NEW YORK—On Feb. 28 backers of the now-defunct Fernwood Art Investments, New York, filed a lawsuit against company founder, chairman and CEO Bruce Taub, charging him with embezzling $8 million of company funds.
The investors further claim, in a suit filed with the District Court for the Southern District of New York, that the founder used the assets as “a vehicle for Taub to propel himself into the rarefied social circles of the art world.” Fernwood, a multimillion-dollar art fund founded in 2003, shut down last fall.
The complaint does not detail ways in which Taub allegedly spent the money, except to state that he used it “to promote himself and his wife in the art world, and to pay their personal expenses. He did so at a torrid pace.” By spring 2006, the lawsuit maintains, Taub had been pressured into providing some financial information, at which point the plaintiffs “discovered that he had spent all of their money without Fernwood having launched a single investment fund.”
Taub and Fernwood Investments were also sued in Los Angeles last May by Shamrock Estates Limited, a private equity company based in Delaware. Neither Shamrock nor its attorneys responded to requests for comment as ARTnewsletter went to press. Neither Taub nor his attorneys responded to requests for comment.
Michael Plummer, formerly a Sotheby’s vice president and later president of Fernwood, told ARTnewsletter that he had first noticed accounting irregularities in early spring 2006. Plummer says that he, together with the fund’s managing director Allen Williamson, immediately confronted Taub with their concerns.
“Money was missing. Something was wildly amiss,” says Plummer, who resigned from Fernwood a year-ago May and reports that he and Williamson are presently setting up a new art-investment partnership. (Williamson could not be reached for comment.)
The plaintiffs include two limited liability companies—Whitmore Brey L.L.C., Florida (invested $500,000), and Louise and Tom Jones Subscription L.L.C., California ($250,000); the Hinchliffe Living Trust, California ($125,000); two more Californians—Andrea Van de Kamp, Pasadena ($250,000), and John Scharffenberger, Philo ($150,000); and two New Yorkers—William Pearlstein ($200,000) and Ashton Hawkins ($150,000). Hawkins, a lawyer in private practice, served as general counsel for the Metropolitan Museum of Art, New York, from 1968-2001.
Two Types of Funds
Fernwood’s initial solicitation, marketed to individuals and institutions with high net worth, described two separate funds involving the buying and selling of artworks.
The first was a fund to acquire and promote art objects within eight major U.S. and European sectors of the art market (Old European Masters, European Masters of the 18th-19th centuries, Impressionism, American art, modern art, contemporary masters [dating from 1945-69], postmodern art and emerging artists) over a period of years. The second was an opportunity fund earmarked for higher risks, involving a rapid turnover of artworks.
Taub had pulled together a high-profile lineup of notable names from the realms of finance and art to work as advisers and staff at Fernwood. Among them was David Nash, co-owner of the Manhattan art gallery Mitchell-Innes & Nash, specializing in Impressionist, modern and contemporary art.
Nash told ARTnewsletter that he never did work for Fernwood since neither of the funds actually had been set up. Moreover, Pierre Levai, president of the Marlborough Gallery, told ARTnewsletter that Fernwood “had asked me to be an adviser, but nothing ever happened.” Levai was not aware that a lawsuit had been filed against Taub.