ARTnewsletter Archive

How the Madoff Scandal Affects the Art World

The Bernard Madoff scandal, in which losses from the investment manager’s alleged Ponzi scheme have been estimated at as much as $50 billion, is already having a significant impact on some of the world’s top art collectors.

NEW YORK—The Bernard Madoff scandal, in which losses from the investment manager’s alleged Ponzi scheme have been estimated at as much as $50 billion, is already having a significant impact on some of the world’s top art collectors.

Among other repercussions of the collapse of Bernard L. Madoff Investment Securities, money managers who had invested with Madoff on behalf of their clients are facing lawsuits from investors. Art collector and money manager J. Ezra Merkin had invested more than $2 billion with Madoff, both through his own hedge funds and on behalf of such institutions as Bard College, New York Law School, New York University, and Yeshiva University, according to a list of alleged victims published in the Wall Street Journal. Merkin and his funds are currently the objects of several lawsuits, including one filed by New York Law School, which lost an estimated $3 million, alleging “recklessness, gross negligence and breach of fiduciary duties.”

In a statement e-mailed to ARTnewsletter, Merkin’s attorney Andrew Levander said that “Madoff brazenly fooled Mr. Merkin and many others.” Levander added that Merkin himself lost “many tens of millions of dollars” as a result of Madoff’s actions.

Merkin and his wife, Lauren, reportedly own a group of paintings by Mark Rothko that could be worth around $150 million/200 million. The Merkins have been receiving inquiries from buyers interested in the Rothkos, according to dealer Ben Heller, who advises the couple on their collection. (Heller added that he personally lost a great deal of money investing with Madoff as well.)

Heller told ARTnewsletter that Christie’s and Sotheby’s have also been “discreetly offering their advice” on the Rothkos, though he insists that the paintings are not for sale. Christie’s representatives e-mailed the following statement in response to requests for comment from ARTnewsletter: “Christie’s provides private sale and auction services for many clients, none of whom we identify unless they request it.” Sotheby’s did not respond to a request for comment.

According to one press report, over four years ago the Merkins spent $100 million to acquire nine Rothko paintings from the artist’s heirs through the PaceWildenstein Gallery, which represents the Rothko estate. A gallery spokesperson declined to comment. Around that time, the Merkins also acquired a tenth Rothko painting from C&M Arts (now L&M Arts), New York. Heller also confirmed that he acquired an untitled royal blue Rothko oil on paper laid down on canvas, 1968, on behalf of the Merkins for $7.8 million at Sotheby’s contemporary sale in New York in November 2007 (estimate: $3.5 million/4.5 million).

Another top collector who fell victim to Madoff’s alleged scam is Norman Braman, former owner of the Philadelphia Eagles, who owns 16 auto dealerships in Miami, Palm Beach and Denver, and is on the annual ARTnews list of the Top 200 Collectors in the world. His wife, Irma Braman, is chair of the board of trustees of the Museum of Contemporary Art, North Miami. Through his assistant, Braman declined to comment. The amount of money Braman lost from his investments with Madoff has not been disclosed.

Braman appeared at number 281 on Forbes magazine’s most recent list of the 400 richest people in America, with a reported net worth of $1.7 billion. His art collection, estimated to be worth $1 billion, includes works by Jasper Johns, Pablo Picasso, David Smith and Andy Warhol. According to Forbes, it was the “swelling contemporary art market” that helped push Braman onto the list last year.

Boston Foundation Lost $145M

The Carl and Ruth Shapiro Family Foun­dation, a major supporter of the Museum of Fine Arts, Boston, and many other Boston nonprofits, had $500 million invested with Madoff. Carl Shapiro, 95, who founded women’s apparel company Kay Windsor in 1939, has personally lost an estimated $400 million, according to the report, while the family foundation has lost an estimated $145 million.

In 2005, the Shapiro family foundation donated $15 million to the Museum of Fine Arts’ building campaign. A courtyard in the museum, known popularly as the Glass Courtyard, is named after the Shapiros, as is a central gallery in the MFA’s American wing. The Shapiro foundation also supports a series of celebrity lectures and other educational programs at the museum.

Kelly Gifford, public relations manager for the museum, said, “Our thoughts go out to the Shapiro family and all those affected by the Madoff investment scheme. The Shapiros are generous supporters of the [museum] and have been for the past four decades.” She confirmed that the Shapiros are Guardians of the Museum, a designation given to donors who have made “lifetime giving of $25 million or more.”

According to a statement on the Shapiro foundation Web site, “The Carl and Ruth Shapiro Fam­ily Foundation was shocked and horrified to learn about the allegations against Mr. Madoff. . . . The [foundation] did have significant assets invested with Mr. Madoff. We are currently reviewing the situation and assessing all options available to recover those funds. The Foundation plans to fulfill all of its current obligations.”

Many of Madoff’s investors reside in Palm Beach, Fla. A spokesperson for the Norton Museum of Art there said, “although the Norton Museum of Art had no investments with Mr. Madoff, we are dismayed at the impact on members of the Palm Beach community, many of whom have been generous donors to innumerable local charities, including the Norton Museum. Our heart goes out to them for this betrayal of faith. We will simply have to wait to see how this all evolves to understand the short- and long-term impact on our whole community.”