Fertitta, Et Al. v. Knoedler Gallery, LLC, Et Al. - Complaint

Jeffrey I. D.
Lewis
John P. Figura
PATTERSON BELKNAP WEBB & TYLER LLP
1133 Avenue of the Americas
New York, New York 10036 t 4 CV
Telephone: (212) 336-2000
2259
Fax: (212) 336-2222
Attorneys for Plaintiffs
UNITEDSTATESDISTRICTCOURT
FORTHESOUTHERNDISTRICTOFNEWYORK
FRANK 1. FERTITTA III and EYKYN MACLEAN,
LP,
Plaintiffs,
vs.
KNOEDLER GALLERY, LLC d/b/a KNOEDLER
& COMPANY; 8-31 HOLDINGS, INC.;
MICHAEL HAMMER; ANN FREEDMAN;
JAIME ANDRADE; GLAFIRA ROSALES; JOSE
CARLOS BERGANTINOS DIAZ; OLIVER
WICK; DRS KRAFT; and John Does # 1 to 10,
Defendants.
COMPLAINT
Plaintiffs Frank J. Fertitta III and Eykyn Maclean, LP, by and through their
undersigned attorneys, aliege as follows:
NATUREOFTHEACTION
1. This action concerns the sale of forged art. In April 2008, plaintiffs
purchased a painting, Untitled (Orange, Red and Blue) purportedly created by the well-known
American artist Mark Rothko in 1959 (the "Painting"). In reality, the Painting is a forgery,
fraudulently sold by one or more of defendants, as part of a series of forged artworks sold by one
Case 1:14-cv-02259-UA Document 2 Filed 04/01/14 Page 1 of 74
ormoreofthedefendantsoverthe courseoffourteen years. Atleastsomeofdefendants
conspiredinacoordinated,concertedefforttodefraudartcollectorsoftensofmillionsofdollars
through thesaleofforged artwork.
2. PlaintiffspurchasedthePaintingwithoutknowledgeofthe fraud,
believingitto beagenuineRothko. Plaintiffsfirst receivedinformationsuggestingthatthe
PaintingwasnotauthenticinNovember2013 whenit waspubliclyidentifiedas aforged work
inoneormorepressreports.
3. Accordingly,this is anaction(a)to rescindtheApril2008 saleofthe
Paintingbaseduponmutualmistake; (b)for violationofthe FederalRacketeerInfluencedand
CorruptOrganizationsAct, 18 U.S.C. 1961 etseq. ("RICO"); and(c)for various common-law
andstatutorycausesofactionbasedondefendants' fraudandbreachofwarranty. Plaintiffs
bringthisactionagainstdefendantsforcompensatoryandpunitivedamagesarisingfrom their
fraudulentsaleofthePaintingandtheiroperationofacorruptenterprise.
THEPARTIES
4. PlaintiffFrankJ. FertittaIII isanindividualresidinginLas Vegas,
Nevada.
5. PlaintiffEykynMaclean, LP is alimitedpartnershiporganizedunderthe
laws of NewYorkwithitsprincipalplaceofbusinessinNewYorkCity.
6. DefendantKnoedlerGallery, LLC,doingbusinessas"Knoedlerand
Company"(collectively,"Knoedler"),is alimitedliabilitycompanyorganizedunderthelawsof
theStateofDelaware. Itsprincipal placeofbusinesshas beenrecordedwiththeNewYork
SecretaryofStateas 19 East70thStreet,NewYork,NewYork. Knoedlerwasoneof the
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world'spre-eminentartgalleriesandwasreputedto beNewYorkCity'soldestartgallerybefore
itclosedwithoutnoticeinoraboutDecember2011.
7. Oninformationandbelief,defendantMichaelHammerisanindividual
residinginornearSantaBarbara,California.
8. Oninformationandbelief,defendantAnnFreedmanisan individual
residinginNewYork,NewYork.
9. Oninformationandbelief,defendantJaimeAndradeisanindividual
residinginNewYork,NewYork.
10. Defendant8-31 Holdings,Inc. ("8-31")is acorporationorganizedunder
thelawsoftheStateofDelaware. Itsprincipalplaceofbusinesshasbeenrecordedwiththe
NewYorkSecretaryofStateas 19East70thStreet,NewYork,NewYork.
11. Oninformationandbelief,Hammeris,andatall relevanttimeswas,the
soleownerof8-31 anditsPresident. InhiscapacityasPresidentof8-31,Hammerwasthesole
memberandsoleownerofKnoedlerand,oninfonnationandbelief,atallrelevanttimesdirected
Knoedler'soperationsactingonbehalfofhimself,Knoedler,and8-31.
12. 8-31 is believedtohavebeenthedirectemployerofFreedmanand
Andrade.
13. Freedmanwasemployedby8-31 and Knoedlerand servedas Knoedler's
DirectorandPresidentatall relevanttimesuntilherdismissal inthe fall of2009.
14. Andradewasemployedatallrelevanttimes bybothKnoedlerand8-31
and waspaidby8-31.
15. Oninformationandbelief,defendantGlafiraRosales,alsoknownas
"GlafiraGonzales"or"GlafiraRosalesRojas", is anindividualresiding in SandsPoint,New
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York. Rosalespled guilty in thisDistrictonSeptember9, 2013 toa9-countindictmentfor her
conductatissueinthiscase, butsheremainsatliberty.
16. DefendantJose CarlosBergantifiosDiazis an individualwhoselast
knownresidencewas,on informationandbelief, inSandsPoint,NewYork. His current
whereaboutsareunknown.
17. DefendantOliverWickis anindividualresiding,oninformationand
belief, inSwitzerland. Oninformationandbelief, he servedasapaidagentfor Knoedlerand/or
Rosales intheirdealings withplaintiffsconcerningthePainting.
18. On informationandbelief,defendantDrsKraftis anindividual residing in
Switzerland,whomaintainsaregularaddress in Kilchberg, Switzerland.
19. DefendantsJohnDoe#1 to #10arepartiesas yetunknownwho
participatedinthematterscomplainedofherein.
20. Thebuyerof thePaintingwasFertitta,actingthroughGurrJohns. Gurr
Johnshasassigned itsclaimsto Fertitta.
21. Oninformationandbelief,thePaintingwassold by oneormoreof the
namedDefendants,operatingthroughKraft.
JURISDICTION AND VENUE
22. Thesaleof thePaintingoccurredwithinthejurisdictionof theStateof
NewYork, by virtueof theBillofSale(ExhibitAhereto)recitingthattheBillofSale,and
thereforethesale,"shallbe governedbyandshallbeconstruedandenforcedinaccordancewith
thelawsoftheStateofNewYork."
23. ThisCourthaspersonaljurisdictionoverdefendantspursuantto
N.Y.C.P.L.R. 301. Totheextentthatanydefendantis notlocatedinthe StateofNewYork,
this CourtalsohaspersonaljurisdictionpursuanttoN.Y.C.P.L.R. 302(a)becausethisaction
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arises outofthetransactionofbusinessinthe StateofNewYorkanddefendantscommitteda
tortiousactinthe StateofNewYork.
24. ThisCourtalsohasjurisdictionoverKraftbyvirtueofthe BillofSale
reciting,"[T]hepartiesheretosubmittothe soleandexclusivejurisdictionandvenueofthe
courtsoftheCountyof NewYork, Stateof NewYork,SouthernDistrict."
25. TheCourthasdiversityjurisdictionoverthisactionpursuantto 28 U.S.c.
1332(a)(l)becausethe actionisbetweencitizensofdifferentstatesandtheamountin
controversyexceeds$75,000,exclusiveofinterestandcosts.
26. Inaddition,the Courthasfederal questionjurisdictionovertheRICO
claimsinthisactionpursuantto 18U.S.C.1964(a)and28 U.S.c. 1331,and overthe
remainingclaimspursuantto 28 U.S.C. 1367(a).
27. VenueisproperinthisDistrictpursuantto 28 U.S.c. 1391(b)(2)
becauseasubstantialpartoftheeventsoromissionsgivingriseto plaintiffs'claimsoccurredin
thisDistrictandbecauseit is theidentifiedvenueintheBillofSale.
FACTUAL ALLEGATIONS
Origins of the Scheme
28. Inthe late 1980sorearly 1990s,BergantifiosDiazencounteredanobscure
buthighlyskilledpainternamedPei-ShenQiansellingartonthe streetinNewYorkCity. At
therequestofBergantifiosDiazand, oninformationand belief,Rosales,Qiancreatedaseriesof
paintingsmimickingthe stylesofrenownedAbstractExpressionistpainters. BergantifiosDiaz
paidhim afewthousanddollarsfor eachofthem. Oninformationandbelief,BergantifiosDiaz
thenforged thesignaturesoftheartistswhopurportedlycreatedthe paintingsand usedchemicals
andothertechniquesto artificiallyagethe paintings,makingthemappearto be originalworksby
famous artists. Oninfonnationandbelief,RosaleswasawareofBergantifiosDiaz'sactions.
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29. Rosales livedwithBergantifiosDiazonLongIsland,NewYork, andat
onetimeranan art gallery in Manhattantogether. Thetwowereromanticallyinvolved.
30. Inthemid-1990s, AndradeintroducedRosalesto Freedman,whowasthen
Knoedler'sPresident. AndradedescribedRosalesas"averygoodfriend." Rosalesproceededto
showFreedmancounterfeitpaintingsandto providefalseprovenancefor eachsuchpainting. On
Freedman'sinstruction,Knoedlerboughtthepaintingsfrom Rosales.
31. AmongthecounterfeitpaintingsthatRosalessoldto Knoedlerearlyin
theirrelationshipweretwopaintingsthatwerepurportedlythework ofthe artistRichard
Diebenkorn. Inoraround 1994,however, FreedmanwasinformedbyDiebenkorn'swidowand
son-in-law(who isalsotheExecutiveDirectoroftheDiebenkornFoundation)thatthetwo
paintingsappearedto beforgeries. Oninformationandbelief,FreedmanandKnoedler
proceededto marketthesepaintingsanddidnotdisclosetoprospectivebuyersthatthey hadbeen
identifiedas apparentforgeries bythewidowandson-in-lawoftheartistto whomRosales
attributedtheworks.
32. Laterin1994,RosalestoldFreedmanthatsheandBergantifiosDiazhad
accesstoacollectionof"previouslyundiscovered"AbstractExpressionistpaintingsby
renownedAmericanartists, includingMarkRothko,JacksonPollock, WillemdeKooning,
RobertMotherwell, ClyffordStill,andBarnettNewman. Rosalessaidtheseworks(the"Rosales,
Collection")had beenacquiredbetweenthe late 1940sand 1964 (or, alternately, in the late
1950sandearly 1960s,dependingonwhichstoryRosalestold)byanartcollectorwho hadlived
in SwitzerlandandMexicoandwhotraveledto the United Statesfrequentlyonbusiness.
Rosales saidsheencounteredthiscollector,to whom shereferredas"Mr. X,"whenshewasa
childgrowingup in Mexico.
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33. Rosales hadno salesdocumentsorothersupportorcorroborationforthe
provenanceofthe worksofMr. X'scollection. Sheexplainedto Freedmanthatno such
documentationhadbeengeneratedbecauseMr. Xhadpaidfortheworksincash. Rosales
claimedthatMr. Xhad communicatedwiththeartiststhroughwrittenlettersbutthathisson
(called"Mr.X, Jr.")hadprobablydestroyedthe lettersafterMr. X'sdeath.
34. Rosales'sstorywasfictional initsentirety. Thepaintingswereforgeries,
newlycreatedinQian'shomeinQueens,NewYork. Mr. X and hissondidnotinfactexist.
35. Oninformationand belief, Freedmanhasadmittedthatshedidnot
investigatethe bonafides ofRosales orBergantifiosDiazortheirclaimsoftheprovenanceof
eachwork. IfFreedmanhaddoneso,shewouldhavediscoveredthatBergantifiosDiazhad
previouslybeenimplicatedinthesaleofforged artwork.
36. Rosales'sfabricatedstorywasso far-fetchedthatHammerand Freedman,
whowerehighlyexperiencedinthepurchaseand saleofartwork,couldnothavereasonably
believeditto betrue. Oninformationandbelief,theyinsteadknowinglyparticipatedinthe sale
offorgeries from theRosalesCollectiondirectlyandthroughbothKnoedlerand8-31
(collectively,Knoedler, Hammer, Freedman,Andrade,and8-31 arereferredto hereinafterasthe
"KnoedlerDefendants").
37. Inparticular,HammerandFreedmanknewthatit wasextremely
implausiblethat,as Rosalesclaimed,(1) Mr. Xhadsecretlyacquiredavaststoreofvaluable
artworkdirectlyfromrenownedAmericanpainters;(2) thispurportedenthusiastchosenotto
displayorpublicizetheworks but insteadhidthemfrom theartworld; (3) hisson,Mr. X, Jr.,
oncepossessedlettersbetweenMr. Xandeachoftheseartistsbut destroyedthem,eventhough
theywouldhavedramaticallyenhancedthepaintings' marketability; (4) theworkswereentirely
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unknown, withnoneofthemhavingbeenmentioned inanyartcatalog,history,monographor
otherdocumentarysource; and (5)Mr. X, Jr. was so insistentonsecrecythathe wouldnotallow
hisorhisfather's identitiesto bedisclosedto anyone, notevenconfidentiallyto Knoedler.
38. Nonetheless,underthedirectionofHammer,who actedindividuallyand
onbehalfof8-31 andKnoedler, inoraround 1994 KnoedlerandFreedmanbeganbuyingworks
oftheRosalesCollectionfromRosalesandBergantifiosDiaz.
Knoedler and Freedman's Misrepresentations and Knowledge oftheFraud
39. OnoraboutJune 18, 1998,FreedmanandRosalesheldameetingat which
theydiscussed,in thepresenceofKnoedleremployeeMelissade Medeiros,the inventoryof
paintingsfrom Mr. X'scollectionto whichRosalesthenhad access. Asrecordedbyde
Medeiros,Rosales identifiedfive toeightworksthatwerestill available. Thenumberof
paintingsthatRosaleseventuallysuppliedtoKnoedlerfromtheRosales Collection,however,
wasfar inexcessofthefiveto eightthatsheidentifiedattheJune 1998 meeting. Eventually,by
thetimethefraud wasuncoveredyears later,Rosales haddeliveredto Freedmanabout25
additional paintingsthatRosalesclaimedhademanatedfrom Mr. X'scollection.
40. In oraround2000, FreedmanquestionedRosalesaboutherclaimthatMr.
Xhad acquiredthe paintingsdirectlyfrom theircreators. Apparentlyrecognizingit wouldhave
beenhighlyunlikely, ifnotphysicallyimpossible, for Mr. Xtohavepurchasedtheworks
directly from eachofthe artists,_FreedmantoldRosalesshe"surmised"thatMr. X insteadhad
acquiredtheworksthroughanintermediary,AlfonsoOssorio(anartistandcollector). Rosales
latertold FreedmanthatMr. X, .Ir. had confirmedFreedman'sconjecture.
41. Knoedler's employeesandretainedexpertsattempted to verifytheOssorio
story by, amongotherthings, reviewingpapersrelatingtoOssorioandPollockat the
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Smithsonian Archives of American Art. They could not do so. They found no evidence linking
Ossorio to Mr. X, to the Rosales Collection, or to any of the works in it. Nonetheless, Knoedler
and Freedman used the purported Ossorio link to the paintings, which Freedman had "surmised"
was the manner in which Mr. X had obtained access to the works, as a tool to bolster the
appearance of authenticity in marketing the paintings to prospective buyers without any
verification.
42. On information and belief, Freedman drafted a short write-up for each
painting from the Rosales Collection explaining its provenance. Knoedler and Freedman used
the write-ups for the purpose of marketing the paintings to potential customers. In doing so, she
generally informed customers that works from the Rosales Collection were originally acquired
from the artist and passed "by descent" to the work's "current owner." She did not state that the
"current owner" of the works - in most cases, Knoedler itself - had acquired the works not "by
descent" but by purchasing them from another third party intermediary - Rosales herself.
43. On information and belief, Hammer was familiar with these write-ups.
Hammer also knew when a painting from the Rosales Collection had been purchased outright by
Knoedler or was being sold for Rosales on consignment.
44. On information and belief, Freedman and Knoedler attempted to create an
air of authenticity for the Rosales Collection paintings by showing them to recognized figures in
the art world. They then told Knoedler customers that these individuals had viewed the paintings
and reviewed them favorably, implying that they had authenticated the works.
45. Knoedler also arranged for some of the paintings to be displayed in
museums and exhibits to lend credibility to each work's asserted provenance and to increase
potential purchase prices. On information and belief, Freedman wrote internal memos at
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Knoedlerinwhichshediscussedtheprovenancesheimaginedfor eachpaintingandtheevidence
that purportedlysupportedeachsuchprovenance.
46. Amongthedocumentsmaintainedat Knoedlerwasapurported
authenticationdocumentpreparedon Knoedlerletterhead,signedby Rosales,anddatedMay26,
2001 (the"AuthenticationStatement").
47. In the AuthenticationStatement,Rosalesstatedthatshewas"the
authorizedagent,as well as aclosefamily friend, ofaprivatecollectorresidinginMexicoCity
andZurich." Rosalesstated: "Forvariouspersonalreasonstheownerprefersto remainstrictly
anonymousastheseller. Theartworks [sic] wereacquiredbythecurrentowner'sfatherdirectly
fromthe artist[sic] andwerepassedbyinheritancetohisimmediateheirs(sonanddaughter)."
The AuthenticationStatementfurtherclaimed"thattheownerhasabsolute clearlegaltitletothe
[works]."
48. InoraboutDecember2001,toinduceatleastonebuyer,JackLevy,to
buyaRosales-sourcedPollockpainting,KnoedlerandFreedmanrepresentedthatitwasa
genuinePollockacquiredby itsowner'sfather, aSwissartcollector,throughOssorio. On
informationandbelief,afterKnoedler'slucrativesaleofthisPollockto Levy, Hammerrewarded
Freedmanby increasingherprofit-sharingpercentagefrom 16percentto 25 percent.
49. OnoraboutOctober9, 2003, the International Foundationfor Art
ResearchsentKnoedlerareport("theIFARReport")notinganumberof "veryconvincing"
"negatives"concerningtheauthenticityofRosales'sPollockthatKnoedlersoldto Mr. Levy.
Thereportconcluded: "IFARbelievesthattoo manyreservationsexistto makeapositive
attributionto JacksonPollock." Thosereservationsfocused largelyonthe inabilityofIFARto
verify the purportedprovenanceofthepainting. Amongotherthings, theIFARReportfound it
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"inconceivable" that the Pollock had passed through Ossorio's hands but had never been added
to the Pollock catalogue raisonne. (A catalogue raisonne is a published work that serves as the
authoritative list of recognized works by a given artist.)
50. Freedman instructed that the IFAR Report be sent to Hammer. Two
executives of 8-31 and Knoedler later sent Hammer a memo acknowledging that the IFAR
Report raised questions about the Pollock's "authenticity" and "authorship." The memo to
Hammer further noted that IFAR was "held in high esteem by galleries, museums and the art
world in general."
51. In the aftermath of the IFAR Report, "the Knoedler Defendants
repurchased Rosales's Pollock from Levy, as they were required to do under Knoedler's
agreement with Levy if the painting was determined to be inauthentic. Despite their awareness
that the painting was a fake, the Knoedler Defendants persuaded a Canadian Gallerist, David
Mirvish, to acquire an interest in the painting.
52. In a document faxed to Hammer dated December 15, 2003, Freedman
advised Hammer of the fallout from the IFAR Report and the willingness of Mirvish to invest in
the painting. On the reverse side of the document, Freedman handwrote the following sentences
in quotation marks: "'discreet sources are my stock in trade,'" "'don't kill the goose that's
laying the Golden egg,'" and '''I am not going to change my way of doing business. If you are
not [comfortable] - step away.'" It has been alleged that Freedman was quoting comments made
by Hammer.
53. Hammer has testified that the IFAR Report raised "questions" and
"concerns" about the work - which he knew was part of the broader Rosales Collection.
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Hammeralsotestifiedthathe revieweddocumentsconcerningKnoedler'sinabilityto verifythe
purportedOssoriolinkto Mr. XandtheRosalesCollection.
54. Oninformationandbelief,theKnoedlerDefendantsunderstoodthat,in
lightofthe otherredflags offraud surroundingtheRosalesCollection,ifthe"Pollock"soldto
Levy could not be attributed by IFAR to Pollock - largely on the basisof the unverifiable
provenance- thenthe o l l ~ k wasaforgery.
55. Oninformationandbelief,theKnoedlerDefendantsunderstoodthatifthis
Pollockwasaforgery, sotooweretheotherworksoftheRosalesCollection,allofwhichshared
thesamemysteriousandunverifiableprovenance.
56. AftertheIFARReportrejectedthestoryof Ossorioas intermediaryas
"inconceivable,"theKnoedlerDefendantsdevelopedanewprovenancestoryto tellprospective
purchasers.
57. Andrade,whoservedasthe"gateway"to RosalesandBergantifiosDiaz,
hadbeenaclosefriendofDavidHerbert,adeceasedNewYorkartdealer, andhadservedas the
executorofHerbert'sestate. AndradeclaimedthathehadintroducedRosalesto Herbertbefore
Herbert'sdeathin 1995.
58. InoraroundNovember2004,theKnoedlerDefendantsstartedtelling
customersthatHerbert,notOssorio,hadactedas theintermediarybetweenthe artistsandMr. X.
59. Oninformationandbelief,Freedmansoughtto makeitappearthatthere
was somesupportforthe purportedHerbertlinktotheRosalespaintingsbyaddingcopiesof
documentsfrom Herbert'sestatetoKnoedler'sRosalesCollectionfile and bycreatingmemos
forthis file thatattemptedto explainhowHerbertwasconnectedto eachoftheRosales
Collectionartists. NoneofthedocumentsthatFreedmanaddedto thefile actuallytiedHerbert
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to Mr. Xas anintermediaryorto any of thepaintingsin theRosalesCollection. Nordid
Andrade,theexecutorofHerbert'sestate,provideanydocumentslinkingHerberttoMr.X.
Andradeadmittedinadepositionthathe hadnevermetanyonewhofit thedescriptionofMr. X.
60. ThestoryofHerbertas intermediarywasfalse. Oninformationandbelief,
Freedman,Andrade, andHammerknewthatit was false, giventhediscreditingofany
connectionofOssorioto thepaintingsandthecircumstancesoftheRosalesCollectionsales.
The Rothko Rooms and the Story of Herbert as Intermediary
61. Inthe summerof2005, theKnoedlerDefendantspromotedtheHerbertas
intermediarystorythroughWick.
62. Wickis recognizedas ascholarofAbstractExpressionistart, particularly
the paintingsofRothko. Fromapproximately2003 to 2013,Wickwas CuratoratLargeofthe
BeyelerFoundationinBasel,Switzerland,wherehecuratedtheBeyelerFoundation'sannual
RothkoRoomsexhibit. He is theauthorofnumerousscholarlybooksand articles, including
Rothko, an illustratedmonographaboutRothko'spaintingsthatwaspublishedinJanuary2007.
In2008, Wickco-curatedaretrospectiveexhibitionofRothko'sworkattheHamburger
Kunsthalle,aprominentartmuseuminHamburg, Germany. Currently,WickisaCuratoratthe
Kunsthaus ZurichinZurich, Switzerland. TheKunsthausZurichstatesthatWick"hasprobably
the mostextensiveinternationalnetworkofanySwissexhibitionorganizer."
63. WickhadanongoingrelationshipwithKnoedlerandshowedatleasttwo
forged paintingsfrom the Rosales CollectionattheBeyelerFoundation.
64. Oninformationandbelief,the first occasiononwhichWickshoweda
fake Rothkoatthe BeyelerFoundationwasin spring2002,whenhe includedapaintingfromthe
RosalesCollectionintheRothkoRoomsexhibit. Knoedlerhad boughtthisforgery from Rosales
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the preceding January for in excess of $700,000. Knoedler prepared a write-up for the work that
stated, falsely, that it belonged to an undisclosed private collection in Switzerland and had been
"acquired directly from the artist through Alfonso Ossorio." On information and belief,
Knoedler discussed this purported Ossorio connection with Wick, and at least one fake Rothko
painting displayed in this exhibit was sold based upon false representations.
65. On information and belief, Wick conducted no independent research into
the authenticity of this fake Rothko from the Rosales Collection shown at the Beyeler
Foundation in 2002. If he had, he would have learned that the story of its having been acquired
through Ossorio lacked any factual support.
66. In or about summer 2005, Wick showed another fake Rothko painting
from the Rosales Collection at the Beyeler Foundation. Wick was advised that this second
painting was from the same unidentified Swiss collector who had acquired the fake Rothko that
Wick showed at the Beyeler Foundation in in 2002. But while the 2002 Rothko was purportedly
acquired through Ossorio, the 2005 Rothko was purPortedly acquired through Herbert, following
the new story of Herbert as intermediary that Freedman and Knoedler had developed in 2004.
67. Wick wholeheartedly endorsed the new Herbert as intermediary story. In
a 2005 article entitled "Mark Rothko Rooms at Foundation Beyeler: Two Rediscovered
Paintings" ("Rothko Rooms Article"), published in Wick's name, he explained how Mr. X
purportedly had acquired the paintings through Herbert:
The ... painting, Untitled, 1956 [a forged Rothko], remained
unrecorded in a private collection for nearly fifty years after its
execution, and is presented here for the first time in the context of
further Rothko paintings. ... The color, brilliantly fresh ....
The collector, long since deceased, regularly travelled
through the U.S. in the 1950s and acquired a small group of works
by artists of the New York School. He was anything but a
collector in the conventional sense... , [H]e obtained professional
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advice from David Herbert. Herbert (1920-1995) was a leading
figure on the New York art scene, especially between 1950 and
1960.... This placed him in the midst of the first commercial
successes of the Abstract Expressionists .... [H]e frequented the
artists' studios. He became a friend, companion and advisor to
Mark Rothko.... In addition, Herbert furthered "his" artists by
mounting private "apartment exhibitions[]" .... It can be assumed
that the work on view here was acquired at such an apartment sale
. . .. (The same collection contained a second unknown Rothko,
likewise Untitled, 1956 [also forged], which we were able to show
in spring 2002 in the Rothko Rooms and which is now in the
collection of the Hilti Art Foundation.)
68. Wick did not explain in this article that the "second unknown Rothko" that
had been shown in 2002 purportedly had been acquired through Ossorio, not Herbert, even
though he wrote that both it and fake Rothko shown in 2005 were from "[t]he same collection"
amassed by Mr. X.
69. Wick did not author the passage quoted above in any meaningful sense.
Most of it came from a Knoedler memorandum purportedly about Mr. X and Herbert, entitled
"Notes on a Collector." Wick paraphrased significant portions of the memorandum and copied
other parts verbatim. He did not attribute the passage to Knoedler, but instead signed his own
name to the article and passed it off as his own work and research.
70. On information and belief, Wick made no effort to verify the accuracy of
the copied passages, nor did he independently research Mr. X or Herbert. He did not require
Knoedler to support its claims of the provenance of the painting shown in 2005 or explain how
Herbert had mysteriously replaced Ossorio as the link between Mr. X and Rothko. If Wick had
required any such support, he would have learned that there was no evidence indicating that
Herbert had acquired paintings for Mr. X - or that Mr. X even existed.
71. The Knoedler Defendants distributed Wick's Rothko Rooms Article to
prospective purchasers of Rosales Collection paintings as a means of promoting the purported
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Herbertintermediarylinkto thepaintings' provenance. Freedmantoldat leastone prospective
customerthatbypublishingthe RothkoRoomsArticle, Wick "hasnowlaunchedthe storyof
DavidHerbertandhis significantrole withtheheretoforeunpublishedRothko."
The Dedalus Foundation's Debunking of the Herbert Story
72. In2007,theDedalusFoundation, Inc. ("Dedalus")examined,seriatim,
sevenpurportedMotherwellpaintingsfromtheRosalesCollection. Knoedlerhad soldfourof
theseworksandrepresentedthemashavingbeenacquiredbyMr. XthroughHerbert. Theother
threeweresoldseparatelyby aformerKnoedleremployee.
73. In December2007andJanuary2008,on informationandbeliefDedalus
advisedKnoedlerandFreedmanthatitbelievedallsevenMotherwellswerefakes, and it rejected
KnoedlerandFreedman'sassertionsthatthepaintingsweresoldthroughHerbertto Mr. X.
74. Oninformationandbelief,FreedmaninformedRosalesinJanuary2008
thatDedalushadconcludedthattheMotherwellswere"false,illegal,orpartofadishonest
scheme"andstatedthatKnoedlerneededa"bonafide defense"to respondtotheallegations. In
oraboutspring2008,KnoedlerandFreedmanaskedRosalesto(a) signarevisedAuthentication
Statementreferringto Herbert'spurportedrole as anintermediaryandstatingthattheowner
"guaranteed[the] authenticity"of theworksin the Rosales Collection;(b)identifyMr. Xand
Mr. XJr. to Knoedleronaconfidentialbasis;and(c)askMr. XJr. to signaletterconfirmingthe
essentialdetailsofthepaintings' provenance.
75. Accordingto notes takenbyKnoedleremployees,RosalestoldKnoedler
that shewas"verycomfortableaboutincludingDavidHerbert"because"theownerhas
co1'iflrmedthat Herbertwas the advisor" (emphasisin original). Rosalesrefused,however,to
sign"theauthenticityclause,"to identifyMr. Xandhisson, orevento purportedlyaskMr. X, Jr.
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to signtheproposedletter. ShesaidthataskingMr. X, Jr. to confirmthepaintings' authenticity
"mightraisehishackles"andthatshedid"notwanttojeopardizetherelationshipbypressuring
him."
76. Oninformationandbelief,HammerwasfamiliarwithDedalus's
conclusionsandknewthatRosaleshadrefusedto signthe revisedauthenticitystatementand
warnedFreedmannotto demandthatRosalesdiscloseMr.X'sidentity.
77. Dedalusdid notreleaseitsfindings aboutthe fake Motherwellstothe
public until atleastOctober2011.
Defendants' Sale of the Painting to Plaintiffs in 2008
78. Oneof thefraudulentworkssoldbydefendantswasthePaintingin
dispute- apurported 1959Rothko, Untitled (Orange, Red, and Blue). Rosalesconsignedthe
Paintingto KnoedleronoraboutMarch 1, 2008.
79. Freedmandraftedadocumentfor Knoedler'sfiles notingthatalthoughthe
PaintingcamefromMr. X'scollection, itwasownedbyRosalesherself. Freedmanwrotethat
theworkwas"ownedjointlyby [Rosales] andherbrother-in-law,althoughoriginallyfrom same
collectionastheotherpictures."
80. Oninformationandbelief, Hammer,whosupervisedFreedmanand
controlledKnoedler'soperations,knewthatKnoedlerwassellingthePaintingfor Rosales.
81. In adeparture from itspreviouspractices,Knoedlerdidnotdiscloseits
involvementbutsoldthe Paintinganonymouslyasthepropertyofan"undisclosedseller."
82. TheKnoedlerDefendantsmarketedthePaintingtoplaintiffsthrough
Wick.
17
83. InoraboutMarch2008,Wickofferedthe Paintingto EykynMacleanLP
("EykynMaclean")for saletooneofits clients. As aresult, EykynMacLeancontactedits client
Fertitta.
84. EykynMacleanasked Wickto providetheprovenanceofthePainting.
On April 7,2008,Wicksentanemailstating, falsely, thatthe Paintingwas "a[c]quiredthrough
DavidHerbert,NewYork,either 1959or 1960forPrivateCollectionSwitzerland[sic]"andthat
itpassedto itscurrentowners"bydescent." Wickaddedaquoteheattributedto theNational
GalleryofArt,whichwasatthetimecompilingacatalogue raisonmi ofRothko'swork: "'The
workhas beenviewedbythe catalogueraisonneteamanditis beingconsideredfor inclusionin
thecatalogueraisonne[.]'" Wickconcludedbystating,"Iconfirmthatthisworkhasbeen
submittedto theteam,allisperfectlyfine, otherwiseIwouldnotwantto beinvolvedwithit.
ForthisIstandwithmynameas aRothkoscholar. Besidesthis, the workwas submittedto [the
artist'sson] ChristopherRothko,whoas weall [are], wasenthusiasticaboutitandthepristine
wonderfullyfreshcondition."
85. Thestatements in Wick'semail(quotedabove)werefalse andmisleading.
ThePaintingwasnotaRothkoandhadnotbeenacquiredthroughHerbert. It alsodidnotpass
"bydescent"to itspresentowner. ThePaintingwasaforgery, anditsprovenancewasfiction. It
wasneverauthenticatedby.ChristopherRothko. Moreover,membersof theNational Gallery
hadnot"viewed"thePaintingnor"consider[ed]"itfor inclusion intheRothko catalogue
raisonne. (AsFreedmanaverredinacomplaintfiled in September2013, shemerely"showeda
photograph"ofthePaintingto twoNational GalJery employees.)
86. Wickwasawareofsubstantial evidencethatthePaintingwas aforgery
andthatthestatementsinhisApril7,2008 emailwerefalse. Wickmadethese
18
misrepresentations'eitherintentionallyorwithwillful blindnessorreckless disregardforthe
truth.
87. Oninformationand belief, theKnoedlerDefendantswereawarethatWick
wasfalselypromotingthePaintingtoplaintiffsasaRothkoacquired throughHerbert.
88. Inadditiontothesemisrepresentations,neitherWicknortheKnoedler
Defendantsconveyedtoplaintiffsanyotherfacts that wouldhaveindicatedthatthePaintingwas
aforgery. Theydidnotdisclose, for example,thatthePaintingwas from theRosalesCoIJection,
Theydid notdisclosethattheKnoedlerDefendantshadpurchasedRosalesCollectionworksfor
apittanceandthenresoldthemforhugemarkups. Nordidtheydisclosethat, by 2008, eight
otherworksfrom theRosalesCollectionhad beendeterminedtobeinauthentic- i.e., forgeries-
byIFARandDedalus.
89. EykynMacleanwasfamiliarwith Wickthrough, inter alia, Wick's
scholarshipand hisworkascuratorofthe BeyelerFoundationmuseum. Oninformationand
belief, Wick'scareerandhisreputationas ascholarand curatorarebasedonhisabilityto
carefullyandpreciselyrecognizeandevaluateauthenticworksofart, particularlythoseof
Rothko. It wasthatreputationthatinducedEykynMaclean,andthereforeitsclients,to trust
Wick.
90. Wickdidnotdiscloseto EykynMacleanthatKnoedlerwaspayinghima
$300,000"Consultant'sfee"forhisroleinsellingthe Painting.
91. Aftersomenegotiation,onoraboutApril 7, 2008, Wicktold Eykyn
Macleanthatthe undisclosedsellerswouldacceptno lessthan$7.2millionforthePainting,with
anadditional $150,000tobepaidto Wickasan"introductorycommission." EykynMaclean
accepted theofferonFertitta'sbehalfthe nextday.
19
92. Wickinstructedthatthe salewouldbe administeredbydefendantUrsO.
Kraft, anattorneyin Kilchberg, Switzerland. On informationandbelief, Kraftsellsartworkon
behalfofhisclientsaspartofhislawpractice.
93. Kraftpurportedlyrepresentedthe"undisclosedseller." Wickinstructed
thatall paymentsbemadeto Wick, andKraftconfirmedthatinstruction.
94. PlaintiffsarrangedforthePaintingto bepurchasedbytheNewYorkart
dealerGurrJohns(doing businessas "GurrJohnsMasterson,Inc."or"MastersonGurrJohns,
Inc.") as an intermediaryonFertitta'sbehalf.
95. KraftandGurrJohnsexecutedaBillofSaleforthe PaintingonApril 11,
2008,includedherewithasExhibitA. It listedGurrJohnsas "Buyer"and"UrsO. Kraft, as
agentfor anundisclosed seller(theOwner),"as "Agent."
96. AttachedtotheBillofSaleas ExhibitAwasadocumentdescribingthe
Paintinganditsprovenanceasfollows:
MarkRothko
Unititled (Orange, Red and Blue)
Provenance: PrivateCollection, Switzerland(acquiredfrom
ArtistthroughDavidHerbert,NewYork, either
1959or 1960)
Bydescentfrom the aboveto thepresentowners
97. TheBillofSaleincludedthefollowing language:
Agent [Kraft], on behalf of itself and on behalf of the
Owner, hereby represents andwarrants to Buyerthat: ... the Work
is authentic, that is, the WorkwascreatedbyMarkRothkoandthe
attribution,provenanceanddescriptionofthe Workas describedin
this BillofSaleareaccurateandcomplete...
Agent agrees to indemnify Buyer against all demands,
suits, judgments, damages, losses or other liability, including all
reasonable attorney orotherprofessional fees, sufferedor incurred
20
by, or asserted or alleged against Buyerarising by reason oforin
connection with the breach or alleged breach of or falsity or
inaccuracyofanyofAgent'srepresentationsorwarranties(express
orimplied)orothertermssetforth in thisBillofSale.
98. Pursuantto Wick'sandKraft'sinstructions,GurrJohnspaidonbehalf of
Fertittathepurchasepriceof$7.2millionforthe Painting,plusWick'sintroductorycommission
of$150,000,infourinstallmentstothreeaccountswithSwissbanks,eachofwhichwasin
Wick's name: $3.6millionsentonApril21,2008;$75,000sentonoraboutApril 22,2008;
$3.6millionsentonMay30,2008;and$75,000sentonMay30,2008. ThePaintingwas
shippedto FertittafromNewYorkonoraboutJune 8, 2008.
99. On informationand belief, WicksentKnoedlertheproceedsfrom thesale
ofthe Paintingbyinternationalwireinaseriesoftransfersfrom late AprilthroughJune2008.
100. Knoedler'srecordsindicatethatKnoedlerwas sellingthe Paintingon
consignmentforRosales, who wasto receive$4.55 millionofthe salesproceeds. Knoedlerpaid
asmallamountoftheproceedsdirectlyto Rosalesandwiredtheremainderto bankaccountsin
SpainheldinBergantiiiosDiaz'sname.
101. Inadditionto whateverotherfees Wickreceived, KnoedlerpaidWicka
$300,000"Consultant'sfee" forhisroleinsellingthePaintingtoplaintiffs.
102. OnOctober30,2008, WicksentEykynMacleananemail soliciting
Fertitta'sinterestin anotherpurportedRothko. Wickwrotethatitwas"theperfectmatch"tothe
Paintingandthat"itseemsasiftheyhavebeenpaintedwithinaweek." Wick describedthenew
paintingas"[a]gainin excellentcondition, from anotherprivatecollection, samemount,simply
perfect,"buthenoted,"However,itis notquitereadyyet."
103. Wickattemptedagainto solicitFertitta'sinterestin apurportedRothko in
anemailsentonMarch 11, 2009. Wickdescribeditas"mintcondition,originallysamesource
21
... as ifthetwoworkshad beenconceivedatthesamemoment." Henotedagain, however,
"[T]heworkisnotquiteavailableyet."
104. Oninformationandbelief,Wick'sOctober2008 andMarch2009emails-
neitherofwhichledtopurchasesbyFertitta- concernedoneormoreadditionalforgedRothko
paintingsfromtheRosalesCollection.
Hammer's Knowledge and Involvement
105. Oninformationandbelief,Hammer,bothindividuallyandonbehalfof8-
31 andKnoedler,knewwellbeforethe saleofthePaintingtoplaintiffsthattheRosales
Collectionpaintingswereforgeries andthatthe KnoedlerDefendantswereinvolvedina
fraudulentscheme. Hammerwas intimatelyfamiliarwithKnoedler'sbusinessandhastestified
incivilactionsrelatingtothesaleofforgedpaintingsfromtheRosalesCollectionthathe was
"directlyresponsiblefortheoperations"ofKnoedler.
106. Hammerwas Freedman'ssolesupervisorandthusinauniquepositionto
monitoranddirectherwork. FreedmaninformedHammerof eachsaleofaRosalesCollection
PaintingandadvisedHammereachtimethatshewas"researching"theprovenanceof a"newly
discovered"RosalesCollectionpainting. HammeroversawFreedman'scompensationand
periodicallyrewardedFreedmanforherparticipationintheschemebyincreasinghershareof
Knoedler'sprofitsaftershesoldpaintingsfrom theRosalesCollection.
107. HammerwasfamiliarwithRosales,theRosalesCollection,andthe
shiftingstoriesputforthtoexplaintheprovenanceoftheRosalesCollectionpaintings.
108. HammerknewKnoedlerboughtthepaintingsfromRosalesfor
inexplicablylowpricesandquicklyresoldthemforenormousmarkups, the proceedsofwhich
he channeledto himselfthrough 8-31.
22
109. HammercarefullyreviewedtheOctober2003 IFARReportand was
familiarwith IFAR' sconclusionthat itcouldnotconfirmtheattributionofthepaintingRosales
attributedto Pollock.
110. Oninformationandbelief,Hammer,givenhisfrequent communications
withFreedmanandhismanagementofKnoedler'soperations,wasfamiliarwithDedalus's
independentconclusionsthatseveralotherRosalesCollectionworkswereforgeries'.
111. Hammerregularlyrequested, received,andreviewedinformationabout
Knoedler'sinventoryofpaintings. Hereviewedquarterlyand annual financial statements,
includingsummariesofcashonhand,profits,andrecenttransactions.
Knoedler Is an Alter Ego of 8-31 and Hammer
112. Atallrelevanttimes, KnoedlerwasanalteregoofHammerand 8-31.
Through8-31,HammerexerciseddominionandcontroloverKnoedlerandused it to participate
inthe RICOschemeallegedherein.
113. HammerwasPresidentof8-31 andChairmanofKnoedleras well as
anothergallerycalled"HammerGalleries." 8-31 hadnoemployeeswhodidnotalsohold
positionsfor KnoedlerorHammerGalleries,orboth.
114. 8-31 employeesworkedinabuildingthathousedtheKnoedlerGallery
and boreonlyKnoedler'snameontheawning. 8-31 hadno offices separatefrom Knoedler's
space. 8-31 paidnorentto Knoedler. 8-31 employeesusedKnoedleremailaddressesand
sharedaphonesystemwithKnoedler.
115. Knoedlerhad no boardofdirectorsandmaintainednofinancial records
separateandapartfrom 8-31'srecords. Knoedlerdidnotpayitsowntaxes,file itsowntax
returns, orpayitsownemployeesdirectly. Thesefunctions wereperformedthrough8-31.
23
116. While nominally maintaining separate bank accounts, Knoedler and
Hammer Galleries indiscriminately shared funds at the direction of 8-31 executives and/or
Hammer. Knoedler and Hammer Galleries transferred funds directly to each other when one of
them needed cash to operate. The transfers occurred with no loan agreements and without the
charge of interest. They have not been repaid at any time relevant to the allegations herein.
117. Funds transferred to 8-31 by one of its entities, such as Knoedler, were
used indiscriminately to pay for expenses incurred by other entities, with no accounting to ensure
that the appropriate entity was charged for its own expenses. These expenses included taxes,
business expenses, attorney and accountant fees, charitable contributions, consulting fees, and
bank fees. On information and belief, 8-31 has admitted that it paid these expenses directly from
its account, with no effort to properly charge the expenses back to the LLC that incurred them.
118. When 8-31 needed funds, it directed Knoedler or Hammer Galleries to
transfer them to itself, looking to whichever gallery had immediately available funds, without
regard to the galleries' receipt of consideration or the basis for 8-31 's use of the funds. 8-31
called these transfers "interdivisional receivables." These funds were commingled in a single 8-
31 account and used to pay 8-31 's expenses, including Hammer's annual salary (of
approximately $400,000) and his "time and entertainment" expense reimbursements.
119. From 200 I to 2012, 8-31 and Hammer transferred $23 million from
Knoedler to 8-31 in the form of loans by Knoedler that were never repaid.
120. On information and belief, because Knoedler's profitability was dependent
on Rosales Collection sales, these transfers from Knoedler to 8-31 and Hammer largely
represented the proceeds of unlawful sales of forged Rosales Collection paintings.
2A
121. Oninformationandbelief, 8-31 andKnoedlerhaveadmittedthatin2010,
8-31 "reclassified"the"interdivisionalreceivable"that 8-31 owedto Knoedler- atthattimethe
largestassetonKnoedler'sbooks- asa"dividend"to 8-31. Accordingto 8-31 andKnoedler,
this"mean[t] thatno repayment [was] necessary"- thatis, Knoedlerforgavethe$23 million
debt.
122. Thisreclassificationoccurredin2010,aftera grandjurysubpoenawas
issuedto Knoedlerin connectionwithitssaleofpaintingsfromtheRosalesCollection,and
shortlyafteranumberof thepaintingsfromtheRosalesCollectionwererevealedto beforgeries.
Atthistime8-31 andtheotherKnoedlerDefendantswereawarethatKnoedlerwasdirectly
exposedto seriouspotentialliabilityasaresultoftheRosalesCollectionsales.
The Profitability of the Scheme
123. TheRosalesCollectionschemebeganasarelativelymodestmoneymaker.
From 1994through 1999,Knoedlersoldapproximately 16paintingsfromtheRosalesCollection
forrelativelymodestsums,with amedianpriceof about$235,000.
124. After 1999,thepricesKnoedlercommandedfortheRosalesCollection
paintingsskyrocketed. Oninformationandbelief,between2000and2008 Knoedlersoldatleast
16paintingsfor amedianpriceof about$2.6million,atenfoldincreaseoverthemediansales
pricefrom thepre-2000years.
125. Eachofthe defendantsprofitedgreatlyfrom theirscheme. Rosalesand
BergantifiosDiazreceivedapproximately$15 millionfrom Knoedlerforthemorethan30
paintingstheysoldto orthroughKnoedler. Theyhad boughtthepaintingsfrom Qianfor afew
thousanddollarseach.
25
126. KnoedlerresoldtheRosales Collectionpaintingsforatotal ofabout$63.8
million,realizinggrossprofitsofapproximately$48.7million,withmarkupsinsomecasesas
highas 16timestheirpurchaseprice. Thislevelof profitwasfar greaterthanKnoedlerwould
havereceivedifithadbeensellingauthenticmasterworks.
127. Hammer, actingonbehalfofKnoedlerand 8-31, causedthesemillionsof
dollarsinprofitto be largelydistributedtohimself,through8-31,andto Freedman.
128. TheseRosalesCollectionproceedsaccountedforalmostallof theprofits
thatKnoedlergarneredfrom 1994to 2011 (excludingaone-timegainfollowingthesaleofthe
Knoedlerbuildingin February2011). From 1994through2011,Knoedlerhadastatednettotal
profitfrom all sourcesoftensofmillionsofdollars. WithouttheRosalesCollectionsales,on
informationand belief,duringthisperiodKnoedlerinsteadwouldhaverecognizedanetloss.
The Investigation and the Closing of Knoedler
129. In2009,theUnitedStatesAttorney'sOfficeforthisDistrictbeganto
investigatedefendants' activitiesandsubpoenaedFreedmanandKnoedlerfor documents
concerningtheRosalesCollection. Oninformationandbelief,HaII).merreceivedandreviewed
thesubpoenasandwasawarethatKnoedlerandFreedmanwerebeinginvestigatedfor
unlawfullysellingforged art.
130. InOctober2009,afterlearningof thefederal criminalinvestigation,
Hammerfired Freedman. Hammerand Knoedlerdidnotdiscloseto plaintiffsor, oninformation
andbelief, to anyofKnoedler'sothercustomersthathe hadfired FreedmanorthatKnoedlerwas
beinginvestigatedforsellingforged art. Instead,hesentalettertoKnoedler'scustomerson
October27, 2009 announcingthatFreedmanhad"resigned."
26
131. InoraboutOctober2009, HammerhadKnoedler'sremaininginventoryof
unsold RosalesCollectionpaintingsmarked"notforsale."
132. Deprivedofitsrevenuestreamfromthesaleofforged RosalesCollection
paintings,Knoedler'sprofitsdisappeared. Accordingto Hammer,Knoedlerincurredoperating
lossesof$2.3 millionin2009and$1.6millionin2010,respectively.
133. OnNovember29,2011, acustomerwhohadpurchasedapurported
Pollockpaintingfrom Knoedlerfor approximately$15.3 millioninfonnedthegallerythathis
paintinghadbeendeterminedtobeaforgerybyamaterialsconsultingfirmthathadperformeda
paintpigmentanalysisonthework. Thenextday, Knoedlerannouncedthatitwasshutting
downpermanentlyaftermorethan 160years ofbusiness. Knoedlerwasnotscheduledto close
atthattime;ithadrecentlyundergonerenovationsandwas inthemiddleofan exhibition.
Rosales's Guilty Plea
134. RosaleswasarrestedonoraboutMay21,2013. Shewasindictedinthis
DistrictonJuly 17,2013,andonAugust 14,2013theGovernmentfiled asuperseding
indictmentdescribingthedetailsofthescheme, includingtheactsofRosales, BergantifiosDiaz,
andPei-ShenQian(thelattertwoofwhomwerenotidentifiedbyname).
135. Afterthesupersedingindictmentwasfiled, Freedmanconcededthatthe
works wereforgeries. See JamesPanero, '''IAmtheCentralVictim': ArtDealerAnn Freedman
on Selling$63 MillioninFakePaintings,"New York, Aug. 27, 2013,available at
http://nymag.com/dail ylintelligencer/2013/081exclusive-interview-with-ann-freedman.html
(ExhibitB).
136. OnSeptember 16,2013,Rosales pledguiltyinthisDistrictto all nine
countsofthe supersedingindictment,includingwirefraud inviolationof18 U.S.C. 2and
22
1343,andconspiracyto commitwirefraud inviolationof18 U.S.C. 1349. United States v.
Rosales, No. 13-cr-518-KPF,Dkt.No. 23.
137. Inherpleaallocution(excerptedas ExhibitC), Rosalesstated,"Frominor
aroundthe 1990sthrough2009,Isoldvariousworksofartto the KnoedlerGallery.... All of the
works Isoldto [Knoedler],includingworkspurportedto becreatedby MarkRothko,Jackson
Pollock,andRobertMotherwell, wereinfact, fakes createdbyan individualresidinginQueens,
NewYork." Rosalesfurtheracknowledgedparticipatingin"aschemetodefraud thepurchasers
ofthefake art"and"aggre[ing] withothersto sell"the works"andto make false representations
as to the authenticityandprovenanceoftheworks." Shedidnotallocutethatthe Knoedler
Defendantswereunawareofthe scheme.
138. AtRosales'spleaallocution,theUnitedStatesAttorney'sOfficeforthe
SouthernDistrictofNewYorkstatedthatitintendedtomake"additionalarrests inthiscase."
Resale of the Painting by Plaintiffs, Discovery of the Fraud,
and Repurchase of the Painting
139. OnoraboutMarch25,2011,FertittasoldthePaintingto anunidentified
buyerthroughthebuyer'sagents. Atthetime,neitherFertittanorthoseworkingwithhimin
connectionwiththe sale hadany reasonto doubtthePainting'sauthenticity.
140. OnNovember21,2013, The Art Newspaper publishedanarticle
identifyingpaintingsfrom theRosalesCollectionthathadbeensoldbyorthroughKnoedler.
See LauraGilbert,"MoreVictimsofAbstractExpressionistFakesScandalRevealed," The Art
Newspaper (Nov. 21, 2013),http://www.theartnewspaper.com/articles/More-victims-of-
Abstract-Expressionist-fakes-scandal-revealed/3106I (attachedheretoas ExhibitD).
28
141. The article included a list of more than 30 paintings, along with their
purchasers, purchase prices, dates of purchase, and the amounts that Knoedler paid Rosales for
them. As to the Painting at issue in this case, it stated:
Masterson Gurr Johns Inc. in Switzerland, bought a Rothko,
Untitled (Orange, Red and Blue), 1959, for $7.2m through the
agent Drs Kraft on 30 April 2008. Knoedler paid Rosales $4.6m
for the work "owned jointly by she [sic] and her brother-in-law,
although originally from same collection as the other pictures[.]"
142. Plaintiffs e:ventually learned of this article and, upon further inquiry,
understood the reference to the Rothko purchased by Gurr Johns to be the Painting they had
purchased via Kraft and Wick.
143. Before learning of the Art Newspaper article, plaintiffs had no notice that
they had been victims of a fraud. They did not know that the Painting emanated from the
Rosales Collection or that Knoedler had been involved in its sale in any way. At no point have
any of defendants alerted plaintiffs that the Painting was a forgery.
144. On February 21,2014, plaintiffs (by counsel) provided notice to Kraft in
accordance with the Bill of Sale challenging the "attribution, provenance and description of the
[Painting]." That notice requested inter alia that Kraft disclose the "identity and contact
information of the Owner" as provided for in the Bill of Sale. The notice was delivered to Kraft
the next business day and he has acknowledged delivery, but as of the date hereof has not
provided the required information or any substantive response to the notice.
145. Because the Painting is a forgery, Fertitta has been exposed to potential
liability to the buyer for his sale of the Painting. Fertitta has agreed to repurchase the Painting
from the buyer for $8.5 million (the buyer's costs associated with his acquisition of the Painting).
29
146. Eykyn Maclean received fees for its services that it has now refunded,
thereby incurring damages.
COUNT I
Rescission Based on Mutual Mistake
(Against Kraft)
147. Plaintiffs repeat and re-allege the allegations in Paragraphs 1 through 146
as if fully set forth herein.
148. Plaintiffs bought the Painting believing it to be a genuine Rothko work.
149. Kraft maintained, represented and warranted in the Bill of Sale and in
communications by Wick that the painting was a genuine Rothko work.
1SO. The Painting has been identified as a forgery in the Art Newspaper on
November 21, 2013 as having been bought from the Rosales Collection.
151. The Work was not known beyond Knoedler, Wick, and their customers, so
there was no generally held belief as to its authenticity or lack thereof.
152. To the extent Kraft was not aware of the fraud, plaintiffs and Kraft were
mutually mistaken in believing that the Painting was an authentic work by Mark Rothko.
Plaintiffs never would have paid $7.35 million - and Kraft would never have accepted $7.2
million - for a painting that plaintiffs and Kraft did not believe to be an authentic Rothko.
153. Plaintiffs agreed to and did purchase the Painting without any knowledge
of these mistakes.
154. Plaintiffs fully performed all of their obligations under the purchase
agreement.
ISS. Plaintiffs have no adequate remedy at law and are therefore entitled to
rescind the purchase.
30
COUNT II
Rescission Based on Unilateral Mistake
(Against Knoedler, Wick, and Kraft)
as if fully set forth herein, except that they plead Count II in the alternative to the allegations in
Count 1.
157. At the time the Painting was purchased, Plaintiffs believed that: (1) the
Painting had been obtained from Rothko and passed to its current owner, a Swiss art collector, by
descent; (2) there were no questions about the work's authenticity; and (3) the work was fully
marketable. These were mistaken beliefs.
158. Plaintiffs purchased the Painting without any knowledge that the items
delineated in Paragraph 157 were mistakes.
159. Plaintiffs could not ascertain the truth concerning their mistaken belief at
the time of the sale of the Painting because such information was exclusively in the defendants'
possession.
160. Kraft was either mutually mistaken with plaintiffs in selling the Painting
as alleged in Count I, or he, like Knoedler and Wick, was aware of information that indicated the
Painting was not authentic and its provenance was false.
161. Plaintiffs exercised reasonable diligence in investigating the Painting
before purchasing it, e.g., relying on Wick who is a world-class expert staking his reputation on
its authenticity, and by obtaining written guarantees of the truth of the defendants'
representations about the Painting.
162. Plaintiffs fully performed all their obligations under the purchase
agreement.
31
163. Plaintiffs have no adequate remedy at law and are therefore entitled to
rescind the purchase.
COUNTIII
BreachofExpressWarranties
(AgainstKnoedler,Wick,andKraft)
as iffully set forth herein, except that they plead Count III in the alternative to the allegations in
Counts I and II.
165. Before and at the time of the sale, for the purposes of inducing plaintiffs to
consummate the transaction and as the basis of the bargain, defendants represented to plaintiffs
that the Artist who created the Painting was Mark Rothko, that the Painting was "acquired from
Artist through David Herbert," and that it had passed "[b]y descent to the present owners."
166. Wick stated in an April 7, 2008 email, "J confirm that this work has been
submitted to the team, all is perfectly fine, otherwise I would not want to be involved with it.
For this I stand with my name as a Rothko scholar."
167. The Bill of Sale executed on April 11, 2008 by Kraft, on behalf of seller,
and Gurr Johns, on behalf of Fertitta, (Exhibit A) stated that the Painting was by Mark Rothko
and described its provenance as follows: "Private Collection, Switzerland (acquired from Artist
through David Herbert, either 1959 or 1960)[;] By descent from the above to the present
owners."
168. The Bill of Sale also included language stating, "Agent [Kraft], on behalf
of itself and on behalf of the Owner, hereby represents and warrants to Buyer that: '" the Work is
authentic, that is, the Work was created by Mark Rothko and the attribution, provenance and
description of the Work as described in this Bill of Sale are accurate and complete .... "
32
169. Thelanguagequotedinparagraphs 167 and 168 createsexpresswarranties
underN.Y. U.e.e.2-313(1).
170. Inagreeingto consummatethetransaction,plaintiffsreliedonKnoedler's,
Wick's,and Kraft'sexpresswarrantiesconcerningthePainting'sauthenticityandprovenance
and wouldnothavepurchasedtheworkhadtheybeenawarethatthosewarrantieswerefalse.
171. Plaintiffsfullyperformedtheirobligationsunderthepurchaseagreement.
172. Defendantsbreachedtheirwarrantiesbecause(a)thePaintingis aforgery,
and(b)theprovenanceofthework,as statedbyatleastWickandKraft,asatleastdesignatedby
Knoedler, andasstatedintheBillofSaleexecutedbyKraft, is false.
173. Plaintiffssuffereddamagesofmorethan$8.6million,plusinterest,asa
resultof thisbreach.
COUNTIV
Breach ofImplied Warranty of Merchantability
(Against Knoedler, Wick, and Kraft)
174. Plaintiffsrepeatand re-allegetheallegationscontainedinParagraphs 1
through 173 as iffully setforth herein,exceptthattheypleadCountIV inthealternativeto the
allegationsinCountsIandII.
175. Knoedlerwas amerchantwithrespectto goodsofthekind thatitsoldto
plaintiffs(namely,worksoffine art), andhelditselfoutashavingknowledgeand skillparticular
to art, includingmodemAmericanartsuchas thePainting.
176. Wickwasawell-respected,worldrenownedscholarwithrespectto goods
ofthe kindthathe soldto plaintiffs(namely, worksoffine art), and heldhimselfoutas having
knowledgeand skillparticulartoart, includingmodemAmericanartsuchas thePainting. Wick
33
vouched for the authenticity of the Painting based upon, in his words, his "name as a Rothko
scholar."
177. In selling the Painting, Knoedler, Wick, and Kraft each made an implied
warranty under N.Y. U.C.C. 2-314 that the Painting was merchantable.
178. Knoedler, Wick, and Kraft breached this implied warranty of
merchantability because the Work cannot pass without objection in the trade as an authentic
Rothko, and the warranted provenance - "Private Collection, Switzerland (acquired from Artist
through David Herbert, New York, either 1959 or 1960)[;] By descent to the present owners"-
cannot be substantiated.
179. Plaintiffs notified defendants by letter to Kraft of their breach of the
implied warranty of merchantability within a reasonable time after discovering the breach.
180. Plaintiffs suffered damages of more than $8.6 million, plus interest, as a
result of this breach.
COUNT V
IndemnificationlReimbursement of Expenses
(Against Knoedler, Rosales, Wick, and Kraft)
as if fully set forth herein.
182. The Bill of Sale is a valid and enforceable contract that gives rise to
certain obligations on the part of defendants.
183. In selling the Painting, Kraft acted on behalf of one or more unnamed
sellers. On information and belief, the unnamed sellers are among the other defendants.
184. Under the Bill of Sale, Kraft and the Painting's Owner agreed to
"indemnify Buyer against all demands, ... damages, losses or other liability, including all
34
reasonableattorneyorotherprofessional fees, sufferedorincurred by, orassertedoralleged
againstBuyerarisingbyreasonoforin connectionwith the breachorallegedbreachoforfalsity
orinaccuracyofanyofAgent's representationsorwarranties(expressorimplied)orotherterms
setforth in [the] BillofSale."
185. Asaresult ofdefendants' aforementionedbreachesofrepresentationsand
warranties setforth inthe Bill ofSale,Plaintiffshaveincurredunreimbursedcharges, fees, costs,
andexpense, includingreasonableattorneys'fees andexpenses in connectionwiththe
enforcementandpreservationoftheirrightsandtheprosecutionofthisaction.
186. Plaintiffsareentitledto indemnificationandreimbursementfrom
defendantsforthosecharges, fees, costs, andexpenses inanamountto bedeterminedattrial.
COUNTVI
(AgainstKnoedler,Freedman,Hammer,Andrade,
8-31,Rosales,BergantifiosDiaz,Wick,and JohnDoes1-10)
187. Plaintiffsrepeatand re-allegethealiegations in Paragraphs 1through 186
as if full y set forthherein,except that theyplead Count VI in thealternati ve to the allegations
in CountsIandII.
188. Knoedlerand Freedman,throughotherdefendants,fraudulently induced
plaintiffsto purchasethe PaintingbycausingWicktotell plaintiffsthatthePaintingwasan
authenticRothkopaintingthatpassed"bydescent"to its owner. Defendants createdthis false
provenancewiththeintentofusingit to marketthe Painting.
189. DefendantsknewthePaintingwasaforgery, that its provenancewasa
fiction, andthatit had no value.
35
190. Wickfraudulently inducedplaintiffsto purchasethe Paintingby
communicatingto themthefalseprovenancethatdefendantsconcocted; by falsely statingthat
thePaintingwas beingconsideredfor inclusionintheNational GalleryofArt'scatalogue
raisonne ofRothkopaintings;byfalsely statingthattheworkhad been"submittedtotheteam"
and that"all [was] perfectlyfine"; andby falsely indicatingthatthe Paintinghad been
authenticated byChristopherRothko,MarkRothko'sson.
191. Wickhad reasontoknowthateachofthesestatementswasfalse, thatthe
Paintingwasaforgery withno value,and thatitsprovenancewas afiction. Wickmadethe
representations in Paragraphs84, 165, 166and 190eitherintentionallyorwithwillful blindness
orrecklessdisregardforthetruth.
192. PlaintiffsreliedonthePainting'sfalse provenanceandoneachofthe
misrepresentationsmade by Wickinpurchasingthework.
193. Plaintiffs' relianceonthePainting'sfalseprovenanceandWick's
misrepresentationswas reasonablebecauseofWick'sstaturein theartisticcommunity,his
affiliationwiththeprestigiousBeyelerFoundation,his renownas acuratorandscholarof the
workofRothkoand otherAbstractExpressionists,andhisaffirmation,"Forthis Istandonmy
workasa Rothko scholar."
194. Plaintiffs' relianceonthePainting'sfalse provenanceand onWick's
misrepresentationswasreasonablebecausethe BillofSaleincludedlanguage"represent[ing]
and warrant[ing] to Buyerthat... the Workis authentic, thatis, the Workwascreated by Mark
Rothkoandtheattribution, provenanceand descriptionoftheWorkasdescribedin theBillof
Saleareaccurateandcomplete."
36
195. InrelianceonthemisrepresentationsandomissionsofKnoedler,
Freedman, and Wick, plaintiffsweredamaged intheamountofmorethan$8.6million,plus
interest.
196. Becausedefendantsengagedinthefraudulent conductstatedinthis
Complaintwillfullyand maliciously, andwiththe intentto damageplaintiffs,plaintiffsare
entitledtoanawardofpunitivedamages.
197. Oninformationand belief,JohnDoes 1-10participatedinthefraud.
COUNTVII
FraudulentConcealment
8-31,Rosales, BergantiiiosDiaz,Wick,andJohnDoes1-10)
198. Plaintiffsrepeatandre-allegetheallegations inParagraphs 1through 197 .
as iffullysetforth herein,exceptthattheypleadCountVIIinthealternativetotheallegationsin
CountsIand II.
199. Defendantsfraudulentlyconcealedfromplaintiffsfactsthatwerenot
readilyavailabletoplaintiffsaboutwhichthedefendantshadsuperiorknowledge. The
defendantsunderstoodthatplaintiffswouldpurchasethePaintingonthebasisoftheincomplete
and incorrectknowledgethedefendantspassedonto themgiveninter alia, Wick'sprominence
inthefield.
200. Ifplaintiffshad knownthe facts thatdefendantshadconcealedfrom them,
theywouldnothaveboughtthePainting.
201. Defendantsdidnotdisclose, inter alia, that:
a. Knoedlerhad obtainedthePaintingfromRosalesandBergantifiosDiaz,
whohad soldKnoedleraseeminglylimitlesscacheofmorethan 30
37
purportedlyundiscoveredpaintingssince 1994,whichKnoedler
immediatelyresoldfor hugemarkups.
b. Knoedlerand Freedmanhad neverdealtwiththepurportedownerofother
Rosales Collectionpaintingsand knewoftheirpurportedprovenanceonly
throughRosales'srepresentations.
c. Knoedlerdevelopedthe Herbertstoryrelatingto the RosalesCollection
PaintingsonlyafterIFARrejected as "inconceivable"theprevious
provenance,whichcenteredonAlfonsoOssorio.
d. Rosaleshad refusedto askMr. X,Jr. to signarevisedAuthentication
Statementverifyingtheauthenticityofthe Rosales Collectionpaintings.
Theconcealedfacts werematerial becausetheywerewarningsignsthatthe Paintingwasa
forgery andhadnovalue.
202. In additionto theabove, Wickdidnotdisclose,inter alia, that:
a. Wickhadconductednoindependentresearchintothe Painting's
authenticityorprovenancedespitevouchingfortheworkbasedonhis
"nameasaRothkoscholar."
b. WickhadneverresearchedthepurportedHerbertlinkto theprovenance
ofthePainting,andthepassageconcerningHerbertthathe included in his
RothkoRoomsarticlehadbeenliftedwholesalefrom an internal Knoedler
memorandum.
c. Wickhadconductedno independentresearch intotheauthenticityor
provenanceofthe RosalesCollectionworksthathe hadarrangedwith
Knoedlerto showattheBeyelerFoundation.
38
d. Knoedlerhad agreedto payWick$300,000to compensatehim forhisrole
insellingthePainting, in additiontothe$150,000thathe was charging
plaintiffs.
Thesefacts werematerialbecausetheyindicatedthat Wickhadnobasisto "standon[his] work
as aRothkoscholar"invouchingthat"everything [was] perfectlyfine"withthePaintingand
thatWickwas actingas anagentfortheseller,notas aneutralbroker.
203. As aresultofdefendants' failure toprovideplaintiffswiththe full
informationthatwasavailableto defendants,plaintiffs-asdefendantsintended-purchasedthe
Paintingandsuffereddamagesinanamountgreaterthan$8.6millionas aresultofhaving
purchasedaforgery.
204. Becausedefendantsengagedinthefraudulent conductstated inthis
Complaintwillfullyandmaliciously,andwiththeintentto damageplaintiffs,plaintiffsare
entitledto an awardofpunitivedamages.
205. Oninformationandbelief,JohnDoes 1--:-10 participatedinthefraud.
COUNTVIII
AidingandAbettingFraud
8-31,Rosales,BergantifiosDiaz,Wick,andJohnDoes 1-10)
206. Plaintiffsrepeat andre-allegetheallegationsinParagraphs 1through205
as ifflilly setforth herein, exceptthattheypleadCountVIII inthealternativetotheallegations
in CountsIand II.
207. Defendantsperpetratedafraud onplaintiffsas setforth herein.
39
208. Rosalesand Bergantifios Dfazhadknowledgeofthefraud becausethey
boughttheworksfrom aforger, tookstepsto "age"them, andsoldthem to Freedmanfor
fraudulentresaleto customers.
209. RosalesandBergantifiosDfazprovidedsubstantialassistancebyproviding
theforged workstoFreedmanand introducingtheminto themarket.
210. Freedmanhadknowledgeof thefraud because,inter alia, she
(a)continuouslyboughttheRosalesCollectionpaintingsincircumstancesstronglyindicating
fraud, (b)developedstoriesofthepaintings' provenanceswithnofactual ordocumentary
evidence,and(c)learnedoftheconclusionsofneutralexpertsthattheRosalesCollection
paintingswereinauthenticandtheirpurportedprovenancesfalse.
211. Freedmanprovidedsubstantialassistance,oninformationandbelief,by
arrangingforWickandKraftto sellthePaintingto plaintiffs.
212. Wickhad actual knowledgeofthe fraud or,ataminimum,consciously
andrecklesslyavoidedknowledgeof the fraud, becausehe(a)expresslyvouchedfor the
authenticityofthe PaintingbasedonhispositionasaRothkoscholardespiteknowingthathe
had no basis to doso; (b) repeatedlyarrangedfor RosalesCollectionworks to beshownatthe
BeyelerFoundationwithoutconductingsufficientdiligenceintotheirprovenance;and(c)passed
offKnoedler'sfalse Herbertprovenancestoryas his ownworkinhisRothko Roomsarticle
withoutperforminganyindependentresearchinto itsveracity.
213. Wickprovided substantialassistancebycommunicatingthePainting's
false provenanceto plaintiffs,negotiatingthesaleandpurchasepriceofthework,collecting
paymentoftheproceedsofthe sale,andfacilitating thepaymentofthe purchasepriceto
Knoedler.
40
214. Hammer knew of the fraud through, inter alia, (a) the IFAR report, which
he carefully reviewed in 2003 and which raised serious questions about the provenance and
authenticity of all of the Rosales Collection works; (b) Dedalus's conclusions that seven Rosales
Collection works were fakes and that the Herbert story could not be credited; (c) the documents
demonstrating Knoedler's failed efforts to verify the Rosales Collection; (d) the outsized profits
Knoedler made on the sales of works from the Rosales Collection, which were highly unusual for
this industry and which, at that time, Hammer knew accounted for nearly all of Knoedler's
profits during the course of the scheme; and/or (e) Hammer's direct communications with
Freedman, which included reports of every sale of a Rosales Collection work and discussions of
the source of those works and Knoedler's "research" regarding their provenance.
215. Hammer provided substantial assistance t6 the ongoing Rosales Collection
frauds by (a) allowing Freedman to use the Knoedler name and platform to lure victims;
(b) personally approving increases in Freedman's profit sharing in 2002 and 2008, thereby
rewarding Freedman's conduct of the fraud, (c) assisting Freedman in obtaining Mirvish's
investment in a Rosales Collection work that had been returned by Knoedler's client after the
IFAR Report questioned its authenticity, and (d) directing the concealment of the fraud, despite
his unique position to disclose it and end it.
216. Andrade had knowledge of the fraud because he served as Knoedler and
Freedman's "gateway" to Rosales and Bergantifios Diaz, participateq in developing the false
Herbert story of the paintings' provenance, and participated in meetings relating to the fraud.
217. Andrade provided substantial assistance by introducing Freedman to
Rosales and by helping Knoedler develop the false provenance based on his friend Herbert.
218. Theactionsofdefendants in assistingand concealingthe fraud arethe
proximatecauseofplaintiffs' damages.
219. Asa resultof the fraud, plaintiffssuffereddamagesinanamountno less
than$8.6million.
220. Becausedefendantsengagedinthefraudulentconductstatedinthis
Complaintwillfullyandmaliciously,andwiththe intenttodamageplaintiffs, plaintiffsare
entitledtoanawardof punitivedamages.
221. Oninformationandbelief,JohnDoes 1through 10participatedinand
aidedandabettedthefraud.
COUNTIX
Conspiracyto CommitFraud
8-31,Rosales,BergantifiosDiaz,Wick, andJohnDoes 1-10)
222. Plaintiffsrepeatandre-allegetheallegationsinParagraphs 1through221
as iffully setforth herein, exceptthattheypleadCountIX inthealternativetotheallegationsin
CountsIandII.
223. Defendantsperpetratedafraud onplaintiffsas setforth herein.
224. Defendantsmaintainedacorruptagreementandenterprisein whichthey
knowinglymisrepresentedtheprovenanceofpaintingsfor thepurposeofsellingthe forged
worksas authentic.
225. Defendantsparticipatedinmultiplemeetingsto discussandalterthe story
regardingtheprovenanceoftheRosalesCollectionworks, givingrisetotheinferenceofa
conscious,corruptagreement.
42
226. Defendantshadactualorconstructiveknowledgeofthefraud, as setforth
above.
227. Freedmanand Knoedlercommittedovertactsin furtherance ofthe
conspiracyby, inter alia, sellingthe RosalesCollectionworksto customersandcommunicating
to themmisrepresentationsconcerningtheprovenanceofeachwork.
228. Hammercommittedovertacts infurtherance oftheconspiracyby
(a)allowing Freedmanto usetheKnoedlernameandplatformto lurevictims; (b)rewarding
Freedmanforherperpetrationofthe fraud; (c) assistingFreedmaninobtainingMirvish's
investmentinaRosalesCollectionworkthathadbeenreturnedbyJackLevyaftertheIFAR
Reportquestioneditsauthenticity;and(d)directingtheconcealmentofthe fraud, bothduringthe
schemeandafteratitsconclusion.
229. Andradecommittedovertactsin furtherance oftheconspiracyby,inter
alia, introducingKnoedlerand Freedmanto RosalesandbycommunicatingwithKnoedlerand
FreedmanconcerningthestoryofHerbertas intermediary.
230. Wickcommittedovertacts infurtherance oftheconspiracybymarketing
thePaintingto plaintiffs,negotiatingitsprice, securingpaymentforthe Painting,andsoliciting
Fertitta'sinterestin asecondforged Rothkowork.
231. BergantifiosDiazcommittedovertacts in furtheranceoftheconspiracy
by, inter alia, acquiringforged worksfrom Qian, forgingtheartists' signatures,and"aging"the
paintingsto makethemappearauthentic.
232. Rosalescommittedovertactsinfurtheranceoftheconspiracyby selling
theworksto Knoedler.
43
233. 8-31 Holdingscommittedovertactsinfurtheranceof theconspiracyby
rewarding Freedmanfor the fraud and byparticipating,throughitsagentsHammerand
Freedman, intheconcealmentofthefraud.
234. InrelianceonDefendants' misrepresentationsandomissions,plaintiffs
weredamagedintheamountofmorethan$8.6million,plusinterest.
235. Becausethe defendantsengagedintheconspiracyto commitfraud stated
inthisAmendedComplaintwillfullyandmaliciously,andwiththeintentto damageplaintiffs,
plaintiffsareentitledto anawardofpunitivedamages.
236. Oninformationandbelief,JohnDoes Ithrough 10joinedtheconspiracy
andcommittedovertactsinfurtheranceofit.
COUNTX
Racketeeringin Violationof18U.S.c. 1962(c)
8-31,Rosales,BergantifiosDiaz,Wick,andJohnDoes1-10)
237. Plaintiffsrepeatandre-allegetheallegationsinParagraphs 1through235
as iffully setforth herein, exceptthattheyplead CountX inthealternativeto theallegationsin
CountsIandII.
238. Theassociationofdefendantsandotherindividualsconstitutedan
enterprisewithinthemeaningof18 U.S.c. 1961(c),whichenterprisewasengagedin, and
whoseactivities affected, interstateandforeigncommerce. Thisenterprisewascontinuousin
thatit lastedformorethantwoyears,hadanascertainablestructure,andactedinwaysdistinctfrom
thepredicateoffensesallegedbyplaintiffs. Thisenterprisewas continuousfortheadditional
reasonthatthepredicateactswerearegularwayof conductingKnoedler'songoingbusiness
andofconductingorparticipatingintheongoingRICOenterprise.
44
239. Eachdefendantisapersonwithinthemeaningof18U.S.c.1961(3)and
separatefromtheenterprise.
240. Defendants' scienter is established by the patternof intentional and knowing
fraudulent,materialmisrepresentationsandomissionsdescribedabove.
Wire and Mail Fraud <Violations of 18 U.S.c. 1341, 1343)
241. Defendantsandothermembersof theenterprise,havingdeviseda
schemeoraItificetodefraud,and/orforobtainingmoneyorpropertybymeansof false or
fraudulentpretenses,representations,orpromises,transmittedorcausedtobetransmittedby
meansof mailandwirecommunicationin interstateorforeigncommercewritings, signs,
signals,pictures,orsoundsforthepurposeof executingsuchschemeorartifice(namely,tosell
forgedpaintings). Theseincludedthefollowingcommunications:
a. Oninformationandbelief,KnoedlerandFreedmanusedinternational
wiresinearly2008tonotifyWickthatKnoedlerwassellingthe
Painting.
b. OnApril7,2008,WicksentEykynMacleananemailusing
internationalwiresrepeatingthefalse provenanceforthePaintingand
makingaseriesof othermisrepresentations.
c. WickusedinternationalwiresinAprilandMay2008tonegotiatethe
priceof thePainting,totransmitandexecutetheBillofSaleforthe
work(whichincludedthePainting'sfalseprovenance),andtoarrange
forpaymentstotheworktobemadebyinternationalwiretovarious
bankaccountsinSwitzerland.
45
d. Plaintiffspaidfor thePaintinginaseriesof internationalwire
transfers, includingwirestothreebankaccounts inSwitzerlandon or
aboutApril21,2008,April22,2008,andMay30,2008.
e. OnoraboutMay 1,2008andJune 13,2008,Knoedlerused
internationalwirestosendaportionoftheproceedsfromthesaleof
thePaintingtoanaccountheldbyBergantifiosDiazatabankin
Madrid,Spain.
f. Oninformationandbelief,KnoedlerandFreedmanusedinternational
wires inoraroundOctober2008tonotifyWickthatKnoedlerwas
sellingasecondpurportedRothkothatwas,oninfonnationandbelief,
aforgeryfromtheRosalesCollection.
g. OnoraboutOctober30,2008,Wickused internationalwirestosolicit
plaintiffs' interestinthesecondpurportedRothkopaintingthatwas,
oninformationandbelief,aforgeryfrom theRosalesCollection.
h. InNovember2007, KnoedlerandFreedmanusedinterstatewiresto
receivepaymentforaforged PollockpaintingthatKnoedlersold to
PierreLaGrange.
1. InJune2007,KnoedlerandFreedmanusedinterstatewirestomarket
and to receivepaymentforaforged Willem deKooningpaintingfrom
theRosalesCollectionthatKnoedlersoldtoJohnHoward.
J. InNovember2005, Knoedler andFreedmanused interstatemails
and/orwiresto sendan invoiceandreceivepaymentforaforged
46
ClyffordStillpaintingfrom theRosalesCollectionthat Knoedlersold
to Nicholasand EugeniaTaubman.
k. Oninformationandbelief,KnoedlerandFreedmanused
internationalwiresand/ormailstotransmitto Wickthe"Notesona
Collector"articlememorandumdiscussingHerbert,whichWick
copiedwholesaleforhis 2005RothkoRoomsarticle.
1. InNovemberandDecember2004,KnoedlerandFreedmanused
interstatemailsand/orwirestomarket,negotiatethepriceof, and
receivepaymentfora forgedRothkopaintingfrom theRosales
CollectionthatKnoedlersoldtoDomenicoandEleanoredeSole.
m. Oninformationandbelief,Andradeusedinterstateand/or
internationalmailsand/orwiresin oraroundfall 2004to assist
KnoedlerandFreedmanindevisingthestoryof Herbertas
intermediary.
n. InNovember2002,Knoedlerusedinternationalwirestoreceive
paymentfora forgedRothkoworkfromtheRosalesCollectionthat
KnoedlersoldtoMichaelHiltionbehalfof theMartinHiltiFamily
Trust.
o. Oninformationandbelief,Wick,Knoedler,andFreedmanused
internationalwiresand/ormailsin 2002 toarrangefortheshowing
ofa forgedRothkoworkattheRothkoRoomsexhibitat the
BeyelerFoundation.
47
p. Oninformationand belief,KnoedlerandFreedmanusedinterstate
wiresand/ormailsin December2001 to market,transmitan
invoicefor, andcollectpaymentfor theforgedPollockfrom the
RosalesCollectionthatKnoedlersoldtoJackLevy.
q. Oninformationandbelief,defendantsusedinterstateand
internationalmailsand/orwirestomarket,negotiatethesalesof,
transmitinvoicesfor, andreceivepaymentfor all orsubstantially
all of theotherRosalesCollectionworksthatKnoedlersold
between 1994and2008.
r. Oninformationandbelief,Andradeusedinterstateand/or
internationalmailsand/orwiresinoraround 1994tointroduce
KnoedlerandFreedmantoRosales.
s. Oninformationandbelief,JohnDoes 1through 10 usedinterstate
and/orinternationalmailsand/orwiresinfurtherance of the
conspiracy.
242. Eachparticipantknew,expected,reasonablyforesaw, andintended
thatthesecommunications bymailsandwires ininterstateandforeign commercewouldbe
usedin furtheranceof theracketeeringschemeandthatsuchusewas anessentialpartof the
scheme.
243. Rosalespleadedguiltytowirefraudandconspiracytocommitwire
fraud inconnectionwiththe saleoffraudulent artworkfrom theRosalesCollection,
includingthePaintingatissue.
48
244. Defendantswillfullyandwithintenttodefraudsoldforgedartworksto!
plaintiffs and, on informationandbelief, dozensofothervictimsandalsomisrepresented
and/orconcealedthematerialfacts from them,as discussedabove.
245. Plaintiffsand othervictimsreliedupondefendants' misrepresentations,'
andsuchreliancewasreasonable,asdiscussedabove.
246. Plaintiffsandothervictimswereinjuredbydefendants' fraudulent
conduct,as discussedabove.
Pattern of Racketeering Activity
247. Theaforesaidactshadthesameorsimilarpurposes,results,participants,
victims,and/ormethodsof commission,andwereotherwiseinterrelatedbydistinguishing
characteristicsandwerenotisolatedevents. Defendantsengagedinapatternof racketeering
activityfromatleast 1994andcontinuingatleastthroughMarch2009,if notlonger,toobtain
andresellcounterfeitpaintingspurportedlybyAbstractExpressionistartists. Thatpattern
includedmultiplepredicateacts of mailandwirefraud.
248. Theracketeeringactsidentifiedabove(a)wereinfurtheranceofacommon
goal,includingthegoalof profitingillegallybyfraudulentlyinducingindividualstobuy
counterfeitworksof art; (b)usedsimilarmethodstoperpetratethefrauds, includingtheuseof
similar misrepresentationsregarding the provenanceofthecounterfeit works;(c)hadsimilar
participants;and(d)hadsimilarvictims.
249. Theactsofracketeeringactivity discussedaboveextendedovera
substantialperiodof timebeginningaround 1994andcontinueduntilatleastMarch2009.
Theseactswerearegularwayofconductingdefendants' ongoingbusinessandof conducting
orparticipatingintheongoingRICOenterprise.Theywereacriticalmeansofsupporting
49
defendants' businessandweresufficientlycontinuousto form apatternofracketeering
activity.
250. Defendantsparticipatedintheschemethroughthemselvesand,inthecase
of Knoedler, its representatives,employees,agents, officers,andJohnDoes 1- 10(thatis, others
whoseidentitiesareknownonlytodefendantsatthistime)as wellas atleastsomeof theother
defendantsthemselves. Defendantsbenefittedenonnouslyfrom theprofitstheymadefromthe
scheme.
251. Eachdefendant'sparticipationwascriticaltotheracketeeringscheme.
Theyenabled,conducted,maintained,aided,abetted,andprofitedfromtheracketeeringscheme
as detailedabove.
252. Thepreciseroleeachdefendantplayed,includingtheJohnDoe
defendants,is knownonlytodefendantsatthistime. Suchinformation,andevidence
concerningtheirparticipation,is exclusivelywithinthepossessionandknowledgeof
defendants.
253. Plaintiffshavebeeninjuredintheirbusinessorpropertybyreasonof
defendants' violationsof18 U.S.c. 1962(c). Asa directandproximateresultof these
violations,plaintiffshavelostmillions of dollarsinconnectionwithapurportedlyauthenticwork
of artthatturnedouttobeworthless.
254. By reason ofthis violationof 18 U.S.c. 1962(c), plaintiffs are entitled to
recoverfrom defendantstrebledamages,pre- andpost-judgmentinterest,costs,and
attorneys' fees.
_50
COUNTXI
Violation of18 U.S.C. 1962(d)
8-31,Rosales,BergantiJios Diaz,Wick,and JohnDoes 1-10)
255. Plaintiffsrepeatandre-allegetheallegationsin Paragraphs 1through254
as iffully setforth herein,exceptthattheypleadCountXI in thealternativeto theallegationsin
CountsIandII.
256. Inviolationof18 U.S.C. 1962(d),defendantsandotherswhose
identitiesareknownonlyto defendantsat thistime conspiredtoviolatetheprovisionsof18
U.S.C. 1962(c)inthat,beginningnolaterthan 1994andcontinuingthroughatleastMarch
2009,theyknowinglyagreedandconspiredtogetherandwithothersto conductorparticipate,
directlyorindirectly, intheaffairsofanenterprisethroughthepatternofracketeeringactivity
describedabove. The sophisticatedfrauds thatwereperpetratedandthecontinuanceofthis
schemecouldnothaveoccurredwithouttheconsentandknowingconnivanceofthedefendants
andotherconspirators.
257. Aspartofandinfurtherance of theirconspiracy, Knoedler, Freedman,
Hammer, 8-31,Andrade,Rosales,BergantifiosDiaz,andWick, and, oninformationandbelief,
JohnDoes 1-10,agreedto andconspiredin thecommissionofthemanypredicateactsdescribed
above, withtheknowledgethattheywere in furtheranceof thatpatternof racketeeringactivity.
Aspartofand in furtherance oftheirconspiracy,eachofthesedefendantsagreedtoanddid
commitatleasttwopredicateactsofracketeering. Further,eachdefendant'sactions are
attributabletotheotherdefendants.
258. Noneofdefendantshavewithdrawn,orotherwisedissociated themselves,
from theconspiracyat issueortheotherconspirators.
51
259. Asadirectandproximateresultofeachdefendant'sviolations, plaintiffs
have beeninjuredas aforesaidin businessorpropertybyreasonofdefendants' violationsof18
U.S.c. 1962(d).
260. Byreasonofdefendants' violationsof18 U.S.c. 1962(d), plaintiffsare
entitledto trebledamages,pre- andpost-judgmentinterest,costs,andattorneys' fees.
PRAYER FOR RELIEF
WHEREFORE,praintiffsrespectfullyrequestthattheCourtenterajudgment
awardingplaintiffs:
A. Compensatorydamagesinanamountto be determinedattrial,butnotless
than$8.6million,plusinterest.
B. Punitivedamagesinanamountto be determinedattrial onplaintiffs' Fifth,
Sixth, Seventh,Eighth,Ninth,andTenthCausesofActionas aresultof
defendants' willfulandintentionaltortiousmisconduct;
C. Trebledamagesunder 18 U.S.c. 1962(c)and(d) onplaintiffs'Ninthand
TenthCausesof Action;
D. Inthealternativeto theabove, rescissionof theBillofSale;
E. Costs,expenses,disbursements, andreasonableattorneys' fees inanamount
I
to beawardedattrial; and
F. SuchotherreliefastheCourtdeemsjustandproper.
JURY TRIAL DEMAND
Plaintiffsherebyrequestatrial byjuryonall claimsso triable.
52
Dated: March31,2014
NewYork,NewYork
ey . i ls@pbwt.com)
P. iguraGfigura@pbwt.com)
TTER ON BELKNAP WEBB & TYLER LLP
133 AvenueoftheAmericas
NewYork, NewYork 10036
Telephone: (212)336-2000
Fax: (212)336-2222
Attorneysfor Plaint(ffs
53
EXHIBITA
BILLOFSALE
Dated: April 11,2008
Sold by: DrsO. Kraft, as agentforan undisclosed seller(the"Owner") ("Agent")
Bahnhofstrasse I
CH-8802Kilchberg
Switzerland
Soldto: GurrJohnsMasterson,Inc. (the"Buyer")
155 East56
th
Street,4
th
Floor
NewYork,NewYork 10022
Work Sold: Artist: MarkRothko (the"Work")
Title: Unfitled (Orange. Red and Blue)
Medium: Oil onpapermounted onboard
Size: 37%x25 %in.
Date: 1959
Signed anddated'MarkRothko 1959'(onreverse)
Provenance: SeeExhibitA
PurchasePrice: $7,200,000.00 (the"PurchasePrice")
SalesTax: None- ResaleCertificate
PaymentTerms: $3,600,000.00payableon April 18,2008
$3,600,000.00payableon May30,2008
Agent, in consideration ofthe PurchasePrice, the sufficiency ofwhich is hereby
acknowledged, hereby irrevocably and without condition or reservation of any kind, sells,
transfers and conveys to Buyerthe Work, and all rightto possession and all legal and equitable
ownership ofthe Work, to have and to hold the Work unto Buyer, its successors and assigns,
forever.
Agent is acting on behalfofthe undisclosed owner ofthe Work (the "Owner").
Agent, on behalfofitselfand on behalfoftheOwner,representsand warrantsto Buyerthatupon
delivery by Agentto Buyerofthe Work and Agent's receipt ofthe Purchase Price, good, valid
and marketable title and exclusive and unrestricted right to possession ofthe Work, free ofall
Claims(asdefined below),willpassfromAgenttoBuyer.
Agent, on behalf ofitself and on behalfofthe Owner, hereby represents and
warrants to Buyerthat: (i) the Work is authentic, that is, the Work was created by MarkRothko
and the attribution, provenance and description ofthe Work as described in this Bill ofSale are
accurate and complete; (ii) the Owner is the sole and legal owner ofthe Work, the Owner has
authorized Agent to sell the Work on behalf ofthe Owner, Agent has full right and legal
authorityto executeand deliverthisBillofSale,andAgent is ablein accordance withthis Billof
Sale to transfer the Work to Buyer, free and clear ofany and all rights or interests ofothers,
claims, liens, security interestsorotherencumbrancesheldorclaimed byany person and relating
NYI 6602982v.1
11
.4
to the Work (collectively, "Claims"); (iii) neither Agent nor Owner has any knowledge of any
Claims threatened or pending, nor any knowledge of any facts or circumstances likely to give
rise to any Claims; (iv) Agent has provided Buyer with all information available to Agent or of
which Agent is aware concerning the attribution, authenticity, provenance and description of the
Work; and (v) neither Agent not Owner has restored or repaired any part of the Work, nor
consented thereto, and to the best of Agent's knowledge no other party has performed any major
restoration or repair. Other than as specifically represented and warranted by the Agent as set
forth in this Bill of Sale, the Buyer is purchasing the Work in "as is" condition, without any
representations or warranties by the Agent as to value or condition. The representations and
warranties contained in this Bill of Sale and all other terms hereof, shall survive the delivery of
this Bill of Sale and transfer of the Work.
Agent agrees to indemnify Buyer against all demands, suits, judgments, damages,
losses or other liability, including all reasonable attorney or other professional fees, suffered or
incurred by, or asserted or alleged against Buyer arising by reason of or in connection with the
breach or alleged breach of or falsity or inaccuracy of any of Agent's representations or
warranties (express or implied) or other terms set forth in this Bill of Sale.
Agent agrees to execute and deliver such additional documents and to take such
other further actions from time to time after the date hereof as Buyer may reasonably request, to
assure and confirm Buyer's rights and/or Agent's obligations under this Bill of Sale.
The Work is in storage at Crozier Fine Art Warehouse, 541 West 21
st
Street, New
York, NY 10011 ("Crozier"). Once Agent receives the Purchase Price in full from the Buyer,
Agent will release the Work to Buyer at Crozier. Agent agrees to insure the Work at Agent's
expense for the full Purchase Price until the Work is released to Buyer.
This Bill of Sale shall be governed by and shall be construed and enforced in
accordance with the laws of the State of New York, without giving effect to any choice of law or
conflict of law rules or provisions that would otherwise cause the application of the laws of any
jurisdiction other than the State of New York. In the event of a dispute arising under or related
to this Bill of Sale, the parties hereto submit to the sole and exclusive jurisdiction and venue of
the courts of the County of New York, State of New York, Southern District.
If the Buyer at any time alleges in good faith a breach of any representation or
wananty contained in this Bill of Sale and provides Agent with written notice of such alleged
breach and the basis therefore, then Agent or Agent's counsel shall furnish Buyer with the
identity and contact information of the Owner.
-2-
NY I 6602982v.1
<,1
../ /
Agent acknowledges that the provisions and subject matter ofthis Bill ofSale,
including but not limited to the identity ofBuyer and the Work and the Purchase Price ofthe
Work, are confidential and Agent agrees not to disclose any ofthe foregoing information to any
person orparty, exceptas may berequired by law, whetherconcurrentwith orsubsequentto the
executionand deliveryofthis Bill ofSa1e.
Agreedtosell:
Agent
./
,.
J
. (
Agreedto buy:
Buyer
GurrJohnsMasterson, Inc.
-3-
NY! 6602982v.1
1959
EXHIBITA
Mark Rothko
Untitled (Orange, Red and Blue)
OiIonpapermountedon board
37%x25 in.
Signedand dated 'MarkRothko 1959' (on reverse)
Provenance:
PrivateCollection,Switzerland(acquired from ArtistthroughDavidHerbert,NewYork,
either1959or 1960)
By descentfrom theaboveto thepresentowners
-4-
,,//f
NYI6602982v.1
,,'
./" / ....
t
EXHIBITB

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8/2712013 at 9 38 AM 64 Comments
'I Am the Central Victim': Art Dealer
Ann Freedman on Selling $63 Million in
Fake Paintings
By James Panero
Ann Freedman
"Iamasshockedaseverybody, moreshocked,asIamthecentralvictim,"Ann
Freedman,thegalleristatthecenterofan$80millionartforgeryscandal,told
meearlierthismonth. "Fifteenyears.Inmyhead,thesepaintingshavebeen
rightupuntilfivedaysago. Horrible."
Overthecourseofmostofthosefifteenyears,Freedmanhadputall of her
influenceandcredibilityasthepresidentofKnoedler& Company,untilrecently
oneofNewYork'soldestand mostrespectedartgalleries,behindwhatshe
believed tobeatreasuretroveofnewlydiscoveredmodernartbythebiggest
namesinAbstractExpressionism.InMay,federalauthoritiesannouncedthat
thepaintings- 63inall- werefakesandchargedGlafira RDsales, theobscure
artdealerwhD suppliedKnoedlerandatleastoneDthergallerywiththe
paintings,withtaxevasiDn. EarlierthismDnth(fivedaysbefDre Freedman
spokethosewords),thefedsspelledoutthedetailsofthelong-runningscheme
inafDllDw-up indictment,chargingthatRosaleshadnever,assheclaimed,
representedtheSDn DfamysteriDus anonymous cDllector. Rather,she allegedly
paidanartistinQueens e73-year-DldChinese-AmericanpainterPei-Shen
Qian, accDrdingtorepDrts)aslittleas $5,000eachtD createthecDunterfeit
masterpieces.
Freedman,whDspoke publiclyabDutthescandal forthefirsttimeinaseriesDf
recentconversationswithNew YDrk, says thattheresultsofthefederal
investigationproveshewasanunwittingagentinthescheme.Underher
leadership,KnDedlersold 40ofthefakesfDr analleged $63million. BefDre
shuttingdownabruptlyin late2011,thegallerymadea $20milliDn paymentto
Rosales.
Photo: Neil Rasmus 18FAnyc-com
BARS,
STORES' THE MAGAZINE 0.
Ths "Pollock" sold for $17 milDon
According to the indictment, the saga began in the early nineties when Rosales
approached Freedman with a fabulous tale. She claimed to represent a foreign
collector who "was of Eastern European descent, maintained residences in
Switzerland and Mexico, wished to remain anonymous, and had inherited the
works ... from a relative." Based on this account, Freedman came to call the
relative "Mr. X" and the anonymous seller "Mr. X, Jr" - of course, neither
existed.
"The story was credible," said Freedman, who is tall with tightly curled silver
hair and a controlled, energetic manner. "Dealers often do not know the
specifics of origin or background, or how the art left the artist's studio. You
cannot turn the pages of an auction catalogue or museum publication without
seeing a majority of the works labeled 'private collection.' The chain of
ownership is often out of order and incomplete."
With time, the story of how Rosales obtained the paintings became more
complex: The married Mr. X and David Herbert, a real-life gallery employee
and owner who died in 1995, knew each other in the fifties; they were lovers,
and Herbert offered Mr. X access to the studios of the Abstract Expressionists,
through whom he could purchase paintings off the books; these works were
hidden away until Herbert's death to protect Mr. X's secret. (Herbert, of course,
had nothing do with any Mr. X or secret stash of paintings - since neither
existed.)
Freedman says that she did her best to get answers from Rosales. "I went to
Glafira and pushed and pushed to get more information, relentlessly,"
Freedman said. "My ongoing diligence met more than the gold standard; there
is plenty of evidence of that."
Speaking with Daily Intelligencer last month, Freedman listed some markers
that led her to believe that the paintings were genuine. "They were very credible
in so many respects." says Freedman. "I had the best conservation studio
examine them. One of the Rothkos had a Sgroi stretcher. He made the
stretchers for Rothko. They clearly had the right materials. I got a consensus.
Some of the paintings were featured on museum walls," she continued. "The
Rothko went to the Beyeler [Foundation], and the Newman went to
Guggenheim Bilbao for the tenth anniversary exhibition. The most
knowledgeable in the art establishment gave me no reason to doubt the
paintings."
Experts seem to have been convinced, by and large, that the individualistic
quality of the Abstract Expressionist paintings Rosales obtained could only have
been achieved by the artists themselves. "The fact is that the entire Eastern
establishment believed in them. I saw the paintings," said Stephen Pokari, a
scholar of Abstract Expressionism and author of Abstract Expressionism and
the Modern Experience. "And they were very good. You wouldn't think twice
about them for a second. Ann did everything she could possibly do."
But others in the art world see a pattern of lax, self-interested behavior on
Freedman's part. "This has ruined one ofthe greatest galleries in the world. It
has trashed a lot of people's money. It seems to me Ms. Freedman was totally
irresponsible, and it went on for years," said Marco Grassi, owner of Grassi
Studios gallery on the Upper East Side and a well-known expert on Old Master
paintings. "Imagine people coming to someone and saying every painting you
sold me is a fake. It is an unthinkable situation. It is completely insane. A
gallery person has an absolute responsibility to do due diligence, and I don't
think she did it. The story of the paintings is so totally kooky. I mean, really. It
was a great story and she just said, 'this is great....
Over time, Freedman came to see the paintings'lack of provenance as a
challenge to overcome. What they were missing in the past, she would make up
for in the present. By placing them in the best collections, she would give them a
footing. Freedman saw a mandate to sell- and sell she did.
"The point is that I believed that these paintings were genuine, that it was my
responsibility to place them into the best of collections," she said. Once the
paintings were out there and established, she hoped "to get many of these works
to come back together for a major museum exhibition that Knoedler would take
part in." Establishing these discoveries as accepted works, she believed, would
in fact be among her greatest accomplishments at the gallery. "I felt that I was
going to create a legacy for Knoedler with these newly discovered paintings, a
treasure trove of paintings to bring out into the world." she said.
At Knoedler, getting paintings out into the world was Freedman's speciality.
She had started her art career as a receptionist of the Andre Emmerich Gallery
in the early seventies but quickly discovered her natural talent for sales. "My
enthusiasm for the art was contagious and won people over. Andre started
seeing more and more invoices on his desk that he could not have imagined,"
she said. "There was a sense of some disbelief, if not resentment - no one
paved the way for me to selJ, but I sought out the opportunity and never looked
back."
In 1977, at age 29, Freedman took a job at Knoedler - at the time, the oldest
continuously operating galJery in New York. She continued to outperform and
eventually took over the palatial central office of the gallery's gilded-age Upper
East Side mansion.
The paintings from Rosales proved to be enormously lucrative for the gallery.
Among the sales were a "de Kooning" that went for $4 million, a "Rothko" for
$8.3 million, and a "Pollock" for $17 million. She successfully built up a market
for each of the paintings as they came in. "If something had been off or wrong
on anyone ofthe paintings, I would have put on the brakes," she said.
She was so convincing, and so convinced, about the paintings that she even
bought three herself - a "Rothko," a "Motherwell," and a "Pollock." "I was a
believer. Not to be stubborn, but I lived with three of those paintings," she said.
"I lived with them, and in the context of my personal collection."
For over a decade as they emerged, the paintings were the envy of the art world.
Art experts, conservators, and museum professionals praised what appeared to
be a newly discovered collection of masterworks. But in 2009, forensic testing
on two paintings supposedly by Robert Motherwell revealed paint chemicals
that were historically inconsistent. Suspicion descended on the lot, and multi-
million-dollar buyers agitated for their refunds. Meanwhile, the FBI began
circling Rosales.
Freedman, coming off a battle with lung cancer, left Knoedler just as these
suspicions began to emerge. (She describes her departure as a management
dispute.) Two years later. the 165-year-old business closed up shop, with no
warning, the very same week the buyer of the $17 million Pollock sued both the
gallery and Freedman.
Even in cases of a forgery, art buyers don't necessarily have a lifetime
money-back guarantee (the Pollock sale was settled out of court). Owing to
statutes of\\mitations, legal experts say, some buyers of Rosales's 63 works
may have limited recourse in recovering their money - a fact that may also
insulate Knoedler and Freedman from additional litigation. "Purchasers of
artwork in New York must be diligent and act Quickly, otherwise they may lose
important remedies," says Raymond Dowd, a partner and art law specialist at
Dunnington, Bartholow & Miller. "In essence, a purchaser who has been
defrauded may have no civil remedies against the gallery."
Robert K. Wittman, a former FBI agent who founded and led the Bureau's
National Art Crime Team, told Daily IntelligenceI' that the buyers were taking a
foreseeable risk. "With Abstract Expressionist and modern paintings, there was
never any real cataloguing when the artists were alive, so things can pop up on
the market that turn out to be legitimate," he said. "The problem is that because
these paintings are modern, it is harder to authenticate them. What this does is
put the buyers on notice. Unless a piece has really good provenance, forensics,
and connoisseurship - the three-legged stool - the buyer shouldn't buy on
SOmeone else's word."
Freedman lias continued to be an active dealer despite the scrutiny of the
Rosales case. She recently opened her own gallery, FreedmanArt, on East 73th
Street, where she now represents Frank Stella, Lee Bontecou, and the estate of
Jules Olitski, among others.
With the revelation of the crime, even though she says she finds relief in
knowing the truth of where the paintings came from, she feels most betrayed by
the paintings themselves. "I am so angry and upset. It is shattering, as if a
trusted friend deserted you." She says the money she spent on her own three
paintings is a loss. It is a big loss."
"How can we know the truth? You not only believe in your own instincts. You
believe in others who believe."
EXHIBITC
Case 1:13-cr-00518-KPF Document 23 Filed 10/17/13 Page 1 of 33 1
d9ggrosp Plea
1
2
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
------------------------------x
3 UNITED STATES OF AMERICA
4 v. 13 CR 518 (KPF)
5 GLAFIRA ROSALES,
6 Defendant.
7 -----------------------------x
8
9
10
New York, N.Y.
September 16, 2013
11:30 a.m.
11
12 BEFORE:
13 HON. KATHERINE POLK FAILLA,
14 District Judge
15
16
17
18
19
PREET BHARARA
United States Attorney for the
Southern District of New York
JASON HERNANDEZ
Assistant United States Attorney
20
21
BRYAN SKARLATOS, STEVEN KARTAGENER,
Attorneys for Defendant
and JULIET FINK
22
23
ALSO PRESENT: MERIDITH SAVONA, FBI, Special Agent
ERIC JONKE, Internal Revenue Service
24
25
SOUTHERN DISTRICT REPORTERS, P.C.
(212)805-0300
Case 1: 13-cr-00518-KPF Document 23 Filed 10/17/13 Page 2 of 33 2
d9ggrosp Plea
1 (Case called)
2 MR. HERNANDEZ: Jason Hernandez for the United States.
3 THE COURT: Good morning.
4 MR. HERNANDEZ: I'm here joined by Meridith Savano,
5 Special Agent with the FBI, and Eric Jonke with the Internal
6 Revenue Service.
7 MR. KARTAGENER; Steven Kartagener. To my immediate
8 left is, of course, Ms. Rosales, and to her immediate left is
9 her own counsel.
10 MR. SKARLATOS: Bryan Skarlatos and my colleague,
11 Ms. Fink.
12 THE COURT: Good morning to you all, and good morning,
13 Ms. Rosales.
14 THE DEFENDANT: Good morning.
15 THE COURT: I understand that there is an application
16 from the parties today to change the plea; am I correct?
17 MR. HERNANDEZ; That's correct, your Honor.
18 MR. SKARLATOS: Yes, your Honor.
19 THE COURT: Thank you.
20
Ms. Rosales, I'm going to ask you to stand please. If
21 it turns out that this is too long a proceeding, we'll ask you
22 to sit down at some poinr if that gets more comfortable, okay?
23 THE DEFENDANT: Yes.
24 THE COURT: Thank you.
25 THE DEFENDANT: You're welcome.
SOUTHERN DISTRICT REPORTERS, P.C. (212)805-0300
Case 1:13-cr-00518-KPF Document23 Filed 10/17/13 Page26of33 26
d9ggrosp Plea
1 makes you guilty of these offenses?
2 THE DEFENDANT: Yes.
3 THE COURT: Then please read them if that is more
4 convenient for you.
5 THE DEFENDANT: Thank you.
6
From in or around the 1990s through 2009, I was
7 engaged in the business of dealing fine arts
8 THE COURT: If you could speak a little slower and
9 louder. I know you want to go through that, but it's better
10 that the reporter. is able to understand what you're saying.
11 THE DEFENDANT: From in or around the 1990s through
12 2009, I was engaged in the business of dealing fine arts
13 and through Glafira Rosales Fine Arts, LLC. This
14 entity was formed under the laws of the State of New York and
15 conducted business within the Southern District of New York.
16 During that period, I agreed with others to sell works of art
17 claimed to be created by various expressionist artists,
18 including Mark Rothko, Jackson Pollock, and Robert Motherwell,
19 and to make false representations as to the authenticity and
20 provenance of those works. These works of art were actually
21 fakes created by an individual residing in Queens.
22
THE COURT: Maybe we can figure out a way to help the
23 transcription.
24 MR. SKARLATOS: Your Honor, perhaps to make it easier
25 for the court reporter, we can provide the reporter with a copy
Case 1:13-cr-00518-KPF Document23 Filed 10/17/13 Page27of33 27
d9ggrosp Plea
1 so she can follow along to understand what Ms. Rosales is
2 saying.
3 THE COURT: I think that makes sense. I think that
4 will aid her with the spellings of some of the artists' names.
5 And I think we have already established that what Ms. Rosales
6 is reading, in fact, are her own thoughts in this case written
7 down for her convenience.
8
MR. SKARLATOS: We will continue. And for the court
9 reporter's convenience, with leave of the Court, she'll start
10 at the second paragraph that begins "From."
11
THE DEFENDANT: From in or around the 1990s through
12 2009, I sold various works of art to the Knoedler Gallery and
13 Julian Weissman Fine Art, both of which are located in the
14 Southern District of New York. All of the works I sold to
15 those galleries, including works purported to be created by
16 Mark Rothko, Jackson Pollock, and Robert Motherwell, were, in
17 fact, fakes created by the individual residing in Queens, New
18 York. Pursuant to this scheme to defraud, I used and caused
19 others to use the interstate wires by making telephone calls
20 and wire transfers.
21 From in or around the 1990s through 2009, I agreed
22 with others to, and did, in fact, willfully cause the galleries
23 to transfer proceeds from the sale of the fake artwork from
24 bank accounts in the Southern District of New York and
25 elsewhere, to bank accounts in Spain.
Case 1:13-cr-00518-KPF Document 23 Filed 10/17/13 Page 28 of 33 28
d9ggrosp Plea
1 I knew that the funds being transferred were the
2 proceeds of a scheme to defraud the purchasers of the fake art
3 and that transferring the proceeds to Spain would help to
4 conceal the true ownership and control of those proceeds.
5 For 2006 through 2008, I willfully signed false
6 federal income tax returns under penalties of perjury and
7 caused those returns to be filed. I knew that the returns
8 substantially understated my income from the sales of the fake
9 art which occurred in the Southern District of New York. The
10 returns were prepared in Westchester County, New York.
11 In addition, I caused some of the proceeds earned from
12 the sale of the fake art to be transferred from bank accounts
13 maintained in the Southern District of New York to bank
14 accounts in Spain over which I had beneficial ownership. For
15 the years 2010 and 2011, I willfully failed to a Foreign Bank
16 Account Reports reporting my interest in those Spanish bank
17 accounts even though I knew that I was required to report those
18 accounts.
19 THE COURT: Ms. Rosales, I think this is covered by
20 what you just said, but I want to make clear, when you did each
21 of the things that you've just been talking about, did you know
22 that what you were doing was wrong and illegal?
23 THE DEFENDANT: Yes, your Honor.
24 THE COURT: I'll ask any of Ms. Rosales' defense
25 counsel whether he or she knows of any valid defense that would
EXHIBII_D
~ liEtfffhlti..:jD ~ t!m
More victims of Abstract Expressionist
fakes scandal revealed
In romi documents, Knoedler lists the buyers and prices paid for
works brought to the gallery by Glafira Rosales
By Laura Gilbert Web only
Published online 21 November 2013
The potential victims of the Knoedler gallery fakes scandal include at
least two museums. several dealers and a number of prominent collectors
who bought or were interested in buying Abstract Expressionist works
through the gallery, most of whom have not been previously identified.
The revelations come to light in documents examined by Tile Art
Newspaper. which include a list prepared by Knoedler and filed in federal
court where five lawsuits are pending against the gallery and its former
director Ann Freedman. All the information on the list here is taken from
that document.
See also:
Ilel"l aliegatlons 111 Knoedler fakes case examine gallery's il!lanCeS
AbEx fakes scandal silences the experts
fJew o r ~ COUli rejects f<noedler and Freedman's motion to dismiss fakes cases
The Long Island dealer who brought the works to Knoedler, Glafira
Rosales, has admitted as part of her guilty plea to money laundering and
- '-
tax evasion thatthe artshesoldto thegallerywas fake. According to the
documentsfiled with the court. five ofthe workswentunsold.
An asterisk in the listbelowindicatesbuyerswho havesued Knoedler.
Pierre Lagrange'ssuitwas settled on undisclosedterms.
The buyers
Murrayand KayBring, boughtaDiebenkorn, Untitled, 1972.for594.000
on 9December 1997. Knoedlerpaid Rosales 560.000fortheworl<.
Michel Cohen acquireaSam Francis. Untitled, 1957. Knoedlerbought
the workfor55,000 in 1999: "(netto ownerreduced form [sic] 595.000to
55.000) 1999- Trade+535.000to Michel Cohen in settlement/exchange
forareturn ofawork by Richard Diebenkorn."
-Domenico and Eleanore De Sole. from NewYork, boughta Rothko,
Untitled. 1956.forS8.3m through James KellyContemporary. Santa Fe.
in December2004. Knoedlerpaid Rosales $950.000.
Larry Evansboughta Diebenkorn. Untitled (Ocean Park). 1972.for
582.500on 9 November1994.Knoedlerpaid Rosales$47.500.
Jaime Frankfurtboughta FranzKline. Untitled, 1956,"foraclient"for
53. 375m on 10 July2008. Koedlerpaid Rosales51.25mforthe work
"ownedjointlybyshe [sic] and herbrother-in-law. although originallyfrom
samecollection as the otherpictures".
Ann and RobertFreedman boughtaMotherwell, Spanish Elegy, 1953.
for515.000 in August2000. Itwent"outon approval" in August2009to
Jaime Frankfurt"foroffer to John D. Howard". Theyalsoboughta
Pollock. Untitled. 1949, "directly"for5280,000in September2000. The
couple also acquired aRothko. Untitled, 1959.Accordingtothegallery's
listthis was "consigned... netto owner5160.000.Purchased 12/1996 ...
for5225.000. Sold 04/1997 toAnn and RobertFreedman (trade)".
Bea and Phil Gersh. from Beverly Hills, boughtaRothko, Untitled, 1959,
for5360.000in October 1997, Knoedlerpaid Rosales 5150.000.
Richard Gilson boughta Diebenkorn, Untitled. 1972. "forJohn Hannon"
for5148,000on 17 February 1998. Knoedlerpaid Rosales 554.000.
:rvlicllael Hilti. from Liechtenstein, boughta Rothko, Untitled. 1956. for
55,SIn in November2002. Knoedlerpaid Rosales 5775.000.
John D. Howard. from NewYork, boughtaDe Kooning, Untitled. around
1956-57. for53.5m on 19 June 2007. Knoedlerpaid Rosales 5750,000.
Mrand Mrs David Howe. from NewYork, boughtaMotherwell. Spanish
Elegy, 1953.for$350.000in rvlarch 2000. Knoedlerpaid Rosales
_ ~ 9 0 O O O
The Kemper Museum of Contemporary Art. Kansas City. Missouri bought
a Franz Kline. Untitled. around 1957. for 5475.000 in August 1999.
Knoedler paid Rosales 5250.000.
Crosby Kemper. Kemper Museum of Art. bought a Diebenkorn. Untitled
(Ocean Park). 1972. for 5110.000 on 3 July 1997. Knoedler paid Rosales
530.000.
Dr Bernard Kruger. bought a Diebenkorn. Untitled (Ocean Park). 1976.
for 595.000 on 1 February 1994. Knoedler paid Rosales 550.000.
'Pierre Lagrange bought a Pollock. Untitled. 1950, for $15.3m in
November 2007 through Jamie Frankfurt. Knoedler paid Rosales
5950.000.
Jack and Fran Levy. from Palm Beach, bought a Rothko. Untitled, 1959,
for 5615.000 in October 1999. Knoedler paid Rosales 5155,000.
Jack and Fran Levy. from New York, bougllt two Clyfford Still works,
Untitled. 1947. for 5600,000 in March 1998 (Knoedler paid Rosales
5250.000) and Untitled. 1947. for 5500.000 in December 2000 (Knoedler
paid Rosales 5300.000).
Mr and Mrs Jack Levy. from New York. bought a Franz Kline, Untitled.
around 1953, for 5560,000 in January 1999. Knoedler paid Rosales
5315.000. They also bought a Pollock, Untitled. 1949. for 52m in
December 2001. Knoedler paid Rosales $750.000. Three years later, this
last work was "purchased back from Mr and Mrs Jack Levy. Then...
jointly owned as of 12/2003 by David Mirvish (his share $1.250.000),
Knoedler (share is 5375.000), Ann Freedman (share is 5375.000)". The
asking price was 515m. but the work was listed as "not yet sold" by the
gallery.
Manny Silverman Gallery in Los Angeles. bought a Clyfford Still, Untitled.
1947. for 5850,000 in June 2000. Knoedler paid Rosales 5250.000.
tvlasterson Gurr Johns Inc in SWitzerland, bought a Rothko. Untitled
(Orange. Red and Blue), 1959, for 57.2m through the agent Urs Kraft on
30 April 2008. Knoedler paid Rosales 546m for the work "owned jointly
by she [sic] and her brother-in-law. although originally from same
collection as ttle other pictures".
Hughes and Sheila Potiker, from La Jolla. California. bought a Franz
Kline. Untitled. not dated. for 5535.000 in June 1997. Knoedler paid
Rosales 5300.000.
Michelle Rosenfeld of Michelle Rosenfeld Gallery. in Ramsey. New
Jersey. bought a Rothko. Untit/ed. 1959. for 5325.000 in July 1998.
Knoedler paid Rosales 5155.000.
Mr and Mrs Jon Sandelman, from Boca Raton, bought a Franz Kline.
Untitled. 1955. for 5900,000 in March 2000. Knoedler paid Rosales
S3fo,UUU.
Donna Schwartz bought a Warhol. Untitled. 1964, for 530,000 in 1999.
Knoedler paid Rosales 520,000.
Elizabeth Schwartz bought a Sam Francis. Untitled, 1957, for 5148.500 in
2004. Knoedler paid Rosales $55.000.
Jay Shidler, from Honolulu, bought a Lee Krasner, Untitled, 1949, for
$1m in February 2007. Knoedler paid Rosales S80,000.
Jay H. Shidler II, from New York, bought a Motherwell, Spanish Elegy.
1953, for S2.2m in March 2006. Knoedler paid Rosales $475.000.
Gerald Solomon. of Solomon & Company Fine Art. New York, bought a
Rothko. Untitled. 1959, for S320,000 in June 1998. Knoedler paid
Rosales $170.000.
and Jenny Taubman. from Roanoke, Virginia, bought a Clyfford
Still, Untitled, 1949. for SSm in November 2005. Knoedler paid Rosales
$600,000.
and Frances White, from Cardiff by the Sea. California. bought a
Pollock. Untitled, 1949. for $3.1 m in April 2000. Knoedler paid Rosales
5670.000.
Jack Wright. of Wright Gallery, bought a Sam Francis, Untitled, 1957. for
5150,000 in 1999. Knoedler paid Rosales $95.000.
The "Nordrhein-Westfalen tvluseum" was offered a Barnett Newman.
Unfitted, 1949. through Oliver Wick. for S18m. but the work was "not yet
sold". Knoedler paid Rosales S1m.
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Fertitta, Et Al. v. Knoedler Gallery, LLC, Et Al. - Complaint

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Fertitta, Et Al. v. Knoedler Gallery, LLC, Et Al. - Complaint

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