ARTnewsletter Archive

Merkin Sells $310M Art Collection Amid Fallout from Madoff Fraud

Financier and art collector J. Ezra Merkin, who has been the target of several lawsuits after having invested more than $2.4 billion with disgraced money manager Bernard L. Madoff, is liquidating the core of his art collection.

NEW YORK—Financier and art collector J. Ezra Merkin, who has been the target of several lawsuits after having invested more than $2.4billion with disgraced money manager Bernard L. Madoff, is liquidating the core of his art collection.

The $310million private sale—including paintings by Mark Rothko and sculpture by Alberto Giacometti—to an unidentified collector is outlined in papers filed in New York State Supreme Court on June 29. The individual works were not specified in the documents, but Merkin and his wife, Lauren, own a number of major Rothko works. According to one report, more than four years ago the Merkins spent $100million to acquire nine Rothko paintings from the artist’s heirs through Pace­Wildenstein Gallery, which represents the estate. Around that time, the Merkins also bought a tenth Rothko painting from C&M Arts (now L&M Arts), New York.

The Merkins were advised on the Pace purchase by New York dealer Ben Heller, who declined to comment for this story but earlier this year had told ARTnewsletter that he also lost a great deal of money on his investments with Madoff. At that time he also confirmed that in 2007 he had acquired an untitled 1968 royal blue Rothko oil-on-paper laid down on canvas on behalf of the Merkins for $7.8million, well above its $3.5mil­lion/4.5million estimate, at Sotheby’s sale of contemporary art in New York in November 2007 (ANL, 1/20/09).

Last April, New York State Attorney General Andrew Cuomo initiated a lawsuit against Merkin, alleging securities fraud, among other charges, stemming from his investments with Madoff. According to a statement, Cuomo’s office “will continue to seek full recovery for investors’ losses,” through the lawsuit, which charges he concealed the investment with Madoff from his clients. The statement further says that Merkin “steered the money to Madoff without their permission, in exchange for $470million in management and incentive fees.”

Merkin’s attorney, Andrew Levander, denied this in a statement when the suit was filed in April, asserting that “investors in the Ascot Funds were well aware that the money was being invested with Madoff. Furthermore, investors in all of the Funds expressly authorized Mr. Merkin to allocate assets to third party managers such as Madoff, without giving them notice or obtaining their consent.”

According to a statement from the attorney general’s office released in April, the collector “commingled his personal funds … with funds of his management company, Gabriel Capital Corpora­tion.” The statement alleges that “Merkin used GCC funds to make purchases for his personal benefit, including purchases of over $91million of artwork for his apartment.”

In a statement e-mailed to ARTnewsletter, Lev­ander wrote that “as Mr. Merkin continues to defend against the actions brought against him by the New York Attorney General and others, he and his wife have decided to sell the core of their art collection in a private sale. The Merkins believe the lawsuits are without merit and have agreed … to place the net proceeds of the sale in escrow” while the suit continues. According to court documents, the Merkins must close the sale by July 15.

Pursuant to the agreement between the Merkins and the attorney general, out of the $310million in proceeds—the value at which Christie’s appraised the material on behalf of the attorney general—Rothko’s heirs Kate Rothko Prizel and Christopher Rothko will receive $42million to satisfy a lien on certain of the works, according to the filing. HSBC Bank USA, N.A. will receive $19.3million for liens on some of the works and on “fourteen lesser works of art.” PaceWildenstein will receive $11million as a fee for advising the buyer. A source familiar with the sale confirmed that Pace “brought the buyer to the deal.” Andrea Glimcher, a gallery spokesperson, declined to comment. A company identified as TLIA, LLC will receive $26.5million as a fee for advising the Merkins on the sale. A spokesperson for Merkin said TLIA is an “independent art consultant, vetted by [the attorney general], and Mr. Merkin has no connection with or interest in TLIA.” The attorney general’s office did not respond to questions about who owns or heads TLIA or whether it had vetted the company.

The remaining $211.2million will be put in an escrow account at BNY Mellon, National Associa­tion. Of this amount, $19.3million will be set aside for federal, state and local taxes on the sale, “as well as other expenses, including legal fees.”

According to the recent statement from Cuomo’s office, “We believe it is only fair that Mr. Merkin liquidate his valuable art collection, which he purchased with the fees he earned from his investors … The $191million that will be preserved in this way will not by itself make investors whole, but this is an important step in the right direction for investors.”