Art fraud forges ahead: Fraud in the collection of fine art

Art fraud and forgeries often are ignored in the world of white-collar crime. However, this small subset of fraud is growing globally as more unsuspecting novice collectors enter a world unfettered by internal controls. Learn how to detect and prevent fraud in this multibillion-dollar industry.  

Vilas Likhite, a Los Angeles doctor, was said to have owned a multimillion-dollar art collection inherited from an Indian maharajah. His collected works included the names of Brancusi, Lichtenstein, Chagall, Casatt, and others. The pieces he collected were best described as "museum quality." At times, he could be persuaded to sell some of these works to trusted friends for exceptionally low prices. However, a recent sale of a Casatt proved to be his downfall when he sold it to an undercover police detective who specialized in art fraud. All of Likhite's carefully documented works, some presented in a three-ring binder, were fakes.

Also the documents supposedly supporting the authenticity of the art were forged. According to the art fraud detective, the fraudulent art pieces looked like they had been purchased in a dollar store because they were so bad. When the police searched his one-room condo, some of the works still were wet with paint. At the time of his arrest, another buyer filed a complaint that the piece she purchased from him was a forgery (Moore, 2004).

Bob Keerseweer won an art auction on eBay by bidding $135,805 for a Diebenhorn painting. What Bob didn't know was that Rob Walton, the owner of the work, was part of a ring specializing in driving up the price of the auction. The ring posted 50 bids on the same auction that Keerseweer won. Bob also didn't know that the work was a forgery. Walton and his gang were eventually arrested and convicted (Silicon Valley Staff, 2001).

Eli Sakhia was a respectable art gallery owner in business for 15 years in Manhattan. He sold privately and to auction houses in the United States and abroad. What he failed to tell his private buyers was that they were buying the forgeries and the auction houses were getting the real works. His modus operandi was to purchase originals, sell them to auction houses, and hire artists in the interim to reproduce fakes for sale to his clients. His problems started when a past buyer of a fake tried to sell his forged piece while Sakhia attempted to sell the original to another auction house. The houses brought in an expert who stated that the past buyer's work was a fake. Sakhia was arrested and convicted; he's expected to serve three to four years in prison (Campanile, 2004).

Ken Dreifach, head of the Internet Bureau at the New York State Attorney General's office, reported the reoccurring sales of a forged painting. An individual purchased a painting from the Art and Design Center of New York City and brought it to an art expert for appraisal who determined the work was a forgery. The Art and Design Center refunded the money to the purchaser but then sold it to another individual. That person also had it evaluated by an expert who said it was a fake. The Center refunded the money to the second purchaser. Then an undercover investigator from the attorney general's office bought the same painting and the jig was up. The attorney general filed charges and the case was settled against the Center for various monetary charges (Department of Law, 2001).

At a recent exhibition held in Helsinki, Finland, which was showing works of Dali, Chagall, Picasso, Miro, and Warhol, the police impounded 450 forged works of Dali along with other fake pieces. The exhibition was closed down, and its organizer was arrested (BBC, 2004).

The multibillion-dollar world of fine art collecting takes place in art galleries, auction houses, estate sales, antique road shows, and the global Internet (Antiques and the Arts Online, 2004). There are few protections and controls in the selling and buying of fine art.

As fraud examiners, much of our attention centers on embezzlements, kickbacks, revenue overstatements, payroll schemes, skimming, and scores of other types of fraud. Art forgery may be just a headline we ignore on the way to the business page.

However, this small subset of fraud is growing globally as more unsuspecting novice collectors enter a world unfettered by internal controls.

Art and art fraud for the masses
Thomas Hoving, the former director of New York City's Metropolitan Museum of Art for 16 years, has noted that about 40 percent of the art for sale are half-forgeries or of questionable authenticity. Even in his own museum, 16 to 21 of the 42 Rembrandt paintings were found to be of questionable authenticity (Atkins). The Museum of Fine Art in Boston reviewed 700 of their European paintings for provenance (or historical corrobation) and found that 200 had problems. (Museum of Fine Art, 2000). Conservart, a company specializing in establishing authenticity, found that only a small percentage of paintings passed muster (Chartier). In the 1990s, the Dutch government studied 630 of its Rembrandt works to determine authenticity and found that only 280 were authentic (Atkins).

Sketchy appraisers and sellers of art base their expertise on dubious experience or appraisal credentials not always grounded in the art field. A recent appraisal done by a company in business for more than 80 years indicated that the art appraisal to be performed was to be done by an expert in antique furniture. The insurance company demanding the appraisal noted beforehand that all that's necessary for qualifying for the art insurance is a note from an art dealer indicating the existence and value of the works to be insured. Apparently, in the business of fine art insurance, due diligence from the sales force is more than acceptable.

In the past, fine art collecting was a hobby of the super rich. Only a Guggenheim could buy a Pollock. Now those of more modest incomes can purchase fine art. The discount chain, Costco, which has been selling fine art for 10 years, recently sold an appraised Picasso for $35,000 (Blankenship, 2005). The Internet holds auctions 24/7 for any type of art. The multibillion-dollar sales volume of fine art, coupled with the lowering of the bar for collectors, has resulted in the increased potentiality for misrepresenting works for greater profit. From Hoving's point - that even with a curatorial staff, four out of 10 works possess questionable authenticity - one can reasonably assume that much of what's being sold outside of the museum is questionable art.

Some of the factors that allow art fraud to continue are similar to the reasons why white-collar crime exists. As Sutherland noted, white-collar crime (or art fraud), takes place because the buyer's guard is down. He or she trusts, respects, and accepts the seller as a member of the professional and ethical social elite (Ball, 2002). Second, victims of art fraud don't know that they've been victimized. After all they're not art experts. Third, often sellers of art don't know that they're being victimized either. The salesperson is, in many cases, a clerical type being paid more to watch over the art rather than evaluate it. Fourth, local police aren't equipped to respond to art fraud, nor are their systems able to process complaints efficiently and effectively. Their focus and system is geared up for murder, rape, robbery, and assaults. This lack of systemic response constitutes an absence of a deterrent and keeps art fraud moving ahead unabated (Friedrichs, 2004). How does one go about establishing authenticity or preventing the purchase of a fraudulent work?

Telltales of authenticity and fraud prevention
As a general rule, authenticity or the prevention of fraud can be accomplished by research, education, and common sense. Research says that to buy a work of fine art one must know the artist, his period, his style, and his travels. Some artists stay at home, and some travel frequently. Knowing the background of a given artist establishes a set of checkpoints that the seller must pass to prove that a given piece is authentic. Education says that time periods are related to certain particular styles of work: the Renaissance period of the 1500s, the Impressionists in the late 1800s, and the Surrealists in the early 1900s, are all examples. If a Surrealist work being sold is dated back to 1650, the potential buyer has a telltale sign that history doesn't agree with the work. Common sense says that fine art isn't inexpensive. If a large Picasso piece is being sold for a few thousand dollars, a little voice should be saying "fake, fake, fake." Having gathered the general maxims of preventing art fraud, there are also specific telltale signs which further adjust the lens of authentication:

Provenance - The more documentation telling us about where the work started (who was there when it was being produced, who bought it, how long the owners possessed it, etc.), the more authentic the work becomes. The previously mentioned Picasso piece, sold by Costco, was worth $35,000 because it was blessed as genuine by one of his relatives. Without this, the work would be worth nothing or at least would be highly suspicious.

Signature - Artists sign their works with their full or partial name in one corner and/or on the back of a work. While the placement of the signature may change, the actual signature normally remains the same and distinctive to that artist. Obviously, an artist's signature is his or her universal statement that the work is produced by that artist. Buying an unsigned or questionably signed work is like buying a poster print of the work. Both are worth the same amount of money.

Some would take issue with the above statement and argue that some works without signatures are obviously the work of a given artist and really don't need the signature. They say these works are acceptable because other factors indicate that the work is attributed to the artist such as provenance, style, etc. However, without the signature, it's missing an important piece of authenticity. Why would a serious, purportedly expensive work of art without a signature be acceptable when today's legal world says an official document of agreement isn't acceptable without the required signing and intitialing?

Subject matter - Research and education tell us about a given artist's propensities toward art. Some artists prefer landscapes while others prefer the sea, urban decay, war, portraits, and some prefer all of the above. Knowing the subject matter enables us to determine whether a work fits into what a given artist developed during his lifetime. If a given artist detested landscapes, and we see one offered as a landscape by this artist, we should recognize that we may be entering the fraud zone.

Style/Oeuvre - Artists develop their styles or oeuvres through distinct use of colors, materials, brush strokes, abstract/representational, size, lighting contrasts, etc. Non-matching styles of artist and work is a telltale sign that questions need to be asked about the authenticity of the piece. This caveat is more about historical works rather than current works because working artists may change their styles as they age. Deceased artists generally only had one style or historically recorded styles.

Strokes provide a signature of the artist. Some artists prefer a fine brush stroke, and others a broad, thick one. Others prefer a dotted approach, and some a computer-generated one.

The work as a composite - A work of fine art should be inspected in its totality. It's not enough to focus on the presentation and signature. The goal here is to establish the most evidence to support fraud or authenticity. For example, the frame holding an oil painting should help confirm or deny the authenticity of the piece. If a sticky residue is on the frame that could indicate that the wood is fairly new and still oozing sap. However, an old frame doesn't mean the work it frames is also old.

Damages - Cracks in the painting surface usually indicate that the painting wasn't recently produced in someone's basement.

Two-sided works - Sometimes artists may start a work on one side of the canvas but start over on the other side. These pieces can be wonderful threads of authenticity because the two paintings or drawings can help determine authenticity.

Certificate of Authenticity - Art is sold with a certificate of authenticity but a COA is only as good as the person or agency providing the certificate.

Estate sales - Organizers of estate sales often laud the importance of the recently deceased owner and hence that person's collection. Many of these sales describe the period antiques, the artists collected, ancient rugs, silverware, etc. But age doesn't necessarily connote high values (regardless of the impressive printed descriptions of the items) and the deceased owner may not have been a knowledgeable collector.

Catalogue Raissonne - This type of catalogue provides photos of the artist's works, when and where they were produced, and how many were printed if they were lithographs. Misrepresented lithographs can be established if the number of a suspected print is higher than those produced, or if the print with that number is already owned by another person.

Consider all the above factors when evaluating the authenticity of the artwork. If 80 percent of the above factors are present, one could argue that the work being evaluated is more authentic than unauthentic. The goal is to provide an analysis based on a given set of sound data rather than merely asserting that, "It sure looks like a Monet painting."

That's not to say that the data is always an indication of authenticity. The case histories have shown that documents can be forged. One way to further corroborate a work of art is to look to scientific testing.

Scientific testing
Some might say that the previous set of rules only represents the beginning investigation or analysis of the authenticity of artworks. However, if the work has a minimal value, the conclusions drawn from the initial analysis using the rules are probably sufficient. A more in-depth investigation could be unnecessarily costly or time-consuming. Expensive pieces might warrant these current tests:

Electronic Spin Resonance (ESR) - This non-invasive method provides a fingerprint of the minerals used in a painting and compares them to minerals used at the time of the painting. Fakes made recently could be determined by dating the materials used.

Ultraviolet fluorescence - This test tells us if repairs were made to the painting.

Infrared analysis/conventional X-ray - This procedure lets us know if prior paintings are on same surface.

X-rays - This method identifies the particles of a given element (Art Attack).

Digital comparison - Computer programs analyze works and compare them to authentic ones. Statistical analysis then determines the probability of the work's authenticity.

These methods don't establish that a work was produced by a given artist, only that the materials used were available at the time the original work was created or that the work statistically matches similar works of an artist.

New hat for CFEs?
The ACFE is comprised of individuals following the mantra of Edwin H. Sutherland, sociologist and famed anti-fraud pioneer. As accountants, law enforcement members, lawyers, private investigators, managers, and professionals, we detest fraud. Major textbooks on white-collar crime don't list art fraud in their indexes. But millions in real money are lost every year from the crimes of art fraudsters no matter the color of their collars.

White-collar crime existed but wasn't recognized until Sutherland noted that existence in 1940. Scholars, scientific bodies, and the media are slowly noting that fraud in collectibles is upon us and there are few internal controls to curb it. This could be a great opportunity for a CFE who's willing to partner with a fine-art expert to catch fine-art fraudsters. Given that no one is currently watching the fine art store, I would propose that in addition to what we do already, we begin trying on the new hat of art fraud investigation. Apparently, those wearing it now bought it a few sizes too small. 

John F. Daab, CFE, is working on a doctorate in business with a focus on art fraud. He is a former high-rise builder, professor of construction, construction consultant, and educational course and program developer. Daab is also a fraud investigator. He has been collecting museum quality art over the last five years.