest of the family are pretty keen to find out, and get what they believe, is rightfully theirs. So watch this space.
So what’s the deal?
Though the leaked papers have lead to much darker places, the revelations from the art market are don’t make for delightful reading; and, the irony is, that many of the works of art being sold for incomprehensible amounts of money, were created by the impoverished, many of whom died impoverished, and are being used to make the super-yacht-rich even richer (I’d be curious to hear what Van Gogh and Modigliani had to think about that) The thing is, it doesn’t matter how many revelations we have; the crux of it is: the people implicated, are acting within the law, and unless that changes, this won’t.
(Sometimes it’s worth remembering that just because it’s not against the law, doesn’t make it right.)
* A Freeport is a free trade zone. As long as art is housed in a freeport, owners pay no import taxes or duties. Critics worry this system of freeports can facilitate tax dodging and money laundering, as precise trasactions and inventories are rarely tracked. The oldest freeport, in Geneva, is said to house enough treasure to rival any museum in the world.