New York Magazine has a lengthy feature about Sotheby’s, the auction house that also happens to be the oldest company on the New York Stock Exchange. Sotheby’s is currently fighting with Christie’s for the dominant spot in the world of art auctions, and if you’re interested in learning how the upper end of the art world basically functions like a wild west, unregulated commodities exchange, the piece is worth a read.
Towards the end of the article the author dives into a pricey art sale that may ring a bell. The controversial Red Rothko auction was the subject of a Dallas court battle last year after philanthropist Marguerite Hoffman, who sold the painting to the mysterious and mercurial billionaire David Martinez while it still hung on the walls of the Dallas Museum of Art, sued Martinez for allegedly breaking a confidentiality agreement. That lawsuit brought to light the nature of shadowy art world dealings that are most often shrouded in secrecy:
Martinez wanted a loaned advance of $15 million, which he would apply toward buying his new Rothko. Sotheby’s financial-services department is one of the lesser-known facets of its business; since few banks will take art as collateral, it is a crucial lending source for private dealers and collectors. Art loans are tricky, though, because they depend on the valuations of Sotheby’s specialists, who are trying to induce consignors. The Martinez loan was much larger, as a percentage of the estimated price, than Sotheby’s internal guidelines call for, but Meyer pressed for a quick approval. . . .
In the end, Meyer got his painting, which became a centerpiece of a Sotheby’s sale in May 2010, and it sold for $31.4 million. The only unhappy participant was Hoffman, the previous owner, who claimed to have sold the painting under a binding confidentiality agreement, assuming the painting would disappear into a private collection, not end up being flipped at a highly publicized auction. Her claims against Meyer were dismissed, but a jury last December found Martinez and L&M Arts (which was aware of the confidentiality agreement) liable for damages of $1.2 million.