Making Sure Your Art Is Yours

On May 8 the champagne was flowing at the Manhattan galleries of Bonham's auction house in anticipation of the upcoming spring sales. The mood was confident, as both buyers and sellers anticipated a successful season. While many of the guests were members of long standing in the close-knit art world, there were also some newcomers, and it's not quite clear how welcome some of them will be.

"Here come the ARIS people!" is how Lawrence Shindell says he and his team were greeted when they arrived. Unlike most of the other attendees, Shindell deals not in art, but in insurance. The former lawyer is chairman and CEO of ARIS Title, which he founded in 2000 with Judith Pearson, his sister, who has an extensive insurance background. Based in Manhattan, ARIS offers a new product called "art title insurance," which is similar in concept to real estate title insurance. Both protect the policyholder against loss in the event of an ownership dispute.

The global art market is flush with cash, having grown by 95% between 2002 and 2006, from $25.3 billion to $54.9 billion, according to a survey by the European Fine Arts Foundation reported in ARTnews magazine. Annual private art sales alone total $25 billion to $30 billion, according to the magazine, and despite global economic insecurity, auction houses continue to set records. A 1976 triptych by Francis Bacon sold on May 14 for $86.3 million and became the most expensive work of modern art ever sold at auction.

Aesthetic Passions vs. Brass Tacks

For buyers, art isn't just about making money. It's a place for investors to have a good time, socialize, and indulge their aesthetic passions. But this rosy atmosphere, says Shindell, can also lead to reckless investing practices, such as the purchase of a work with a questionable title.

"The problem of art title has existed for some time. It was first illustrated in the context of claims of art seized during World War II, and over time as each title dispute presents itself the art market becomes more aware and risk-averse," Shindell says. "This is combined with the increasing complexity of art transactions that involve investment funds, lending against art, people generally regarding art as an asset, and the increasing value of art. Today, the financial risk of transaction is much more acute and much more in need of risk management."

Last year's highly publicized title dispute involving director Steven Spielberg has become a cautionary tale for collectors. In 1989, Spielberg purchased a Norman Rockwell painting, Russian Schoolroom, that, unbeknownst to him, had been stolen from a Missouri gallery 16 years earlier. If Spielberg had had art title insurance, Shindell argues, he would have been able to avoid the whole mess because either his company would have uncovered the painting's origins during due diligence or it would have reimbursed the director the full cost of the painting. Without it, Spielberg was not only out the $700,000 value of the painting but also his legal fees.

The FBI estimates that $6 billion worth of art is stolen each year. But Jane Jacob, a board member of the Appraisers Association of America, a nonprofit organization based in New York, estimates the number to be even higher, somewhere between $7 billion and $9 billion.

Private and Unseen

"The stolen art industry is second only to gun trafficking and drug-running. They say it's tied into that, and I believe that's exactly true," says Jacob, who is also president of Jacob Fine Art, an art appraisal and advisory firm in Chicago. She added that because the majority of art sales are private, many stolen artworks disappear for years and reappear only when they enter the public sphere as part of an auction, exhibition, or publication.

For years the best defense for a buyer was hiring experts to trace a work's history, but it was often just as easy to forge a provenance as it was a painting.

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