Inland marine experts say the hot market for art lures fraudsters.
- Meg Green
- December 2018
AP Photo/Thibault Camus
A pair of experts in art and art fraud said forgeries and fakes have become more prevalent, keeping pace with the rise in value of artwork and collectibles.
David Hall, a partner with the law firm Wiggin and Dana, and Robert Wittman, a founder of Robert Wittman Inc., a security and recovery consulting firm, spoke with A.M.BestTV at the annual conference of the Inland Marine Underwriters Association.
Following is an edited transcript of the interview.
How big is the art market today?
Hall: The fine art market is about $60 billion in size. It's a rough approximation. The cultural property market is larger than that.
Whitman: When I was at the FBI it was estimated that the cultural property market's about a $200 billion industry. When we talk about the cultural property market, it's not just fine art. It's also things like baseball cards and comic books. A Superman comic book sold for $1 million.
It's other things like archaeological artifacts and antiquities. When you put all these pieces together, at the FBI they call it cultural property.
What's very interesting, the United States is the largest consumer country in the world for this type of material. The estimate in the United States is that it's an $80 billion industry, over 40% of the overall world market.
What trends are you seeing in terms of theft and forgeries?
Hall: The legitimate art market has grown substantially in the last 10 or 15 years and has grown even when the economy generally was not growing. That's created incentives for people to commit art crimes, including thefts and forgeries.
As a result of all that, we've seen the total volume of art crime increasing along with the market.
Wittman: There's a famous bank robber who was once asked why he robbed banks. He said, “Because that's where the money is.” It's the same theory. These thieves and fraudsters, they're following the market. As the market trend of the art goes higher and higher in value, they follow the market.
In fact, there's actually market funds now where people can invest in the value of art. It's become a hard property for investment for future gains, as well.
Isn't it important when you buy a piece of art to look at the history of it and the paperwork? How do thieves get around that?
Hall: It certainly is important to review the provenance of any work. Thieves get around that in different ways. One way is that, as a practical matter in the art market, provenance is rarely perfect. It's not unexpected to find gaps in provenance. Criminals can take advantage of that in the course of committing a crime.
Sometimes they'll also forge provenance. In other words, they'll just make it up in order to bolster their claims.
Wittman: When we're looking at value of art, there's three things that make a piece of art valuable. The first is authenticity. That's one of the three legs of the stool. The second thing is the provenance, the history. The third thing is a good title. In other words, if you buy something that's been stolen, in the United States you never acquire a good title.
As a result, you don't have anything worth anything at all. It doesn't matter what you paid, you don't own it. Those are the three things you have to have to have a valuable piece of art.
How does the insurance industry respond to the market?
Hall: The insurance industry insures different kinds of risks in the context of the art market. The answer to the question depends on what exact risk is being insured. Title insurance requires knowledge of the title history of a work. That's an area that implicates what Bob just mentioned, which is the title in the U.S., a title is void when an object is stolen at some point in its history.
It's very important to figure out whether that could be the case, because that would entirely void the title that's been insured.
Of course, there's also casualty insurance and other sorts of insurance to insure the piece itself. Actually, it's damage to art that probably causes the most claims and the greatest loss to the insurance industry.
Wittman: I would second that. I think damage is more prevalent than art crime as far as losses to the industry are concerned. Usually, that damage occurs in transit when the art's being transported, say, from one museum to another.
It's really important that insurance companies make sure that when these pieces are being moved that the registrars at the museums do their due diligence, do their jobs, and that the proper moving companies are used that do the proper techniques for safe transport and that registrars in the incoming museums also do a good registration report.
Those are the things that are important to hold down the losses in the insurance industry.
What happens to really high-profile pieces of art that are stolen from a museum? I would think it would be very hard to find a buyer for that.
Hall: I think that's true. What Bob and I've seen over the years is that a lot of art thieves are really good at the thieving part. They're really good at burglary, robbery, maybe not so good at the art market side of things.
They're two completely separate skill sets and knowledge bases for that. There have been cases where famous pieces of art have been stolen, and then they can't be moved as a practical matter. I think that explains some of the disappearances of famous art that's been stolen over the years.
Wittman: I've always said that the real art in an art theft is not the stealing; it's the selling. The thieves are better at being criminals than they are businessmen. That's why, over the years, we've done so many undercover cases where we were able to recover the artwork as they tried to take it back to the market.
The whole purpose of the thefts and frauds is to make money. When it hits the market, that's when these things are discovered and recovered. A good part about it, when you have a high-value, well-known artwork that's stolen from a museum in some fashion, whether it's gunpoint or through a burglary or whatever, it's my experience that someday it will come back.
That's the good news. It's very seldom when pieces go away forever. Of course, they could be destroyed, but if they're not destroyed at some point within the theft, they will come back because they will outlive the people who steal them. These Rembrandts that are 400, 500 years old today, they're much older than anybody that's around here.
If someone steals one, at some point, it's going to move. It will be recovered and discovered.
Is technology changing the landscape at all when it comes to art crime?
Hall: Yes. The internet has changed everything. It changes the way in which art is sold in certain circumstances. It hasn't completely replaced old-fashioned methods like art dealers, and galleries, and auction houses, but there's a lot of economic activity on the internet in the art market.
This is one way in which, for example, forged art is moved, is through the internet. The seller feels comfortable because he's anonymous and does not feel as vulnerable as he might if he was trying to sell the forged art in a physical place.
I think it's fair to say that over the last 10 to 20 years there's been an increase in art crime that has been committed over the internet.
Wittman:The internet's really helped police departments, as well. The fact is, if a painting was stolen from a museum in Paris 30 years ago, it might take a day and a half to two days to get all the information out about the theft, police departments on alert, even in countries contiguous with, say, France.
Today, because of the internet, within minutes, everyone knows, everyone's seen the picture. It puts the information out very quickly and clearly on about what's been taken so that it can be recovered more quickly.
How likely is the art to be recovered?
Hall: I think that's probably impossible to answer, just because there's so much variety in terms of the nature of thefts and the nature of recoveries. I agree with Bob that, in the long run, if it's not destroyed, it's likely to be recovered. That's cold comfort to somebody who just had their art stolen because, in the long run, I'm thinking generationally.
Often, what will happen is that somebody will come into contact with stolen art, maybe even unwittingly, and then will hold it and then die. The estate gets a hold of it. The estate's trying to sell it.
Wittman: What's good about that, from the insurance standpoint, is insurance companies last a long time, as well. Even though there might be a payout immediately, at some point, when that piece comes back, the insurance industry will get back their investment. Oftentimes, depending on the policy, there could be an exponential value growth for the artwork itself.
We had a case involving a number of Norman Rockwells that were stolen back in the late 1970s. At the time that these Rockwells were stolen, the insurance company paid out tens of thousands for these paintings. When they were recovered, they were valued in the millions.
The insurance company would get the value of the growth. It actually seems to work out.
Hall: It was actually a win, in that case, for the insurance companies.