Wildenstein and Qatar Battle Over Aborted New York Art Palace Sale

Before finalizing a $90-million contract to buy Wildenstein & Company’s palatial New York headquarters last year, Qatari diplomats tried it on for size, hosting a lavish party inside the stately gallery where the art-dealing dynasty had long exhibited its treasures.

The emirate’s maroon and white national flag hung over the arched entrance on Manhattan’s Upper East Side and a dazzling light show splashed projections of Arabic calligraphy across the pilastered facade. The diplomats removed the Fragonard and Boucher paintings that customarily graced the marble-floored salons to make way for photos of falconry and an ice sculpture in the form of I.M. Pei’s Museum of Islamic Art in Doha.

A few weeks after the December 2013 celebration, Qatar’s consul general signed the contract to take ownership of the sumptuous, limestone-clad townhouse that Wildenstein built for itself in 1932. But in what may have been a costly case of buyer’s remorse, Qatar reneged on the record-price deal just days after Wildenstein vacated the building it occupied for over 80 years.

Now Wildenstein has filed a lawsuit against Qatar in federal court and is undertaking the arduous move back (for the time being at least) to the five-story building from which it has purveyed Old Masters and Impressionist paintings as well as sculpture to clients like John Paul Getty, John D. and Nelson Rockefeller, Gianni Agnelli, and Walter Annenberg.

According to papers filed in U.S. District Court for the Southern District of New York, Qatar initially told the art firm that it was backing out at the last minute because Wildenstein had made a false representation in the sales contract related to allegations that Guy Wildenstein, president of the gallery, had laundered money. But the lawsuit calls this just a pretext by the Qatari government to abandon the deal for fear that it looked overly extravagant to use the Gilded Age showcase as a consulate after news reports that the sales price was a new high for a Manhattan property of its kind.

The contract, under the 2001 U.S. Patriot Act to prevent terrorism and money laundering, contains a provision that neither the seller nor its affiliates have been in violation of laws relating to these offenses. Wildenstein acknowledges in its complaint that Guy Wildenstein has been under investigation in France since 2011 for tax fraud and money laundering in connection with the estate of his father, Daniel Wildenstein, who died in Paris in 2001. But the complaint states that the Qataris could have “with reasonable diligence learned about these proceedings in any number of mainstream newspapers.” It added that neither Guy Wildenstein nor any family member has been found in violation of money laundering laws in France.

“The purchase of the property, and its record price, came under review in Doha, where there was a reluctance to be seen as profligate,” the lawsuit states. Qatari Consul General Ahmed Yousef Al-Rumaihi, who signed the contract to purchase the building for use as a consulate last January, was recalled to the emirate soon afterward in what Wildenstein’s complaint termed “an internal shakeup” in response to news reports about the sale. Despite its enormous wealth derived from natural gas reserves, Qatar has come under critical scrutiny from human-rights organizations over the treatment of migrant workers, many of whom have died, while constructing infrastructure for the country to host the 2022 World Cup.

Wildenstein, through its subsidiary 1964 Realty, which controls the property at 19 East 64th Street, is seeking damages for breach of contract amounting to at least $9 million, equal to the 10-percent down payment that Qatar placed in an escrow account for the agreed purchase, plus attorneys fees and litigation costs.

Qatar has asked the court to dismiss the lawsuit, filed in August and still pending. An attorney representing the Qatari consulate, Steven Sinatra of the New York law firm Greenberg Traurig LLP, also submitted a letter to the court in December saying that the consul general “did not have actual authority to enter into the agreement.”

The lawsuit involves two clearly deep-pocketed parties. But while Wildenstein family members and those of the Qatari ruling family have been habitués of opulent showrooms and frequent the thoroughbred horse racing circuit, court proceedings indicate they are in different leagues.

Trying to explain how a consul general was able to wire $9 million to Wildenstein even if he was not authorized to sign a contract, Robert P. Charrow, another attorney defending Qatar in the lawsuit, told a court hearing on January 7, 2015, that the emirate’s unparalleled riches may have shaped its officials’ attitudes toward money. “I think that the court has to bear in mind that Qatar is the wealthiest nation in the world on a per capita basis and $9 million may not be as much to them as it is to us,” Charrow said, according to the court transcript. When Judge Edgardo Ramos then asked, “So they’re willing to forego it?” Charrow declined to reply. The judge subsequently remarked to Wildenstein’s attorney: “I recognize that your client is not the government of Qatar and probably has a little more sensitivity to $9 million than they do.”

In preparation for the scheduled real-estate closing in June 2014, Wildenstein packed up its massive library and archives and emptied its high-security vaults of a fabled inventory including paintings by Frans Hals, Claude Lorrain, and Claude Monet, leaving the premises “vacant and broom clean,” according to the complaint, but Qatar never paid the $81 million balance due.

The art gallery, with a staff of 29 including six art researchers, has since been operating from provisional quarters in a Fifth Avenue office building near the Museum of Modern Art. Now that the sale has fallen through, Wildenstein will return to its historic premises at the end of March, but it is also considering other location options after that, said Alice McGillion, executive vice president of Rubenstein Associates, which handles public relations for the gallery. Although Wildenstein’s peregrinations may be intensely cumbersome, the family-owned firm needn’t worry about appearances when it returns home. The impeccably maintained townhouse has soaring 30-foot ceilings, a magnificent curved staircase and a paneled salon that came from the Paris residence of Talleyrand, Napoleon’s foreign minister. Much of building was modeled on the Wildenstein family’s 18th-century mansion in the Rue La Boétie in Paris.

Last September, the Paris newspaper Le Monde reported that a Court of Appeal in France set a €20 million ($25 million) bail for Guy Wildenstein in connection with his alleged failure to pay hundreds of millions of dollars in taxes due on his father’s estate, a tax adjustment which he has contested. But the French court reduced the bond amount to €10 million, held as security should the French tax authority obtain a judgment against Daniel Wildenstein’s heirs, and that has now been paid by Guy Wildenstein, according to a lawyer familiar with the French proceedings. Wildenstein’s legal filing against Qatar is accompanied by a document showing Wildenstein owns clear title to its building, free of any claims or liens.

Wildenstein lawyer Steven Schindler has challenged the assertion that the Qatari consul wasn’t authorized to purchase the building, telling a court hearing that Qatari Foreign Minister Khalid bin Mohammed al Attiyah inspected the premises together with the consul general in September 2013. Two weeks before signing the agreement to buy the building in January 2014, Qatar applied for and received approval for the deal from the U.S. Department of State. Officials at the Qatari consulate, who now work out of a Ritz-Carlton Hotel suite overlooking New York’s Central Park, declined comment on the lawsuit, as did the Qatari Embassy in Washington.

Wildenstein opened its first gallery in Paris in 1875 and is now in its fifth generation of family management. It has sold works to major museums and collectors around the world. But in recent years, the family has been hit by a series of scandals, including the 1997 publication of a book stating that Guy Wildenstein’s grandfather, Georges Wildenstein, worked with an influential art dealer during World War II to buy and sell art plundered from Jews. The Wildensteins lost a 2003 court case for damages filed against the book’s author, Hector Feliciano. Then in 2010, fear of becoming entangled in the Wildenstein family’s spiraling legal problems led another art-market juggernaut, New York’s Pace Gallery, to terminate a 17-year partnership with Wildenstein & Company, The Wall Street Journal has reported.

When it announced the planned sale last January, Wildenstein & Company vice president David Wildenstein, Guy’s 34-year-old son, said the gallery no longer needed such a spacious headquarters because of the changing nature of art dealing, which is increasingly dominated by major auction houses, international fairs, and online transactions.

David Wildenstein has expressed interest in steering the family business more toward involvement in contemporary art and real estate, and has been developing Madison Avenue property adjacent to the New York gallery for use as retail space. “I like the idea of having a real estate business on the side,” he said in an interview with ARTnews last February. “It goes alongside our views on art. Real estate is something that is a long-term growth asset just like art.” In the face of the aborted $90-million sale of its headquarters, Wildenstein retains that key asset in its portfolio alongside its traditional trove of artworks.