London’s Art World Blues

Eager to get the best auction price for an 18th century oil painting, Victoria Parnall asked a respected art dealer in Milan for advice.

“I would smuggle it,” replied Roeland Kollewijn, the Old Masters expert at Sotheby’s, the Italian city’s branch of one of the world’s premier dealers. Illegally evading tight Italian export controls, the painting could go to London by truck for auction by Sotheby’s there, he explained. Transportation cost: about $750. Possible gain between Italian auction price and London auction price: about $4,000.

“I’m not going to smuggle it until I have it out of this office legally,” Kollewijn cautioned Parnall at Sotheby’s Milan headquarters. “It’s not that I don’t trust you. It’s just that this is such a filthy business.”

Parnall was a reporter. A TV camera in a brooch she wore captured the moment, broadcast across Britain last month in a documentary on the underside of the London art market, one of the world’s greatest.

Now, alarms are sounding in the sophisticated, market-for-everything capital, a magnet for buyers and sellers of art and antiquities since its days as the center of a world empire. Behind the glossy catalogs, the fairy-tale auction salons, the beautiful people bidding thousands with the flick of a manicured finger, trouble is building.

Challenged by scandal and intrusive European bureaucrats, the multibillion-dollar London art world is struggling to preserve its credibility and prestige while its profits and international competitiveness are also threatened.

“If there is bad news about one auctioneer, it affects us all in the minds of the public,” said Roger Hollest, managing director of Phillips of Bond Street, a major auction house. “Now is a particularly sensitive time, because so much change is in the air. The whole art market is under a hell of a lot of pressure.”

Economically, London art dealers face demands from the European Union to levy increased sales taxes and royalties. They fear that higher costs in a fiercely competitive business would push sellers away from London and toward less controlled markets such as New York and Geneva.

Ethically, the market is troubled by accusations that some of its members collaborate in art smuggling and in the sale of looted antiquities from the Mediterranean region, India and China.

The smuggling of the painting of an old woman by Giuseppe Nogari, a lesser-known Venetian artist, climaxed an investigation by Peter Watson, a British journalist and art expert who in 1991 was given hundreds of internal Sotheby’s documents by a disaffected former employee.

Watson bought Nogari’s “Old Woman With a Cup” in Naples, Italy, last year for about $15,000. Parnall, an Australian of Italian extraction, took it to Milan with her hidden camera and the story that it was among a group of Italian paintings she and her sister had inherited.

Expecting a collection of Old Masters from Parnall’s supposed inheritance to also be consigned to Sotheby’s, Kollewijn volunteered to smuggle the Nogari--a clear violation of company rules.

“They don’t want to know I do it, but they want me to do it,” Kollewijn told Parnall.

Diana D. Brooks, president and CEO of Sotheby’s Holdings, said she watched the documentary in shock and pain.

“I couldn’t believe it. I felt as if I had been hit by an express train, as if everything important to us in the world was being trampled. I was devastated, because our integrity means everything for us,” Brooks said last week from Sotheby’s headquarters in New York.

Age-Old Custom

Sotheby’s, founded in 1744 and bought by American developer Alfred Taubman in 1983, is the world’s biggest and most famous auction house. An art-world icon for more than 200 years, Sotheby’s says its ethical standards are “the most stringent in the industry.”

Spiriting the Nogari out of Italy was, on one level, a contemporary replay of a custom as old as history. Victorious Roman legions shipped home carved Egyptian columns; 2,000 years later, some of them still decorate piazzas in the capital. Successive conquerors, from Goths to Crusaders, Mongols and rampaging European armies--followed by latter-day archeologists and private collectors--burnished the take-it-home tradition over the centuries.

Today, however, the export of artistic patrimony is restricted or illegal in many parts of the world. Italy, for example, forbids the export of any art object more than 50 years old without permission. India has a 100-year threshold but almost never grants permission.

Yet newly arrived old Indian statues, Etruscan pots and Chinese vases regularly reach London, selling routinely at all the best addresses.

“A number of auction houses and dealers subscribe to a code of conduct. My impression is that they pay not the slightest bit of attention to it,” said Colin Renfrew, a Cambridge University archeologist and member of the House of Lords. “The market in Old Master paintings is generally conducted to higher standards than the antiquities market.”

Brooks said she was at dinner recently in New York when some art-world friends tried to cheer her up with smuggling stories of which they had firsthand acquaintance. “I said, ‘You can’t do this stuff!’ ” she recalled.

Now, in the aftermath of scandal, she said: “We’ll take this as an opportunity to look at ourselves and analyze our practices in light of the world we live in today. I have absolute confidence in the integrity of the firm. At the same time, we must recognize that we operate in a complex business carried out in hundreds of places around the world where some operate by different standards.”

In Milan, Kollewijn has resigned. An internal Sotheby’s inquiry exonerated the official who received the painting in London. Results of an investigation by company directors and two outside law firms are pending.

No British law was broken by the shipment of the Nogari. Italian art police are investigating, although no charges have been filed. There have also been sporadic calls by British lawmakers for stiffer import regulations. But because only annual sales figures really demonstrate the health of the market, it will be some time before it is apparent whether art sellers will turn away from London.

Was Kollewijn a loose cannon, as Sotheby’s insists?

Watson says the episode “was not an isolated case.”

Watson, who has published a book about his six-year investigation, said he can document hundreds “if not thousands” of smuggled pieces of art from Italy and India that have sold at Sotheby’s.

Said Brooks: “We have looked at the last couple of years of our sales. I can’t find what he’s talking about. The book is full of inaccuracies. We can only speak to allegations when we know what they are.”

Sotheby’s, which sells more than 170,000 lots a year in 70 categories, from paintings and silver to wine and furniture, did about $1.6 billion in business worldwide in 1996.

Watson’s documentary, in which an actress was filmed buying the Nogari at auction in London for about $4,000 less than it had cost in Naples, triggered debate as well as consternation. People who know and love the London market disagree completely about its accuracy.

Said Anthony Browne, chairman of the British Art Market Federation, an umbrella group of major auctioneers and dealers: “A scandal can undermine the whole market just as a financial scandal can undermine the banking world. One could do without it. But I don’t believe one scandal allows the hypothesis of a barrel of rotten apples. This is an extremely open and transparent market.”

Countered Hugh Leggatt, who was awarded a knighthood for his 50 years in the market, seven of them as a member of the government’s watchdog Museums and Galleries Commission: “Of course it is a dirty business. Smuggling? It goes on all the time! Hanky-panky among rich people making fools of themselves--that’s Parliament’s attitude. But it’s morally wrong; it should be stopped. The trade is beginning to come a cropper.”

In general, the vagaries of the art trade do not interest British police or customs officials. It is not illegal to import or offer for sale art objects that have been illegally exported from another country.

There is in fact little government monitoring of a market whose yearly turnover is between $3 billion and $5 billion. Britain is also liberal when it comes to allowing its own art to be exported, limiting official interest to pieces of significant artistic or historic value.

The high-toned, self-governing London art world, an important source of wealth, employment and national pride, is expected to follow high standards as a matter of enlightened self-interest.

“The current system works adequately compared to nothing at all, or some super-policing that would be inconsistent with a democratic society,” said Charles Hill, who until recently headed Scotland Yard’s Art and Antiques Squad. He now works for an art insurance company.

“That’s not to say it is good. The people who are indifferent set the pace for everybody else,” Hill added.

In context, though, insiders believe that a passing scandal poses less long-range concern to the market than does meddling by outsiders.

“It is not ethical standards, which are a matter for individual members, but the questions of tax and royalty that are the main threat to the market,” said Browne at the Art Market Federation.

At present, a 2.5% value-added tax applies to all artworks coming from outside the European Union. EU planners in Brussels want that to be doubled next year.

EU officials also want Britain to impose a royalty charge or resale right called a droit de suite, which would pay 2% to 4% of an artwork’s sale price to the artist, or to his estate if he died within the past 70 years. The tax is recognized by 11 of the 15 EU Members, although only eight apply it in practice. All should levy it equally, EU officials say, in the interest of market harmonization.

While the industry lobbies against the EU measures, it is also reviewing the state of its own house. Some constructive changes are already in place, and others are on their way: The broadcast of Watson’s documentary has encouraged all dealers to review their ethical standards.

Databases of stolen art and antiques, including the Art Loss Register, underwritten by Sotheby’s and other major houses, are making it easier for dealers to guard against stolen goods. The Register has lately been adding about 1,400 pieces of stolen art and antiques each month, more than triple the 1993 average, and has thus far in 1997 identified nearly $20 million in stolen goods, according to operations manager Caroline Wakeford.

In coming months, old-line, cash-on-the-barrelhead business practices will be sacrificed to help insulate the trade from thieves and drug smugglers, who often use works of art to launder money. In the future, dealers will be asked to record the identity of major clients and to deal by check when possible, establishing a paper trail.

‘The Auction Market Is Clean’

“I genuinely believe that the auction market is clean. We work ethically, but we need to prove it. We must not only be clean but also be seen to be clean,” said Hollest at Phillips of Bond Street.

Proposals for radical reforms ride the restless winds. Some critics want Sotheby’s, London-based Christie’s and other mainline houses to close their antiquities departments altogether, sending a powerful message to gangs of thieves who are systematically looting countries unable to defend their artistic patrimony.

The Assn. of Art and Antique Dealers, known as LAPADA, is asking the nation’s 470 fine-arts auction houses to rewrite their rules, proposing that auctioneers guarantee the authenticity of what they sell and that they adopt measures to clarify bidding procedures, which many critics now say are stacked against buyers.

“None of these measures would be revolutionary. None would damage the legitimate interest of the auction houses. All of them would serve the public interest and would go a long way to restore confidence,” LAPADA argues.

Hardly anybody is sanguine about the London market’s future, but nobody is disconsolate either.

“Scandal does rock the boat, but it is a very strong boat,” said Nicholas Somers at the Society for Valuers and Auctioneers. “It is not a dirty business for our member firms. People normally behave professionally.”

It is important, says Brooks at Sotheby’s, to keep sight of the goalposts in the flux of a rapidly changing industry.

“This is a defining moment in the art market,” she said, “not just for London but internationally. The issue is whether the market will find a way to operate with standards that people are comfortable with.

“Or will regulations and laws make it so difficult that people will choose to go underground? Obviously, that is not in anyone’s interest.”