art

ubs1When Christie’s auctioned off Edgar Degas’s “Danseuses” for nearly $11 million in 2009, the catalog noted that the masterpiece was being sold as part of a restitution agreement with the “heirs of Ludwig and Margret Kainer,” German Jews whose vast art collection was seized by the Nazis in the years leading up to World War II. But now a dozen relatives of the Kainers are stepping forward to object. Not only did they fail to benefit from that sale, they say they were never even told about it, or any other auctions of works once owned by the couple, including pieces by Monet and Renoir. It turns out that the Kainer “heir” that has for years collected proceeds from these sales and other restitutions, including war reparations from the German government, is not a family member but a foundation created by Swiss bank officials. In lawsuits filed in New York and Switzerland, the Kainer relatives contend that officers of the bank — now part of the global banking giant UBS — never made a diligent effort to find them, and worse, used the family name to create a “sham” foundation ostensibly organized to support the health and education of Jewish youth but actually formed, they say, to cheat them out of their inheritance. [NYT via Matt]

Over at Dealbook today, you will find a story about how banks like JP Morgan and BofA are “devising low-fee banking especially for customers with troubled finances,” in spite of the fact that such products are “not expected to make the bank[s] any profit.” And while many argue that the sole motivation is to garner some good PR after doing things like foreclosing on someone who wasn’t in default and stealing her parrot, to boot, it’s nevertheless a nice thing to do. Not having much familiarity with how the other other other half lives, it took some time to figure out how to best serve the needs of these new clients, who Bank America started a sociology department to study. Read more »

Luckily, Steve Cohen could count on Goldman to loan him some scratch. Read more »

  • 31 Oct 2013 at 2:49 PM

Steve Cohen Is Selling Some Art For No Reason

Mr. Cohen is now parting with about $80 million worth of blue-chip art at the important auctions that begin next week at Sotheby’s and Christie’s. It is the largest single group of artworks he has sold at one time and includes top examples of paintings and sculptures by Brice Marden, Rudolf Stingel and Cy Twombly, along with previously reported Warhols and a Gerhard Richter. “We’re in a robust market, and we are actively managing the collection,” said Sandy Heller, his longtime art adviser…Lawyers for SAC and federal prosecutors are putting the final touches on a settlement that, in addition to the guilty plea, will include an agreement for the fund to stop managing money for clients as well as to pay penalties of about $1.2 billion. Combined with $616 million in government fines assessed this year in two related civil cases, SAC will have paid penalties of more than $1.8 billion. Because Mr. Cohen owns 100 percent of SAC, that money will effectively come out of his pocket. People close to Mr. Cohen, who were not authorized to speak, say that the art sales from his fabled collection are not an effort to raise money for his mounting fines and legal fees. Even after his fines are paid, Mr. Cohen will still have billions of dollars in the bank. [NYT]

Someday soon, the Manhattan U.S. Attorney may back the trucks up on Cummings Point Road and Crown Lane and Further Lane and seize some of the toys Steve Cohen has acquired with his allegedly illicit fortune. Perhaps Preet’s mind wandered to that day when he was signing a big chunk of Mark Dreier’s former art collection to a hedge fund Dreier screwed over. Perhaps it occurred to him that, since there’s no Heathfield Capital owed a pickled-shark-and-Picasso‘s worth of restitution, Stevie’s impressive private museum might just make a fitting monument to his own prosecutorial victories? Read more »

  • 26 Mar 2013 at 12:20 PM

Steve Cohen Bought Himself A Little Pick-Me-Up

As you may have heard, the last number of months have been a bit tough on hedge fund manager Steve Cohen. In November, one of his former employees, Mathew Martoma, was accused of orchestrating “the most lucrative insider trading scheme ever,” in a criminal complaint in which Cohen was referenced as Portfolio Manager A. A week later, the Times lopped 21,000 square feet off his house. Earlier this month, he had the pleasure of setting the record for the largest insider trading fine ever, at $614 million, a sum that does not even put this whole thing behind him, as the settlement “doesn’t preclude the Securities and Exchange Commission from pursuing Cohen himself in the future.” So you’ll excuse the Big Guy if he felt the need to indulge in a little retail therapy recently. Read more »

If you like or hate financial regulation you might take a quick look at today’s front-page New York Times article about how the art market is unregulated. Apparently this leads to terrible things like “chandelier bidding,” where auctioneers get the ball rolling by calling out a few fake bids, as well as conflicts of interest involved in third-party guarantees where someone writes the auction house a put on an artwork, is paid a variable commission for that put, and in some cases is allowed to credit that commission against his own bid for the artwork.1 One question you might ask is “why is that bad?”; the answer seems to be that some rich people who go to art auctions pay more for art than they would in the absence of these systems, and then feel vaguely uneasy about it. I think the whole thing disappears in the face of one more iteration of “well, why is that bad?,” but perhaps I am wrong.

There are places where you should think “customers should be protected from various sorts of sharp practices by dealers,” and there are places where you should not think that. I guess? Are there only the former?2 I come from a place that believes deeply in the separation between “sharp practices” and “illegal fraud” and works to keep them distinct. One thing the Times article mentions is that there is a law saying that stores have to display the price of their wares, and art dealers ignore that law, and this is bad for some reason. Try that law on derivatives dealers. One of the main driving forces behind financial innovation is finding novel places to hide fees.

The rest of the art-auctioneer tricks also seem pretty familiar. Imagine an M&A banker who couldn’t bluff, to the one serious bidder for an asset, that he had other bidders waiting in the wings. And of course the financial industry is very familiar with the creative use of options and guarantees to allocate value in ways beyond a headline purchase price. One flavor of that is “schmuck insurance.”3 Read more »