Sunday, December 7, 2014

156. Sotheby's and Christie's and Bunny and Andy, and Who Goes to Jail and Who Doesn't



     Imagine a banquet hall with a long table – the longest I have ever seen – where sixty or eighty elegantly attired guests are dining sumptuously, while uniformed waiters and waitresses stand quietly behind them, bottle in hand, ready to replenish the guests’ wine or champagne glasses, should the need arise.  Except for the contemporary togs, it could be a scene from the Gilded Age, or even the Versailles of Louis XIV.  But no, it’s a photo in the New York Times of a dinner party given by Sotheby’s to provide a preview of furniture, jewelry, and other objects from the estate of the deceased philanthropist Rachel Lambert Mellon, known as Bunny, soon to be auctioned.  When not dining, the select guests perused thousands of objects up for sale – French furniture, porcelain, silver, rugs, crystal, weather vanes, and jewels – all of them a tribute to Bunny’s mania for acquisition, her refined taste, and her love not of flamboyance but simplicity. 

     The late Mrs. Mellon (whom I can’t resist calling Bunny) was no New Yorker, for she and her husband lived on a 2,000 acre estate amid the rolling hills of Virginia where even today a moneyed gentry rides to hounds.  (At least, that was one of her five homes.)  Born to wealth, she had married into even greater wealth and so could have whatever she wanted, but she surrounded herself with just what she loved.  When not collecting art, she gave herself to philanthropy and gardening, and at the invitation of President John Kennedy redesigned the White House Rose Garden. 

     The first auction, comprising 43 of her art works, had already drawn bidders from 32 countries and four continents to a sale that realized $158.7 million, far more than anticipated.  Though William F. Ruprecht, Sotheby’s CEO, emphasized that Sotheby’s knows better than to predict the excitement and outcome of a given sale, it was expected that the general public would bid up the property of a woman who was, if not quite the last of her kind, at least a dazzling representative of a bygone Whartonian age (meaning the age of novelist Edith Wharton), when hereditarily rich Americans lived lavishly and well.  Typical of her discerning taste were two blue pendant diamonds, one light blue and the other described by a Sotheby jewelry expert as “a rare, fancy, vivid, intense blue”; together, they were expected to go for between $10 and $15 million.  And a 34-carat ruby set in a simple diamond bracelet was termed “just über-chic.”  But lack of ostentation was Bunny’s principle.  “Nothing,” she insisted, “should be noticed.”   At least, not until auctioned by Sotheby’s.

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The Duchess of Alba
Octavio Aceves
     If I have lingered a bit over Bunny Mellon and the Sotheby auctions of her possessions, it’s because the world of the superrich is terra incognita for me, a vast hinterland on whose shining shore I have never set foot, and therefore, for me, a land of dark and baffling mystery.  And even as I was learning for the first time of the existence of the fabled Bunny, I read an obit of another celebrated heiress, Spain’s legendary Duchess of Alba (the eighteenth of that name), whose flamboyant and much-reported lifestyle forms a sharp contrast with the discerning and low-keyed Mrs. Mellon.  The Duchess – María del Rosario Cayetana Alfonsa Victoria Eugenia Francisca Fitz-James Stuart y de Silva – had even more inherited titles than names, and as head of the five-century-old House of Alba she enjoyed such rare privileges as not having to kneel before the Pope, and the right to ride on horseback into the cathedral of Seville.  (Whether she ever did the latter, I have no idea, but I’d love to have seen it.)  Her second marriage to a defrocked Jesuit priest shocked society, as did her third and last marriage to a commoner of little wealth some 25 years her junior.  A Times photo shows her at 85, her fuzzy white hair a sort of Castilian afro, dancing with hubby no. 3 and, by the looks if it, having a hell of a good time.  I mention her here as a contrast to Bunny Mellon, for if you might expect the European aristocrat to be conventional and hidebound by tradition, and the American to be a bit wild and adventurous, the exact opposite seems to have been the case.  But they were both filthy rich and, in spite of it or because of it, interesting.  To me, at least.

     If a fabulously rich American dies, the estate is bound to end up being auctioned off by either Sotheby’s or its arch rival Christie’s, both of them New York-based American branches of venerable English enterprises dating back to the mid-eighteenth century.  Sotheby’s traces its origins to an enterprise founded in London in 1744, and established its New York branch in 1955.  Today it is headquartered in a soaring ten-story building with a nine-story glass atrium and galleries at 1334 York Avenue, on the corner of 72nd Street, with exhibition space on six floors that boasts a state-of-the-art lighting system allowing nuances and subtleties of color and surface to be strikingly revealed.  Above its palatial entrance fly the flags of five nations, in testimony to its international operations.  Its premises past and present have seen the sale of such notable items as Napoleon’s St. Helena library, the Duchess of Windsor’s jewels, Rembrandt’s Aristotle Contemplating the Bust of Homer (memorably satirized by the Le Canard enchaîné as de Gaulle contemplating de Gaulle), and the first printing of the Declaration of Independence.  A fitting locale, then, for the sale of Bunny’s estate.

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Sotheby's on York Avenue

     But lurking in the offing, always, is its rival, Christie’s.  Dating from 1766 in London – 22 years after Sotheby’s founding – Christie’s came to New York in 1977, once again 22 years after Sotheby’s, and it has been trying hard to catch up ever since.  By the mid-1990s its annual pretax profits were about $60 million, an impressive figure until compared with Sotheby’s for the same period: $265 million.  But Christie's has auctioned off works by Picasso, Rembrandt, Leonardo de Vinci, and van Gogh, and items associated with Marilyn Monroe, and yes, Napoleon.  It is now housed in a 310,000-square-foot facility at 20 Rockefeller Plaza, in the heart of Rockefeller Center, with the flags of three (only three!) nations flying above its soaring triple-height entranceway: a location that might make Sotheby’s location off to the east on York Avenue seem just a trifle out of the way. 

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Christie's in Rockefeller Center
David Shankbone

     Of all Christie’s legendary sales, none is more impressive than the one on November 12, 2014, of 80 works of contemporary art, which brought in a record-breaking $852.9 million.  Christie’s experts had promoted the sale for months as a once-in-a-lifetime event, and buyers had flocked not only from the U.S. but also the Middle East and Asia.  Prominent among the works sold were two by Andy Warhol: “Four Marlons” showing a quadruple Marlon Brando in a leather jacket staring defiantly from under a peaked cap on his motorcycle, which went for $69.6 million; and “Triple Elvis (Ferus Type)” showing three overlapping Elvis Presleys in cowboy garb, legs apart, brandishing a handgun, which fetched an astonishing $81.9 million.  Even so, neither topped the $104.5 million paid at Sotheby’s a year before for Warhol’s “Silver Car Crash (Double Disaster)” – a sale that I marveled at in my post #108: “Andy Warhol: Genius or Fraud?”  But the two Warhols eclipsed the other items offered, including works by Willem de Kooning and Cy Twombly that also broke auction records for those artists.

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A Christie's auction, circa 1808

     And who paid these remarkable prices?  For the Warhols, two unidentified telephone bidders, for such is the discretion accompanying these headline-making sales.  Someone somewhere can get his (or her) eyeful of Andy’s quadruple Marlon, and enjoy the thrill of having no less than three Elvises point his handgun right at him.  Given what they paid, I wish them well, though therapy might be appropriate.  Still, history was made.  Said one successful buyer, “The quality of the sale was epic.”  But not everyone agreed, as shown by comments appended to a Wall Street Journal online account of the sale:

·      How many royalty payments went to the artists or their estates?
·      I smell a lawsuit coming.  Equal pay for equal work.
·      P.T. Barnum knew his stuff.
·      “Andy Warhol is the only genius I’ve ever known with an IQ of 60.”  Gore Vidal

     Whatever happens at Christie’s can have repercussions at Sotheby’s, and vice versa.  Christie’s “epic” sale, netting a record $852.9 million, far eclipsed the mere $343.6 million that a sale of contemporary art by Sotheby’s had brought in the night before.  It was surely no coincidence that one week later, on November 20, Sotheby’s announced that its longtime CEO, William F. Ruprecht, was stepping down – an announcement hailed by shareholders, it would seem, since shares in Sotheby’s, the oldest listed company on the New York Stock Exchange, jumped more than 7% in after-hours trading.  Mr. Ruprecht’s departure was “by mutual consent,” the company insisted, but there was little doubt that it had been prompted by the well-publicized criticism of billionaire hedge fund manager Daniel S. Loeb, a major shareholder, who had long derided Sotheby’s as “an old master painting in desperate need of restoration,” and fiercely criticized its deteriorating competitive position with regard to Christie’s.  

     Judging from photos, Mr. Ruprecht is a full-faced, chubby gentleman with graying hair who could be your kindly grandfather.  Formerly an auctioneer, he is also an expert in textiles and tapestries, so he knows the auction and art scene well.

     By way of contrast Daniel S. Loeb, only five years his junior, looks younger and leaner; dark-haired, he radiates an aggressive, almost savage energy.  Annoyed by a job inquiry from a U.K. fund manager who cited the applicant’s “place in society,” Loeb replied that his New York-based hedge fund, Third Point, was “a bunch of scrappy guys from diverse backgrounds (Jewish, Muslim, Hindu etc.) who enjoy outwitting pompous asses like yourself in financial markets globally.”  Which echoes his reminiscence of the “prep school snotty kids” who treated him like a “jerk” but failed to get A’s when he did.  Vibrant he is; subtle he ain’t.  And he certainly isn’t your kindly grandfather, more likely an irascible uncle whose visits inspire more dread than joy.  His stated aim: to make money for his shareholders.

     Loeb, who loves the limelight, takes delight in buying up stakes in underperforming companies and then noisily demanding major changes.  Frankly, he thinks Sotheby’s management sucks.  Among his many complaints:

·      Sotheby’s has lost market share in contemporary art.
·      Its board owns only 0.87% of the stock, has little “skin in the game.”
·      Sotheby’s lacks innovation and creativity at senior levels.
·      It is focused on the short term rather than on long-term investment.
·      It is slow in developing an online strategy.
·      It hasn’t wooed millionaire customers in third-world nations like China.
·      It has wasted money on “legal shenanigans.”
·      It disregards shareholder interests.
·      Its CEO remuneration is excessive.

As regards the last point, he mentions Mr. Ruprecht’s $25,000 annual personal automobile allowance (he must be rather mobile), and the company’s paying his country club dues and financial planning fees.

     Certainly Daniel Loeb’s criticism merits attention, since he himself is a serious collector of contemporary art, adorning his residences and Park Avenue office with multimillion-dollar masterpieces such as a giant metallic pink-and-blue egg by Jeff Koons, and a sculpture of a crucified frog by Martin Kippenberger.  His fondness for metallic eggs and crucified frogs shows that he is no chaser after Rembrandts; his stance is defiantly modern, and that’s what he wants from Sotheby’s.  Meanwhile, when not shaking up the business world, he is surfing at a “secret spot” in the Caribbean, or practicing Transcendental Meditation, which involves a 20-minute silent meditation twice a day – a good antidote to the pressures of Wall Street.  (Admittedly, I find it hard to imagine Daniel Loeb silent for 20 minutes even once a day.)

     William Ruprecht will get severance pay of $4 million and stay on at Sotheby’s until his successor is found, but changes are surely on the way.  Will Daniel Loeb’s scathing criticism revive the venerable auction house and let it beat out Christie’s?  Time will tell.

      Ironically, William Ruprecht became Sotheby’s CEO in a time of crisis.  Back in 2000 the art world was shocked, shocked to the bones, to learn that the two colossi of the auction scene had been engaged in price-fixing, which was definitely a no-no and against the law on this side of the pond.  It seems that Sir Anthony Tennant, upon becoming chairman of Christie’s in 1992, invited Sotheby chairman Albert Taubman to get together and discuss the affairs of both houses.  Meeting at Taubman’s digs in London over a breakfast of scrambled eggs and smoked salmon, each voiced his gripes about the other’s firm and lamented the current state of the auction world.  To remedy matters, they then initiated an agreement, the details to be worked out later by their CEOs, not to waive their commissions so as to win major consignments, and even to have a nonnegotiable sliding scale for those commissions, depending on the size of the consignment.  Which was definitely price-fixing.

     The U.S. Justice Department had its suspicions but no proof, until a new majority owner of Christie’s, French billionaire François Pinault, fired Christie’s CEO Christopher Davidge for alleged extravagant spending.  Miffed, Davidge then, like a good citizen, offered his ample notes on the price-fixing deal to Justice in return for amnesty for himself and Christie’s, and an $8 million severance from Christie’s.  In short, he spilled the beans.  The result:

·      Sotheby’s CEO Diana D. Brooks agreed to testify against Taubman, and got 3 years probation, with 6 months detention in her $5 million Manhattan co-op (which must have been rough).
·      Taubman, Sotheby’s chairman, at age 78 got a year and a day in prison, plus a $7.5 million fine and the cost of his incarceration (an estimated $21,601 a year).
·      Sotheby’s was fined $45 million.
·      Christie’s and Sotheby’s both survived the scandal and continue to be the auction houses of choice for the superrich.

     So while Taubman’s codefendant Tennant kept his knightly presence aloof and safe in England, Taubman, an untitled American, took the rap, presumably showing that auction house honchos (at least some of them), unlike bankers, are not too big to jail.  And this in spite of testimonial letters from such luminaries as ex-President Gerald R. Ford, ex-Secretary of State Henry Kissinger, and Queen Noor of Jordan, not to mention the defense’s claims that the defendant was in poor health, a victim of multiple strokes, and taking 26 pills a day, to which the prosecutor replied, “He still hunts, fishes, plays golf, and travels nationally and internationally.”  “No one is above the law,” pronounced the judge.  Taubman did indeed go to prison, but when released in 2003, he was picked up by his private jet and was soon attending celebrity social events in New York, following which he was honored by more than seventy Detroit notables at an event in his home state of Michigan celebrating their friendship with him.  He was, after all, a well-known philanthropist, and a real estate developer credited with pioneering the modern shopping mall.

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The Taubman Student Services Center at Lawrence Technological University in Southfield, Michigan.  No wonder Mr. Taubman is popular in Michigan.

     When this scandal broke out in 2000, it was none other than William Ruprecht who succeeded Diana Brooks as CEO of the embattled Sotheby’s, hoping to bring peace to its troubled soul and redeem its once sterling reputation.  Which he did, more or less, until that nasty Daniel Loeb came along.

     But Christie’s has just shocked the art world with a surprise development of its own.  On December 2 of this year, a mere three weeks after he presided over Christie’s record-breaking sale of contemporary art, Christie’s announced that CEO Steven P. Murphy is being replaced by Patricia Barbizet, a longtime aide to M. Pinault, the majority owner.  Why the change, when under Murphy’s tenure Christie’s has clobbered Sotheby’s in sales of contemporary art?  Probably because Christie’s, competing fiercely with Sotheby’s, has been giving up commissions and giving sellers hefty presale guarantees, thus cutting into its profit.  M. Pinault apparently got tired of this, hence the change.  So another CEO bites the dust.  I doubt if I'd care to work for M. Pinault.

     But enough of the doings and misdoings of the superrich.  What is it like to attend a Sotheby’s or Christie’s auction and bid therein?  I have no personal knowledge of such, but a friend of mine does.  She informs me that the presale exhibits of the two auction houses are often the best art and antique shows in town, and well worth visiting even if one has no intention of bidding.  Over the years she and her husband have seen extraordinary exhibits there of Old Masters, French Impressionists, Americana, and English, Russian, Japanese, Chinese, Korean, and Latin American art, not to mention furniture, carpets, books, and historical memorabilia. 

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A Rake's Progress, plate 3.  A wild party in a brothel, where the prostitutes steal the drunken
rake's watch.

     A real pro, at the exhibits she has never hesitated to speak to one of the experts for information and advice about how much to bid.  And bid she does, finding it exciting and fun.  She and her husband furnished their East Side apartment with English and American furniture and Oriental rugs from Sotheby’s at prices well below those quoted by retail outlets.  A disciplined buyer, she has never bid more than she intended to, and is never depressed if an item escapes her.  (I confess that I would be, but then, I’ve never been a buyer.)  But the best fun of all, she assures me, comes when you find a bargain because you know more about it than the auction house and the seller.  Once, at Drouot, a leading auction house in Paris, they bought a complete set of Hogarth’s famous prints A Rake’s Progress, which had been mislabeled “estampes allemandes” (German prints).  As for the difference between the two houses, she thinks Sotheby’s is more popular and Christie’s more elegant, but often finds the objects and art they both offer breathtaking.  Her remarks are a reminder that the two houses don’t just cater to the superrich; they have stuff for everyman … and everywoman.

     Coming soon:  Taxes: Who Pays Them and Who Doesn’t.  In the offing:  Goldman Sachs: is it really a giant vampire squid?

     ©  2014  Clifford Browder