by Don Thompson
Heidi bids and is successful. She arranges with Christie’s for possession of the Warhol and transfer of title to a trust account to take place a few days later, timed to coincide with arrival of the painting on the taxiway beside the Luxembourg Freeport. As the plane rolls to a stop at Findel, funds are transferred from the Swiss bank to Christie’s account in London. The plane offloads the Warhol, which goes into storage. Neither Christie’s nor Heidi knows the beneficial owner of the work—nor do they want to. When it comes time to resell the Warhol the process works in reverse. Neither the auction house nor dealer knows the identity of the seller. Proceeds move to Gerhardt’s trust fund, onward to Ivan’s Swiss bank, then to an offshore account. Any profit from the transaction is taxable in Ivan’s country of domicile. It is Ivan’s responsibility to report the transaction and profit.
Gerhardt is bound to confidentiality by strict Swiss legal and banking codes; he is subject to both civil and criminal penalties for any violation. Swiss courts will not honour foreign court orders for Gerhardt to produce information.
Note, though, that David Hiler, president of the Geneva Free Port (which is partially owned by the municipality), announced in November 2015 that identity checks would be made on new and existing tenants. Anyone with a criminal record would be asked to leave. Gerhardt may now find a new role as nominee owner of Geneva Free Port spaces.
Readers who were intrigued by the April 2016 leaking of the Panama Papers and the subsequent Modigliani seizure in Geneva may assume that most offshore art deals—like my Warhol example—take place via Panama, with a shell company registered in the British Virgin Islands. Both Panama and the BVI have been used for decades to conceal assets, but not often art.
The Panama Papers are 11.5 million documents from Mossack Fonseca, a Panama-based law firm that specializes in wealth management. The documents were leaked to German newspaper Süddeutsche Zeitung and shared by the International Consortium of Investigative Journalists with media partners around the world. They reveal some of the offshore assets of several thousand people, including twelve presidents, prime ministers and monarchs, plus thirty people on a US blacklist for terrorism, for drug sales or for illegal trading with countries that the US has blacklisted. The Panama Papers have been interpreted as showing how the law firm helped clients hide money and evade tax.
The documents contain many revelations about the art world. They shed light on the Christie’s auction of the Ganz Collection of modern art in November 1997. That sale totalled a then-record $206.5 million and included works by Picasso, Jasper Johns and Robert Rauschenberg. The Papers revealed that six months prior to the auction, many works in the collection had been sold for $168 million to a company called Simsbury International Corporation, which was registered in Niue in the South Pacific. The seller was listed as Spink & Son, a London auction house then owned by Christie’s. Spink appears to have been acting as a broker for the Ganz family. The sale stipulated that the artworks would be offered at auction as the “Ganz collection.” If they brought more than $168 million, Simsbury and Spink & Son would share the difference.
Another disclosure was that Dmitry Rybolovlev (mentioned in Chapter 10) stored $650 million in art in a sole-owned offshore company, Xitrans Finance, amid divorce proceedings with his wife, Elena, that began in 2008. The art included works by Picasso, Van Gogh, Monet, Degas, Rothko and Modigliani. A Rybolovlev family trust official said that “the structures were set up completely legitimately for the purposes of asset protection and estate planning.”72
In my Warhol example, the “offshore account” that money comes from and returns to could be in the BVI, the Cayman Islands or one of a dozen other jurisdictions offering bank secrecy. A new option, one increasingly used because of additional benefits, involves placing art or other assets in a trust based in the Cook Islands.
The Cooks cover 236 square kilometres—fifteen small islands in the south Pacific, 1,100 kilometres southwest of Tahiti. The largest island is Rarotonga. The Cooks have 12,500 citizens and English as the language of business. The Cooks judicial system is based on English common law; Cook trusts were designed for offshore asset protection trusts. Investment accounts, businesses, real estate, yachts, private aircraft and art can be registered in a trust. The trust assets may be located in a foreign freeport. Trust owners need not have ever visited the islands. Trust holders are guaranteed total anonymity.
The Cooks offer a potentially valuable additional benefit. In almost all cases the courts will ignore foreign court orders or government inquiries. Cook law prevents trust assets from being transferred when the owner is under duress; that specifically includes the owner being under arrest or involved in a legal case. Trust owners in either situation are unable to honour a court order requiring them to transfer assets in the trust, or even to obtain confirmation that they have a trust.
The International Consortium of Investigative Journalists, based in Washington, uncovered some details about Cook trusts in 2013. Reports in the New York Times based on this information identified one trust controlled by Denise Rich, divorced wife of convicted commodities trader Marc Rich. Her trust was reported as containing $100 million in assets, including a Learjet and a yacht. R. Allen Stanford, who was sentenced in 2012 to a 110-year term for running a $7-billion Ponzi scheme, had a Cook “Baby Mama” trust, the term indicating a mistress with whom he had children. The trust contained bank accounts in Switzerland and the Isle of Man, with Mama as the trust’s beneficiary.
Freeports and Cook Island trusts have received little attention from Western regulators, perhaps because they are not under any country’s jurisdiction. Art-world perception is that this will continue as long as freeports are diligent about screening terrorists or organized crime. Use of a Cook trust to shelter a valuable art collection has so far elicited little legislative concern in any jurisdiction.
CHAPTER FIFTEEN
THE UNEASY MARRIAGE OF ART + FASHION
“A black hole of bad art and superficial temptation.”
—Nicolai Ouroussoff, New York Times writer, on the 2008 collaboration called Chanel Mobile Art73
“I don’t think Mr. Murakami would have the reputation he does today if it weren’t for the collaboration with Louis Vuitton.”
—Mitchell Oakley Smith, art and fashion writer74
IN 1999 FRENCH FASHION SUPERSTAR BERNARD ARNAULT PURCHASED A controlling share of Phillips auction house for $120 million, through his publicly traded luxury goods holding company LVMH Moët Hennessy Louis Vuitton SE, known as LVMH. Stock analysts and the financial press were hugely critical of the acquisition because being identified as owner of an auction house, even one focusing on contemporary art, was considered detrimental to the aura around high fashion. The criticism was sufficiently intense that after a money-losing 2001, Arnault walked away from Phillips, essentially gifting the LVMH share of the auction house to partners Simon de Pury and Daniella Luxembourg, who owned the minority share.
In 2008, control of what was then called Phillips de Pury was sold to the two Leonids—Leonid Friedland and Leonid Strunin, who controlled the Russian luxury retail conglomerate Mercury (distributors of Armani, Chopard and Tiffany). The Leonids argued that Phillips was a logical extension of their existing luxury and fashion empire.
The perceived compatibility of art and fashion changed a great deal in the years after Arnault originally purchased his controlling share of Phillips. Consider the following examples of the marriage of art + fashion, and reach your own conclusion as to whether these represent a threat to the way contemporary art is perceived.
The first example is an expensive promotion that took place just for the media coverage it was expected to produce. In 2007, the Chanel fashion house commissioned London-based architect Dame Zaha Hadid to design a flying-saucer-shaped display structure, a 7,500-square-foot, 180-ton building to be called Chanel Mobile Art (see photo insert). The structure was designed to be disassembled and moved to a new city every few months. The interior was desig
ned by Karl Lagerfeld, Chanel’s creative director. Mobile Art was filled with commissioned artwork inspired by the label’s quilted, chain-strapped black leather 2.55 handbag.
French contemporary artist Fabrice Hybert contributed a quilted-leather S&M room. Swiss-born contemporary artist and sculptor Sylvie Fleury produced Crystal Custom Commando, a purple 2.55 handbag containing a large Chanel makeup compact showing a video of women with guns shooting at Chanel purses. Chanel Mobile Art opened in Hong Kong in February 2008, moved to Tokyo in July and closed in New York’s Central Park that fall. It was withdrawn after only those three stops, and after expenditure of €12 million ($18 million). Chanel said the display had met its goal of emphasizing the artisanal nature of Chanel’s products and their relationship to contemporary art.
Chanel Mobile Art probably did little damage to the careers of the artists involved. Fleury and Hybert were not well known at the time; their names would likely not be remembered by those who toured the display. For the artists it was a source of income, a chance to monetize their momentary market fame. It is understandable, given the frequency of promising artists suffering precipitous declines. Many artists with long careers still earn far more from their fashion affiliations than from the sale of their art.
For the two artists it also offered a brief admission to a world of publicity and glamour. Short-term advantages outweighed the reputational risk. It used to be accepted that artists jeopardized their authenticity with almost any corporate collaboration. Today, artists cross their fingers and sign the contract. The larger question was whether the concept of contemporary art was damaged, given that art was being used like designer packaging or a television commercial, as burnishing for a cosmetic.
Those who did remember the names of the artists would thereafter think of them differently. A dealer friend provided an interesting analogy (referring to one of his own gallery artists): “The temptation is like a starlet being offered the chance to pose nude for a Playboy centrefold. It is profitable, and results in temporary fame. The net result may be good or bad, but the actress is never viewed the same afterwards.”
A better-known art-to-fashion collaboration is that of Japanese artist Takashi Murakami with Louis Vuitton. At the fall 2007 Murakami retrospective at the Museum of Contemporary Art, Los Angeles (LAMOCA). curator Paul Schimmel made the controversial decision to host a 1,000-square-foot Vuitton boutique within the Murakami exhibition. The Oval Buddha sculpture, the feature exhibit of the show, is a 6600-pound, 18-foot-tall sculpture of a Janus-faced Buddha in a lotus position. Vuitton offered $960 handbags with Murakami’s well-known cherry blossoms and fruit, or “jellyfish eye” illustrations plus the LV logo. Reportedly about ten handbags were sold each day. Art and fashion writer Elizabeth Currid described the venture as “a new kind of product, one that expands the economic horizons of all the parties involved.”75 The involvement of LAMOCA as a party took commercialization of art + fashion to a new level. Murakami titled his LAMOCA show “© Murakami.”
Marc Jacobs then invited Murakami to help design other LV handbags. Several years later, Vuitton offered Murakami cherry-design handbags to coincide with the release of two versions of his sculptures of a smiling red cherry. Murakami later expanded from high fashion to low. The artist’s company marketed T-shirts, key chains, mouse pads and phone caddies with art images. Murakami was quoted in the New York Times as saying that his art process is “more about creating goods and selling them” than about exhibitions.76 His art, he says, is a hybrid of a commercial and an artistic product. He creates commerce; his commerce creates art.
Following Murakami came the Japanese artist Yayoi Kusama, who in 2012 produced a collection for LV featuring polka-dot handbags, plus window displays and interior store designs. The window display at the Selfridges department store in London featured her giant pumpkins. The fashion house released the handbags in conjunction with the opening of Kusama’s retrospective at the Whitney in New York.
The most publicized commercializer of his own art is Damien Hirst, particularly when it comes to his spot paintings and his sculpture For the Love of God (2007). The latter is a platinum cast of an eighteenth-century human skull, encrusted with 8,601 diamonds. At the centre of the forehead is a fifty-two-carat, brilliant-cut diamond said to have cost £4 million ($6.2 million). The work was constructed by artisans from the Bond Street jewellers Bentley and Skinner, with Hirst maintaining creative control. The skull was offered for sale at £50 million ($78 million). Hirst’s dealer White Cube sold limited-edition silkscreen prints of the work priced at £900 ($1,400) and £10,000 ($15,500). The higher price was for a print sprinkled with diamond dust.
Hirst also launched a line of clothing featuring Levi Strauss black denim jeans with pockets featuring a Hirst skull or other symbols from his iconic works. For his 2012 retrospective at the Tate Modern in London, the museum store offered a £36,800 ($57,000) limited-edition plastic skull painted in household gloss. There were also rolls of spot wallpaper at £250 ($387) and a dozen other products based on his coloured dots. Later Hirst opened his own retail shop in Marylebone, called Other Criteria. It offered a different plastic skull. This also had glossy paint, and sold for £25,000 ($38,700). The London Telegraph reported that his shop had first-year sales of £7.5 million ($12 million). Hirst has said that seeing people buy his spot-themed wallpaper “makes me feel alive.”77 So how should the public consider Damien Hirst—as a contemporary artist or a fashion conglomerate that makes art? How should his work be perceived?
For her spring 2014 Milan show, Miuccia Prada commissioned six contemporary artists to create murals for the catwalk. The resulting imagery appeared on dresses and handbags in the collection. In December 2014, luxury jeweller Swarovski exhibited at the Design Miami fair, in a tent adjacent to Art Basel Miami. The company offered a Swarovski crystal–encrusted 10-foot (3-metre) sculpture of King Kong climbing the Burj Khalifa in Dubai. Priced at $520,000 each in an edition of seven, at least two sculptures sold during the fair.
Many art movements have a history of being “hot” and then at some point losing that status. Sometimes, as with trends in fashion, this has happened because the movement became extreme, or because a new movement replaced it. Sometimes there was no apparent reason. Think of the relative loss of centuries-long interest in the art of the Renaissance after 1990, or on a smaller scale, of Dada after 1924 or surrealism after 1960, or op art after 1970. The social appeal of collecting almost any form of wall art declined in Britain for much of the 1800s, then returned.
Owning and displaying contemporary art became hot in Western countries between the late 1970s and the early 2000s, and in Russia, China and the Middle East toward the end of this period. In no country did someone say, “This is the thing that you should have to illustrate your cultural stature and wealth.” In some mysterious way, the desire to acquire reached a tipping point among the wealthy of each country.
What could cause contemporary art to lose some of its current status? Not to lose its artistic appeal, but its social significance and speculative appeal? One factor could be the wilder attempts by fashion houses to cross-brand with art and artists. Another could be attempts by contemporary artists to diversify by marketing fashion products based on their art. The legitimacy of the current art market depends on the market retaining the belief that current distribution channels and price levels can sustain the social and cultural significance of collecting.
Fashion and art are collaborating to a degree far beyond the just-mentioned examples. Artists and art are incorporated in fashion promotion, targeted not only at the affluent who have traditionally been a market for both fashion and art but also at consumers under the age of thirty, the entry-level market for fashion. The fashion houses involved include Louis Vuitton, Chanel, Hugo Boss, Salvatore Ferragamo and Burberry. These firms try to absorb the desirable attributes of contemporary art in their own products. An art connection allows fashion and luxury goods to expand their brand image and sell at higher price
s. Such brands are Veblen goods, where demand rises as goods get more expensive, because the goods now convey more status. The concept originated in 1899 with economist Thorstein Veblen. He famously defined luxury as a form of waste designed to confer status on an essentially useless class of people.
There has been a proliferation of fashion exhibitions in museums of fine art, in part because fashion is much less expensive to assemble, insure and show than painting; in part because fashion houses offer “generous support” for shows of their work; and in part because young museum patrons seek events rather than exhibitions (more about that later).
Immediately after a Frank Stella retrospective, the Whitney museum in New York offered Proenza Schouler’s fall showing of blazers, dresses and knitwear. In March 2016, the de Young Museum in San Francisco presented a retrospective of the fashion of Oscar de la Renta, “organized … with the collaboration of Oscar de la Renta LLC.”78 At about the same time, the Cooper Hewitt museum in New York held an exhibition of Thom Browne shoes, showing fifty pairs of Thom Browne brogues coated with nickel. The distinctive red, white and blue brand labels on each pair were visible. Jason Farago wrote of the show in the New York Times, “This featherweight display is neither a show of decorative arts nor of fashion. It is something closer to an ad campaign.”79