Hiding money: The art of secrecy

Source:   —  April 07, 2016, at 9:10 PM

Proving it's been another matter. The work, by Italian artist Amadeo Modigliani, is known as “Seated Man with a Cane.” Modigliani, a young, impoverished alcoholic, died of tuberculosis nearly a cent ago; his paintings today sell for as much as $170 million.

Hiding money: The art of secrecy

After a chance discovery, the grandson of a Jewish art dealer learned that a valuable painting he believed the Nazis had looted from his grandfather might presently be in the hands of one of the art world’s most influential families. Proving it's been another matter.

The work, by Italian artist Amadeo Modigliani, is known as “Seated Man with a Cane.” Modigliani, a young, impoverished alcoholic, died of tuberculosis nearly a cent ago; his paintings today sell for as much as $170 million. The portrait of a dapper man with a mustache perched on a chair, hands resting upon his walking stick, may be worth $25 million.

Investigators traced the painting to a clan of billionaires who bought the work at auction in one thousand nine hundred ninety-sixth. Lawyers working for the grandson sent a letter to the Nahmad Gallery in New York, stating that the painting belonged to the grandson, who was entitled to its return. They requested a meeting to discuss the matter. The gallery failed to respond, according to Ct documents. The grandson sued. Four years later, the two sides’ lawyers still are fighting it out.

The Nahmads have insisted in federal and state Ct in NY that the family doesn't possess the Modigliani. An offshore company called International Art Center, registered by a little-known Panamanian law firm, does.

But secret records obtained by the , the German newspaper and other media partners suggests that the statement is a valid sleight of hand designed to obscure the true owners of the painting.

The records, more than eleven million documents in all, arrive from the internal files of Mossack Fonseca, a Panamanian law firm that specializes in building corporate structures that can be used to conceal assets. Dating from one thousand nine hundred seventy-seven through two thousand fifteen, the files comprise the biggest known cache of interior information on the connections between the international trade in art and offshore secrecy jurisdictions. The records paint a picture of a thinly regulated industry where anonymity is regularly used to shield all kinds of questionable behavior.

The Nahmad family has controlled the Panama-based company, International Art Center, for more than twenty years, the records show. It's an necessary portion of the family’s art business. David Nahmad, the family leader, has been the company’s sole owner since January two thousand fourteen.

When confronted with documentatation that showed the Nahmads owned International Art Center, David Nahmad’s lawyer, Richard Golub, said “whoever owns IAC is irrelevant. The main thing is what're the issues in the case, and can the plaintiff prove them?”

The central question, Golub said, was whether the grandson can demonstrate this specific painting was stolen from his grandfather. Despite years of battling in court, it’s an issue that's received stint attention from a judge, since both sides have been fighting over who currently owns the painting.

Mossack Fonseca not only helped the Nahmads set up International Art Middle in one thousand nine hundred ninety-fifth, it provided many of its other clients with the tools to secretly carry out high-end art transactions worldwide for works by artists such as Van Gogh, Rembrandt, Chagall, Matisse, Basquiat and Warhol.

Other famous art collectors with companies registered through Mossack Fonseca comprise Spain’s Thyssen-Bornemisza clan, Chinese entertainment magnate Wang Zhongjun and Picasso’s granddaughter, Marina Ruiz-Picasso.

Zhongjun didn't reply to a request for comment. Ruiz-Picasso declined to comment. Brojia Thyssen, through a lawyer, acknowledged having an offshore company but said it was fully declared with Spanish tax authorities.

The firm’s records mention sufficient art to fill a tiny museum. Along with crucial new proof in the valid battle over the Modigliani, there are clues in Mossack Fonseca’s files to the mystery of the lost masterpieces of a Greek shipping magnate and previously unknown details behind one of the twentieth Century’s most well-known modern art auctions.

The documents reveal sellers and buyers of art using the same shadowy corners of the global financial system as dictators, politicians, fraudsters and others who benefit from the anonymity these secrecy zones offer.

In recent years, as art prices have grown dramatically, transactions are frequently obscured by the utilize of offshore companies, front men, free trade zones, manipulated auctions and private sales. While secrecy may be exploited legally to avert publicity, limit valid exposure or ease operations across borders, it can also be employed for evil purposes, such as evading taxes and hiding shady ownership histories. Since art is easily transportable, expensive and poorly regulated, authorities fear that it's frequently used for money laundering.

Boom times

The current art market boom — and its connection to the secrecy zones within the global financial system — offers more proof of the spectacular rise of the super rich. Art has become a valuable asset for a global elite anxious to stash their money in secure and secluded harbors. In two thousand-fifteenth, sales of art exceeded $63.8 billion, according to the trade publication Art Market Report, with top-dollar art experiencing the greatest growth.

Total billionaire wealth allocated to art was estimated to be $32.6 billion in two thousand-thirteenth.

“The single best driver of the art market is accumulated wealth,” says Michael Moses of Pretty Asset Advisors, which tracks art sales. “If high-end wealth is increasing at a faster rate than any other kind of wealth — which it is — these people have excess money to spend on art.”

Roughly half of art transactions are private, strictly between sellers and buyers, Art Market Report estimates. There is tiny public information about these sales. The rest are done through public auctions, which allow some transparency in regards to price but generally still authorize buyers and sellers to stay a mystery, Moses says.

When high-dollar art changes hands, it frequently lands in a free trade zone known as a freeport. As long as art is housed in the freeport, owners pay number import taxes or duties. Critics worry the freeport system can be used to dodge tax or launder money since precise inventories and transactions aren't tracked. According to the international professional services firm Deloitte, forty-two % of art collectors it surveyed said they'd likely utilize a freeport. The oldest freeport, with the most art, is in Geneva. Its complex of storage facilities is said to contain sufficient treasure to rival any museum in the world.

Natural Le Coultre, a company owned by Yves Bouvier, rents nearly a quarter of the space in the Geneva freeport. Bouvier is also a primary owner of other freeports in Luxembourg and Singapore and a consultant to a facility below construction in Beijing. These interests have earned him the title “the King of the Freeports.”

But it's Bouvier’s activities as a middleman in private deals that have made him the speak of the art world, and a target for civil suits. Russian billionaire Dmitry Rybolovlev has filed complaints against Bouvier in Monaco, Paris, Hong Kong and Singapore, accusing him of fraudulently marking up the prices of paintings before selling them. After reviewing the claims, a judge in Singapore lifted a freeze on Bouvier’s assets and a judge in Hong Kong followed suit. Bouvier has strongly denied the charges.

Not surprisingly, given the no of billionaires and art dealers who utilize Mossack Fonseca services, both men are clients of the firm.

The law firm’s records indicate at minimum five companies connected to Bouvier, although none show up to be related to the Rybolovlev case.

His antagonist, Rybolovlev, has two.

Rybolovlev declined to comment. A representative for Bouvier said his client used offshore companies for well-established valid purposes.

The auction game

Many trace the art market’s wild enthusiasm for modern art to a sale on a Monday evening in November one thousand nine hundred ninety-seven. Held at Christie’s in New York, the auction of the Victor and Sally Ganz collection produced record valuations for paintings and proved a milestone in the transformation of art into a global commodity.

“All of a sudden the game was afoot with the Ganz sale in a way that hadn’t happened before,” says Todd Levin, director of Levin Art Group, a New York-based art advisory firm. “It was love a steroid injection to the market.”

The full legend behind the Ganz auction has never been revealed. The leaked documents indicate it involved hidden interests, controversial maneuvers by the auction house and, at its center, Mossack Fonseca.

The Ganzes were longtime collectors of works by Pablo Picasso, early champions of Frank Stella and friends and patrons of Jasper Johns, Robert Rauschenberg and Eva Hesse. After the couple died, their children were forced to sell a collection that'd adorned the walls of their childhood home.

It'd cost the Ganzes about $two million over fifty years to assemble. In one evening, the collection sold for a record $206.5 million.

What wasn't publicly known until presently is that the Ganz heirs show up to have sold the collection months before the auction. The key player in the transaction was a Corp based on Niue, a speck of an island in the S Pacific. The company was named Simsbury International Corp.

Simsbury International, which was inc in April one thousand nine hundred ninety-seven, a mo before purchasing the collection, appears to have been created solely for the Ganz transaction. Simsbury’s registered agent was Mossack Fonseca and employees of the Panamanian law firm served as Simsbury International’s “nominee” directors, stand-ins who controlled the company on paper but who exercised number genuine authority over its activities.

They signed its agreements with a bank, an auction house and an art shipping company. Ownership of the company was held through “bearer shares.”

Bearer shares are simply certificates that authorize whoever holds the paper to anonymously transfer or claim their value. Today, they're banned in many countries because of their usefulness to those who wish to be engaged in in tax evasion and money laundering.

In an agreement struck on May 2, one thousand nine hundred ninety-seven, Simsbury International bought the Ganz paintings for $168 million from Spink & Son, the London auction house then owned by Christie’s, according to the leaked documents. The exact nature of the arrangement between the Ganz family and Christie’s isn't clear from the documents.

Neither representatives from the Ganz family nor Christie’s would reply questions from ICIJ and its media partners about the specific details of the auction.

The sale came with a side-deal. If the auction for the works brought a higher price, the owner of Simsbury International and Spink & Son would share in the difference.

The utilize of Simsbury International may have been an early form of a controversial but not uncommon tactic in the auction world known as a “third-party guarantee.” Below such an arrangement, an exterior entity agrees to allow the auction house with a base sales price. Essentially the exterior guarantor is betting that the real sales price will be higher.

Kate Ganz, one of the heirs behind the auction, would neither confirm nor deny that there was a guarantee offered for her family’s paintings.

Critics worry the third-party guarantor can unfairly tender up the cost of paintings at auction. The guarantors sometimes get special breaks from the auction house such as financing. Yet in the largely unregulated art market, the arrangement is legal.

Regardless of whether Simsbury provided a guarantee or simply purchased the paintings outright and then offered them for auction in the title of the Ganz family, the identity of Simbury’s owner would've been a revelation to those in attendance that Nov night.

The man who'd power of attorney for Simsbury, and thus exercised control over the company and its bank account, was British billionaire Joseph Lewis. Then the richest man in England, Lewis made his fortune betting on currency movements. He was also Christie’s largest shareholder.

The Ganz catalog stated “Christie’s has a direct financial interest in all property in this sale,” but the terms of that interest were never explained.

Lewis had made a bet that'd pay off in multiple ways.

The Ganz auction would assistance turn one thousand nine hundred ninety-seven into one of Christie’s biggest years for sales up until then. The auctioneer raked in more than $2 billion that year.

Lewis didn't reply to a request for comment.

One of the most expensive paintings sold at the Ganz auction was Picasso’s “Women of Algiers, version O.” It’s one of a celebrated series of fifteen paintings Picasso made in the mid-1950s. In addition to “O,” the Ganz auction featured versions “M,” “H,” and “K.”

Bidding on the works were members of the billionaire Nahmad clan. David Nahmad went residence with version “H,” adding it to what's considered one of the largest collections of Picassos in private hands.

An art dynasty

The Nahmads began as a banking dynasty of Sephardic Jews from Aleppo, Syria. In one thousand nine hundred forty-eighth, Hillel Nahmad relocated his wife and eight children to Beirut.

Three of his sons — Giuseppe, David and Ezra — eventually moved to Milan and, by the early one thousand nine hundred sixty, had become active art dealers. Giuseppe, the patriarch of the family, had a taste for expensive sports cars and, according to his brother David, once dated Rita Hayworth. He also pioneered treating the art business love a futures market, stockpiling paintings until precisely the right time to sell to maximize profit.

He died in two thousand-twelfth. David assumed the mantel of family leader. He and his older brother Ezra both named their sons Hillel after their grandfather. The two go by Helly. Together the four continue the family business.

The two surviving brothers are worth a combined $3.3 billion, according to Forbes. They live in Monaco, among other locales. In addition to currency trading and art dealing, David Nahmad is also a championship backgammon player. Each son has a namesake gallery. Ezra’s son has the Helly Nahmad Gallery in London and David’s offspring an identically named one in New York.

The Mossack Fonseca records indicate the Nahmads were early adopters of the benefits of offshoring art.

Giuseppe Nahmad registered International Art Middle S. A. in one thousand nine hundred ninety-fifth through the Swiss bank UBS and the Geneva office of Mossack Fonseca. It may have existed in another form prior to that date. A document in the Mossack Fonseca files mentions International Art Middle acquiring the pastel “Danseuses” by Edgar Degas in October one thousand nine hundred eighty-nine.

The Nahmads’ business, which stretches across jurisdictions and blood ties, is tailor-made for offshoring. With the Nahmad principals based in three countries, galleries on opposite sides of the Atlantic Ocean and most of the paintings stashed in Switzerland, the family requires the kind of valid siloing made possible by offshore companies.

International Art Center isn't the family’s only corporate entity with Mossack Fonseca. Giuseppe Nahmad also created Swinton International Ltd., which was registered in the British Virgin Islands in August one thousand nine hundred ninety-two.

The offshore entities are interconnected, their utilize a family affair. Giuseppe Nahmad had power of attorney over International Art Center’s UBS bank account as early as one thousand nine hundred ninety-five. David and Ezra could also sign for the company’s bank account at UBS. For a company bank account with Citibank two years later, Giuseppe co-signed with his brother Ezra Nahmad, the documents show.

In one thousand nine hundred ninety-fifth, Swinton International authorized David Nahmad to deal the sale of five paintings it owned — an oil on panel by Picasso, “Danseuses” by Degas, two oils on canvas by Henri Matisse and an oil on canvas by Raoul Dufy. Some of the paintings subsequently went on auction at Sotheby’s identified as being from a “private collection.” Two of the paintings had been the property of International Art Center.

International Art Center’s ownership was initially held in bearer shares, making it impossible to tell who actually owned it. In two thousand-first, a board resolution by Mossack Fonseca nominee directors created one hundred shares in the company and granted them to Guiseppe. In two thousand-eighth, those hundred shares were reassigned in equal portions to David and Ezra Nahmad. A year later, Ezra split his shares with his son Hillel. David didn't do the same with his son.

A hint of tension between David and his son surfaced in two thousand-seventh, in a scarce profile of the family in Forbes. The article portrayed David, while “frowning,” saying, “My son likes publicity a lot. I don’t like publicity.”

His son Helly’s extracurricular activities could've made him an unsuitable shareholder of International Art Center. Love his uncle Giuseppe, Helly had huge appetites. The tabloids charted his exploits: models for girlfriends, a floor of multi-million dollar apartments in Trump Tower, film star pals and high-stakes gambling. Given the family history, none of that was likely a problem until the U. south Attorney for the Southern District of NY indicted him in April two thousand thirteen for his leadership role in an alleged $100 million gambling and money-laundering ring with ties to Russian gangsters.

Wiretaps in the case caught him discussing how his family art business could be used to cover money.

“[S]ometimes a bank needs a justification for a wire, right?” he said, according to a conversation from March two thousand twelve, quoted in the government’s sentencing memorandum. “We can just say, Ohh, you're buying a painting. If they necessity justification, you know what I mean? You just be like, Oh yeah, I bought a, you know, Picasso drawing or something.”

It was never proven in Ct that the behavior discussed took place. The conversation didn't factor into the ultimate charge and the Nahmad’s lawyer said in an interview it's nothing to do with the Modigliani case.

Helly Nahmad pleaded guilty to operating an illegal gambling business in November two thousand thirteen. A judge sentenced him to a year and a day in prison. He also agreed to forfeit $6.4 million and relinquish rights to a painting by Raoul Dufy. He served five months.

Lost art

The Nahmads aren't the only prominent art collecting clan that's found their offshore holdings embroiled in valid actions.

The Mossack Fonseca data provides new insight into a valid dispute involving the Goulandris family, a Greek shipping dynasty that's in the center of a fight over what happened to eighty-three lost art masterpieces.

“All told this is about $3 billion worth of paintings,” Ezra Chowaiki, a gallery owner who's helping to bankroll one of the valid claims, told ICIJ in an interview. “It could be the largest collection of lost paintings in history.”

Two lawsuits and a criminal investigation are underway in Lausanne, Switzerland, to attempt to define the whereabouts and ownership of the art collection. The cases feature a sprawling and wealthy family at war with itself, shell companies based in Panama, allegations of a forged document, and museum quality paintings by the likes of Van Gogh, Matisse and Picasso.

Some of the paintings have been sold. The seller didn't wish the history known. In a $20 million sales agreement found in the Mossack Fonseca files for one of the Goulandris paintings, Van Gogh’s “Nature Morte aux Oranges,” there is a portion about confidentiality. It forbids revealing, “the identity of the parties to this Agreement (including the identity of the Seller’s sole shareholder)” and “any information or documentation pertaining to the Provenance of the Work and the chain of title.”

The art once belonged to Greek shipping tycoon Basil Goulandris. In one thousand nine hundred ninety-fourth, Goulandris died of Parkinson’s disease. After his widow, Elise, died in two-thousandth, her heirs learned the couple’s massive art collection had changed hands years earlier. A Panamanian company called Wilton Trading S. A. owned the paintings.

In one thousand nine hundred eighty-fifth, according to Basil’s nephew Peter J. Goulandris, Basil sold the all collection of eighty-three paintings for the extraordinarily low price of $31.7 million dollars to Wilton Trading. Despite the sale, the paintings never left the couple’s possession. During this period, Basil and Elise Goulandris lent the artwork to museums and sold pieces to dealers with the provenance listed as if it belonged to them.

Much of what's known about Wilton Trading comes from the Ct cases in Switzerland. It was created in one thousand nine hundred eighty-first but didn’t have directors until one thousand nine hundred ninety-five, ten years after the sales agreement was supposedly signed. According to a Swiss prosecutor, the paper on which the sales agreement is inked didn’t exist in one thousand nine hundred eighty-fifth, and number one has been able to prove that any money changed hands.

Peter J. Goulandris told a Swiss Ct that his late mother, Basil’s sister-in-law Maria Goulandris, was the owner of Wilton Trading.

Through his lawyer, Peter Goulandris declined to comment.

Elise died without offspring. Her niece Aspasia Zaimis believes she deserves a share of the eighty-three paintings and is suing the executor of Elise’s will.

In November two thousand four, anonymous companies set up by Mossack Fonseca started the process of selling some of the Goulandris paintings that Wilton Trading had kept.

Early the following year, at a Sotheby’s auction in London, a company called Tricornio Holdings sold a painting by Pierre Bonnard called “Dans le cabinet de toilette.” Another company, Heredia Holdings, signed an agreement with Sotheby’s to sell a painting by Marc Chagall, ““Les Comédiens.” A third company, Talara Holdings, keep up for auction a Chagall painting called “Le Violoniste Bleu.”

Around the same time, the one thousand eight hundred eighty-eight Van Gogh depiction of a basket of oranges went to CA direct marketing tycoon Greg Renker and his wife Stacey in a private sale. The seller was a company called Jacob Portfolio Incorporated.

Renker didn't reply to a request for comment.

All four companies were registered just before the transactions and shuttered shortly afterwards, leaving number public trace of who was behind them. The documents presently reveal that all four shared a mysterious owner: Marie Voridis.

One of the transactions provides a clue to the identity of Marie Voridis. On October twenty-two, two thousand four, Voridis transferred all rights to an oil painting by Pierre-Auguste Renoir known in English as “the Seamstress” to Talara Holdings. A few weeks later, Talara Holdings transferred the painting back to Voridis.

In September two thousand five, a Greek fashion magazine featured the opulent NY apt of a Greek socialite, Doda Voridis, the sister of Basil Goulandris. Masterpieces by famous artists decorated the E Side apt of Voridis, who died in December two thousand fifteen. In the gossip columns she was always known as Doda but her genuine title is Marie. Hanging over a handsome armoire in one photo was Renoir’s “the Seamstress.”

War and treasure

The controversy over Modigliani’s “Seated Man with a Cane” began in a time when the fog of war provided the kind of concealment the offshore world offers today. Oscar Stettiner, the Jewish dealer who's alleged to have been the original owner of the painting, fled Paris in one thousand nine hundred thirty-ninth, in advance of the Nazis, leaving behind his art collection.

After the city fell, the Germans seized the collection and appointed a French “temporary administrator,” who auctioned off the painting for the benefit of the Nazis, according to valid filings. “Seated Man with a Cane” changed hands multiple times after that. In October one thousand nine hundred forty-four, a U. S. military officer bought the Modigliani in a café for 25.000 francs, according to Ct documents.

In one thousand nine hundred forty-sixth, Stettiner filed a claim in France to start the process of recovering the painting, Ct documents filed on behalf of his grandson say. He died two years later, with his petition still pending.

The Nahmad’s lawyer Richard Golub disputes this narrative. He questions whether Stettiner ever owned the painting.

By one thousand nine hundred fifty-eight, the Modigliani entered a private collection where it stayed hidden until one thousand nine hundred ninety-six, when International Art Middle bought it at Christie’s in London for $3.2 million, according to documents filed in NY courts. The Helly Nahmad Gallery exhibited the painting in London in one thousand nine hundred ninety-eighth and at the Musee d’Art Moderne in Paris in one thousand nine hundred ninety-ninth. Six years later it was portion of a Modigliani exhibit at the Helly Nahmad Gallery in New York.

Toronto-based Mondex Corp., a firm that specializes in recovering Nazi-looted art, discovered the painting’s alleged provenance by accident while looking through files in a French ministry. The company helped begin the valid battle to return it to Philippe Maestracci, Oscar Stettiner’s grandson. Mondex doesn't disclose its fee for this service.

On Feb. eleven, two thousand fifteen, the Nahmad’s lawyer defending the Maestracci case in New York, Nehemiah Glanc, wrote an email to International Art Center’s attorney in Geneva. Glanc was on record as the lawyer for IAC, but he needed some key facts about the company before he could proceed, the leaked records obtained by ICIJ show.

“Please advise as soon as possible as to who's authorized to sign on behalf of IAC,” he wrote in an email.

If the Nahmads had signed the documents as the owners of International Art Center, they'd have likely lost the valid protection the company provided.

The attorney in Geneva keep Glanc in touch with Anaïs Di Nardo Di Maio in Mossack Fonseca’s Geneva office. Di Nardo could obtain the signatures of the Mossack Fonseca nominee directors in Panama as long as Glanc’s clients would pay for it. He agreed.

One document signed by Mossack Fonseca’s nominee directors cost $32.10.

As the case progressed, emails flew back and forth between Glanc and Mossack Fonseca, the leaked documents show. Every time a motion came from International Art Center, the stand-in directors had to sign.

In September two thousand fifteen, in an austere courtroom in New York, state Supreme Ct Judge Eileen Bransten dismissed the Maestracci case. Among her findings, the plaintiffs had failed to properly serve the complaint on International Art Middle because they'd served papers at the Nahmad Gallery in NY instead of going to Panama. She also ruled that a court-appointed administrator, not Maestracci, was the proper plaintiff. Two months later, the administrator re-filed the case in state Supreme Ct in NY as plaintiff.

The new complaint against the Nahmads made another effort to link the family to ownership of International Art Center, which it described as an alter ego of the family undertaking “in a manner so as to confuse and conceal their identities, and cover revenues generated” from the Nahmad family’s art dealing business.

As the case continues on, Modigliani’s one thousand nine hundred eighteen portrait, “Seated Man with a Cane,” is tucked far in the Geneva freeport in Switzerland, another treasure hidden from view.

Munich’s Suddeutsche Zeitung newspaper was given the files, which were shared with the International Consortium of Investigative Journalists.

11.5 million emails and client records. It'd take twenty-four hours to download the 2.6 terabytes at normal internet speeds.

More than three hundred fifty journalists, including a U. S. McClatchy reporting team, in seventy-seventh countries examined the data.

twelve current and former heads of state and government, sixty-one relatives and associates of leaders, and one hundred twenty-eight other public officials.

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