To break the tension, I held up a copy of the Financial Times, pointed to the headline, and said, “I don’t think I’d look good in stripes!” (Later in court, testifying under oath, Dede would twist this story to say I had threatened her by saying she would look good in stripes. Don Pillsbury testified to the accuracy of my account, but no perjury charges were ever brought against Dede, the government’s star witness.) The lighthearted aside, which prompted nervous but audible laughter from Dede and Don, was intended to dismiss the unthinkable outcome of my going to jail. I was relieved to hear Dede’s assurances that there was nothing to worry about.
When we met about a week later at my home in Palm Beach, Dede again failed to come clean. She acted as if it were business as usual with Don, Max Fisher, Jeff Miro (on the phone), and me, and left the meeting early to fly to Paris on business. What she didn’t tell us was that she had arranged an unauthorized meeting to offer the company for sale to Bernard Arnault, chairman of LVMH Moët Hennessy–Louis Vuitton. Arnault had recently acquired Phillips, a second-tier London-based auction house. Years earlier, Arnault had inquired through his bankers if we were interested in selling Sotheby’s. He visited with me in New York and made a verbal offer for my shares. I informed Dede of Arnault’s offer, and she encouraged me not to sell, insisting that Sotheby’s stock was worth $100 per share. I turned him down, and the discussions never went beyond that preliminary, exploratory stage. Evidently, Dede, acting on her own, felt the time was right to rekindle Arnault’s interest—just as the U.S. Justice Department was preparing to charge us with price-fixing!
Over the next few days, it became clearer that Dede had indeed conspired with Christie’s CEO, Christopher Davidge, and was prepared to testify that she had done so on my orders. While I knew these charges against me were false, there was mounting pressure on the company for me to step down as chairman. As much as it hurt me to take this step, which I was concerned would be misinterpreted by the board, employees, and the Justice Department as an admission of guilt, I agreed to resign my post. Dede stepped down from her position on the same day, February 21, 2000. Bill Ruprecht, who had worked his way up at Sotheby’s through expert, marketing, and senior management positions, stepped in as president and chief executive officer. (He has done a terrific job guiding the company back to strength and profitability.)
At the time, I considered firing everybody on the board (as majority owner, I could technically do that) when they lost confidence in my innocence and me. Who the hell did they think they were? They knew my character. Isn’t everybody innocent until proven guilty?
Photographic Insert
My wonderful parents, Fannie and Philip
A steel crew taking a break on a Federal’s Department Store site in Detroit in the mid-1950s. I’m the young guy with the fancy hat seated in the center of the first row.
This September 4, 1971 issue of Business Week focused on the wave of regional mall development in America. I was lucky enough to be featured on the cover.
I designed this innovative (for the 1960s) fascia treatment for Max Fisher’s Speedway 79 gas station chain. We created what was, essentially, a large plastic light box along the front of the service station using just-introduced outdoor fluorescent lighting. Motorists took notice, and Max became my lifelong friend.
The closing of our Irvine Ranch acquisition in 1977. Joan Irvine Smith is seated in the center, and Milton Petrie is the first gentleman standing on the left. Next to him is Don Bren, and second from the right is Herbert Allen.
That’s the Great Root Bear on the right. I’ve been told there is a striking resemblance.
I designed The Taubman Company’s office building in Oak Park, Michigan, which served as our headquarters from 1955 to 1968.
Ed Hoffman of Woodward and Lothrop, Taubman Company president Bob Larson, and me visiting a shopping center in the mid-1980s.
The Wall Street Journal was the first to shorthand—and in the process distort—the intended message of a speech I delivered to the Harvard Business School in 1985. Regrettably, “selling art is like selling root beer” became my slogan and was repeated (and often defended) by journalists around the world despite my best efforts to correct it, or at least place it in context.
This ancient Persian fabric bazaar effectively illustrates the fact that enclosed shopping centers were not invented in the twentieth century. Note the center-court fountain, the skylight, and the corridors housing multiple shops. Sketch in a Starbucks, and you’ll have a great- looking contemporay mall.
I went in front of the Monopolies and Mergers Commission in London in 1983 to share my vision for Sotheby’s. They approved and we acquired the venerable auction house soon after.
Dede Brooks and I posed for this photograph during the renovation of Sotheby’s New York office and auction facility on York Avenue. The sparks flying in the background were a sign of things to come.
The first day of trading for Sotheby’s Holdings on the New York Stock Exchange in 1988. With me are Michael Ainslie, then–NYSE president Dick Grasso, and our specialist on the floor, Jack Geary.
A Washington, D.C., cartoonist created this shortly after we acquired the Woodward and Lothrop department store company in 1984. Most cartoons bring a smile to my face, even if they are critical of me. I really admire the art form.
They pour champagne on you when you win a football championship. With me after the 1983 USFL victory in Denver are Shire Rothbart, Panther coach Jim Stanley, and Max Fisher.
My wife Judy and I prepare for a day of shooting at Alnwick Castle in Northumberland.
Visiting India in 1984 with friends Amy Matouk and Ehab Shafic (left), recording industry genius Ahmet Ertegun and my wife (center), and Jerry Zipkin and Mica Ertegun (right).
With my fishing buddies in Iceland: my attorney Jeffry Miro, Parker Gilbert, Graham Allison, Otto Winckelmann, and Lord Michael Blakenham.
Relaxing at home in Palm Beach.
My beautiful—but leaky—Richard Meier–designed home in Palm Beach.
My current home in Palm Beach, after major restoration, which does not leak.
Spending time with my friend Les Wexner at his beautiful home in Aspen, Colorado.
With my daughter Gayle.
A great round of golf in Vail. With me are Henry Kravis, Jack Geary, and George McFadden.
During my 10-month stay in Rochester, Minnesota, I was inmate 50444-054. I used this card whenever I could to access the delicacies served from the prison’s vending machines. I put on my best tough-guy face for the camera, but the experience was terrifying.
With my sons Robert and William.
Doing my part to thin out the duck population on Long Island.
Karl Lagerfeld took this photograph of my wife Judy and me in 1998. It’s one of our favorites.
But underneath my anger I realized this was not just about me. This unthinkable scandal was threatening to bankrupt a 250-year-old company. Starting in January 2000, customers filed civil suits, alleging they had been cheated by the collusion. Investors were fleeing from our stock like rats abandoning a sinking ship. Through no fault of their own, and as the stock fell, Sotheby’s employees saw their life savings evaporate. My continued presence on the board was making things worse for everybody.
But stepping down didn’t mean giving up. According to Forbes and Fortune, I was worth hundreds of millions of dollars. But my most precious asset was my good name—the one thing my father had taught me to protect at all costs. I remembered the lengths he went to during the depression to make good on his debts and preserve his reputation.
This was a huge blow, and it was certainly not how I had planned on spending my seventy-sixth year on earth. It was a confusing and difficult time. I was angry and frustrated at Dede Brooks and at the prosecutors, and fearful of what the future might bring me. Developers generally don’t look back; we look to the future. It’s not that we don’t have memories or learn from the past. Rather, when you’re involved in a construction project
or a leasing campaign, you have to continually move forward, or else you lose time, momentum, and money. Problems have to be faced head-on in a realistic way. That’s how I approached my legal difficulties. I had to fight back. And so as I always had done, I set out to find the best professionals I could find.
On the recommendation of Don Pillsbury, we retained the law firm of Davis Polk & Wardwell. Robert Fiske, a former U.S. Attorney and the first Whitewater independent counsel; Scott Muller, a highly respected litigator (Scott served as general counsel to the Central Intelligence Agency for several years after my trial); and Jim Rouhandeh headed the Davis Polk team. They were all exceedingly smart, intensely focused, and seasoned in the complicated world of antitrust prosecution.
This was to be a very messy two-front war. Civil challenges were mounting as a sitting grand jury was determining potential criminal charges. Davis Polk was prepared to lead my defense on both the civil and criminal battlefields. The continuity was very important.
Recognizing that the fight of my life would also be played out in the court of public opinion, Christopher Tennyson, my longtime communications adviser, brought veteran crisis public relations guru John Scanlon on board. With his white beard, red hair, and piercing blue eyes, John looked more like an Irish poet than a tough-as-nails PR guy. But he had earned a reputation for being a first-class advocate for his clients, and he was on a first-name basis with the most important electronic and print journalists in New York. At the first meeting with John in my New York office, at 712 Fifth Avenue, he brought us what he described as very bad news.
“Dede has hired Steven Kaufman, the flipper, and that’s not good,” said Scanlon.
“What’s a flipper?” asked Tennyson.
“An attorney specializing in offering up a superior to make a deal with the prosecutor,” Scanlon explained. “Kaufman rarely goes to trial. He has only one play in his playbook, but he runs it very well.”
If Dede’s strategy hadn’t been clear before, it was now. And this time the superior being offered up in exchange for leniency was me.
In one of the many strange and tragic twists in this saga, John Scanlon suffered a fatal heart attack in his Manhattan apartment on May 4, 2001, the morning I was arraigned in U.S. District Court on a single charge of price-fixing. Heading into the eye of the storm, we lost a terrific guy and an important member of our team. Two of John’s partners, Lou Colasuonno and Laura Murray, stepped in admirably to assist us.
The civil side of the dispute was relatively cut-and-dried. Dede and Davidge, who had been the CEOs of their respective companies, had admitted their collusion. Both companies, therefore, were guilty as charged. David Boies, the high-profile attorney, represented the “class” of auction house customers that brought suit against Sotheby’s and Christie’s. He hadn’t fared too well in Bush v. Gore, but he sure did all right with us. He won a settlement of $256 million from each company for his clients.
Christie’s owner, François Pinault, paid all $256 million of his company’s portion, and I agreed to contribute $186 million of Sotheby’s civil settlements personally. My level of participation was consistent with my majority ownership position. I also was fully aware that without my assistance, the company faced the very real prospect of bankruptcy. These were decisions made out of enlightened self-interest, not charity. Sotheby’s represented one of my most significant investments. Abandoning the company and fending for myself would have destroyed a personal asset that, even in the midst of scandal, was worth hundreds of millions of dollars. Besides, all this had happened on my watch. I was committed to the survival of this extraordinary franchise and the preservation of its employees’ livelihoods.
David Boies is an interesting guy. I’ve never met him, but I recently read his book, Courting Justice. Chapter 9, “The Auction House Scandal,” presents his insightful account of the civil settlement. Boies and I, it turns out, have a lot in common. He, too, suffers from dyslexia. He’s a skilled poker player; I do pretty well at bridge. He grew up in Orange County, California, home to the Irvine Ranch. More important, there is probably no one on the planet who studied the evidence in this case with more skill and intensity than Boies. And what was his conclusion? Here’s what he told author Christopher Mason in an interview for Mason’s meticulously researched book, The Art of the Steal:
“There wasn’t any real evidence that they fixed prices,” Boies noted, referring to Taubman and Tennant, “just that they had a lot of meetings.” It was a stunning observation coming from the lawyer who had spent the spring and summer of 2000 poring over documents and taking depositions in an attempt to establish Taubman’s guilt.
In other words, after examining all the evidence, Boies concluded that while the two companies’ CEOs, Dede Brooks and Christopher Davidge, willingly admitted that they met and agreed to fix prices, there was no evidence that the two companies’ chairmen were involved in any way.
One thing David Boies and I do not have in common, however, is our taste in restaurants. In Courting Justice, Mr. Boies reveals that when his law firm wrapped up the auction house suits and secured a $26 million fee for four months’ work, he celebrated by taking his wife to dinner at Sparks Steak House in Manhattan. I’ve got nothing against Sparks (John Gotti put the place on the map). But that kind of payday merits a night out at Daniel or, if you want a great steak, Peter Luger in Brooklyn.
Thanks in large measure to David Boies’s legal and negotiating acumen, the civil challenges were resolved swiftly (and expensively). But the potential exposure on the criminal side was far more frightening. Over the years, I had dealt with civil litigation many times. It’s a hazard and natural byproduct of doing business. There were times I won, and times I lost, and times when settling made economic and business sense. I wasn’t happy about paying to settle the civil suits, but I could survive and live with it. This was different. Much different. Criminal prosecution brought with it the prospect of jail time. Was the Justice Department going to pursue criminal charges against me? It was uncertain for all of 2000 and the first quarter of 2001. What was certain, however, was that prosecutors were hard at work making it difficult, if not impossible, for me to defend myself.
From the outset, the deck was stacked against us. In an action that startled even the most seasoned judicial observers, the U.S. Justice Department granted Christie’s, a foreign-owned company, and all its employees, including Christopher Davidge, amnesty from prosecution in return for their cooperation in the effort to essentially cripple or destroy Sotheby’s and put me in prison.
Now, I understand that the amnesty program has yielded important victories for our country’s prosecutors. It’s easy to applaud the decision to isolate a mob boss or terrorist by protecting informants from criminal prosecution. But the practice seriously distorts the concept of equal justice. Here’s how the writer James B. Stewart, in the October 15, 2001, issue of the New Yorker, described the questionable practice in my case:
Prior to 1993, a price-fixer who wanted amnesty for testifying against a co-conspiring competitor had to take his information to the Justice Department before an investigation was under way. But that year the department began offering amnesty even after an investigation was in progress—to whoever came in the door first and promised that all its employees would confess and cooperate against other conspirators. From a law-enforcement perspective, the program has been a success. Since it began, requests for amnesty, which under the old program had averaged one a year, jumped to more than one a month, and in the last four years the government has reaped fines of $1.7 billion. Many defense lawyers, mindful of the innate American distaste for informers, have argued that such incentives to cooperate are too generous, extravagantly rewarding testimony from people who are criminals and who tailor their testimony to what prosecutors want to hear. But so far none of the cases have generated a public outcry.
Unfortunately, neither would mine, even though Christie’s received this “extravagant” treatment without meeting the most fund
amental requirements to qualify for the program. First of all, according to the Justice Department’s guidelines, the instigator of the price-fixing is ineligible for amnesty. If you started it, forget it. Even to this day, nobody in the world (including the prosecutors, I believe) believes Sotheby’s or I started this thing. Not a soul. In Christopher Mason’s book, Christie’s senior executive François Curiel stated what everybody has always understood to be the truth: “Chris [Davidge] is a chief manipulator with a capital C…He did it very, very cleverly.” Granting amnesty to the party starting the wrongdoing could lead to all sorts of problems and injustice. But the Justice Department conveniently ignored this disqualification.
According to the rules, you can also forget about amnesty if you fail to come forward in a timely manner with your information. Christie’s didn’t even come close. The collusion between Dede and Davidge was an open secret at Christie’s at the highest levels of the company in London and New York. In 1997, three years before Christie’s knocked on the door of the Justice Department, Lord Hindlip—the man who succeeded Anthony Tennant as Christie’s chairman and who has admitted publicly to knowing in 1995 about the two CEOs getting together to discuss the seller’s commissions—provided Davidge with the following handwritten note:
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