Wire fraud seems to find its way into diverse industries and legal specialties, including auctioneering and art law; however, it is the criminal cases that make for the best stories, and this brings us to the case of Michael Barzman, an auctioneer living and working in North Hollywood, California. Based upon documents filed in court by the U.S. Department of Justice (DOJ), Barzman was an auctioneer whose business model was to buy storage units and then auction off the contents.
Much to Barzman’s surprise and good luck, in 2012, he purchased the contents of a storage unit that contained not one, but 30 paintings by the neo-impressionist painter Jean-Michel Basquiat. As a young man, only in his 20s, his paintings won rave reviews for his work, earning as much as $1.4 million per year. Unfortunately, his life was cut short at age 28 in 1988, when he died from a heroine overdose. A prominent theme in Basquiat’s work was heroes and saints. Over the next ten years, Barzman auctioned off these works for an undisclosed amount of money. The provenance for the artwork consisted of documents from the storage unit owner showing that the unit had been owned by Thaddeus Mumford, Jr, a television writer from North Hollywood, who passed away in 2018, and an affidavit from Barzan attesting to his discovery.
Eventually some of the Barzman discovered Basquiats made their way to the Orlando Museum of Art where they were featured in the “Heroes and Monsters”, where, in turn, it precipitated an FBI raid on the Museum and the seizure of twenty-five paintings. The raid also set up a string of resignations and firings at the Orlando Museum, which is in and of itself an interesting story. A curator at the Museum had signed statements after a forensic examination and analysis of signatures attesting to the authenticity of the pieces.
Nevertheless, suspicion arose when it was discovered that one of the paintings, allegedly painted in 1982, had been painted on a federal express box that contained design elements that had not existed until 1994. The Board of the Museum subsequently fired its director, Aaron De Groff, who, it turned out, had a history of obtaining works of questioned provenance. In 2023, the American Alliance of Museums placed the Orlando Museum of Art on probation, thereby threatening its certification.
To quote DOJ, “[a]ll was not as it seemed—the artworks were fakes”. The pieces of art were allegedly forged by a mysterious person known as “JF”. Apparently, JF was the artist behind the scheme, and in a mere 30 minutes, oftentimes less, he could prepare an authentic-looking Basquiat. The duo left the paintings outside to give them an authentic weathered look so that it would appear they were actually painted in the 1980s.
Initially, Barzman denied any knowledge of this fraudulent scheme, but within the past couple weeks, he has signed a plea agreement with DOJ admitting to fabricating the provenance of the paintings in question. It goes without saying that things do not look good for JF.
But is Forgery Illegal?
One of the more striking aspect of the DOJ press release is that it assumes the illegality of the forgery without identifying a statute or explaining why the forgery of artwork is a crime. This is because forgery of artwork—copying a work of a known master or painting a work in the style of a known master—is not illegal. The problem arises when a forgery is passed off as an original. Suppose a person is rummaging through their recently deceased grandmother’s attic when they discover a work of a lesser-known western painter. The painting could have been worth very little when someone bought it in the 1920s but may now be worth hundreds of thousands of dollars.
Forgery usually involves the alteration of a written instrument with an intent to defraud.[1] The Barzman case involved a “forgery” of paintings by the mysterious J.F., and Barzman, who actually pled guilty to lying to the FBI,[2] but the real crime involved is a standard wire fraud.[3]
[1] The New York Penal Statute 170.05 is typical of forgery statutes. That law provides: “A person is guilty of forgery in the third degree when, with intent to defraud, deceive or injure another, he falsely makes, completes or alters a written instrument”. Since a painting is not a “written statute”, the law does not apply.
[2] There is no reason to lie to the FBI, or any other federal law enforcement agencies. I know there are people out there who believe they are accomplished liars or that the FBI will believe them because of their charming smile or helpful demeanor, but it won’t work. It simply adds another charge to an indictment. I have had many cases over the years where the government could not prove a major fraud, but the client nevertheless was convicted of 18 U.S.C. 1001.
[3] For a full description of wire fraud, see my book Understanding Mail Fraud and Wire Fraud, available at: https://www.amazon.com/Understanding-Mail-Fraud-Wire-Nonattorneys/dp/1662486219/
The Wire Fraud Statute requires a scheme or artifice to defraud. The scheme in the Barzman/J.F. case comes from the misrepresentation of the paintings painted by J.F. as painted by Basquiat. This misrepresentation would cause the victims of the scheme to pay more for the paintings than they were actually worth. The DOJ press release was silent as to the fair market value of an original J.F., but we can surmise it was less valuable than an original Basquiat.
To get more specific concerning Barzman’s role in the wire fraud, it does not appear Barzman ever actually identified the paintings as original Basquiats. Rather, his false statement was that he “found” them in an abandoned storage unit, a not altogether unbelievable story. Valuable items are frequently found in abandoned storage units (as are dead bodies and murder weapons). In this case, the storage unit had been owned by a prominent Hollywood screenwriter, Thaddeus Mumford, and Mr. Mumford would have been the sort of person who would have collected Basquiats.
The Importance of Provenance.
This brings us to the issue of provenance, a complex topic that experts have written volumes about. Basically, however, provenance is the evidence that proves an item is what it purports to be. A particular painting may have a strong provenance running from the painter to the current owner, or it may be much weaker, like a “Certificate of Authenticity” from a disreputable source. It can consist of documents or records, photographs, affidavits, forensic analysis, etc. The rules concerning the establishment of provenance are fiercely debated and often litigated in cases between sellers, buyers, and collectors.
At Boyle & Jasari, LLP, however, we focus on white-collar criminal defense and civil fraud litigation. For us, when we look at provenance, we are looking for something more than an inadequate or wrong provenance. We are looking for an intentional misrepresentation of material fact.
Let’s examine works sold at auction. If an auctioneer is told that a particular painting is a Basquiat, and he sells it as a Basquiat, but it later turns out not to be an original, has he committed wire fraud? The answer is “no” because there was no intentional misrepresentation. The auctioneer was merely repeating what he was told, and assuming he did not make any warranties or guarantees, there would not be any criminal violations. If the buyer lost tens of thousands of dollars, would it make a difference? The answer is “no”. The same rules apply.
But what if the auctioneer knew the paintings were not original Basquiats? The situation changes completely because by lying about the painting’s origins, the auctioneer is engaging in wire fraud. Even if he does not know for certain that the paintings were not original, he could still be convicted if he were “Willfully Blind” to the paintings’ origins. Willful blindness is another complicated topic, but for purposes of this discussion, it is sufficient to say that if one intentionally avoids learning the truth of a matter because he or she knows that the truth would make them criminally liable, they are considered to be willfully blind, and a jury may convict them of the offense even though they do not have a specific intent to commit a crime.
This brings us back to provenance, probably the most common place where fraud occurs in the art world. Barzman did not lie about the paintings per se. His misrepresentation involved finding the paintings in a storage unit belonging to a Hollywood writer. He did not identify the paintings as Basquiats. Rather, his false statement supported the provenance of the paintings by placing them in a location where original Basquiats could have been located. Although we do not know all of the facts, it is likely that experts in the field identified the paintings as Basquiasts.
The lesson to be gleaned from this case is that any false statement in the provenance of a painting could serve as a basis for a wire fraud prosecution.
Conclusion.
Wire fraud touches nearly every industry in the United States, even the art industry. Indeed, the arts are one of the more common industries where one can expect to see wire fraud and allegations of fraud. Whether fraud exists in any particular case, however, is a matter for careful investigation and consideration in each particular case. Estimates of the percentage of paintings in museums that are fake run anywhere from twenty percent on the low end to fifty percent or more on the high end—and paintings owned by private collectors may be even greater.[4] It is an industry where fraud is everywhere.
Another aspect of fraud in the art world: a victim can quickly become a perpetrator. Whenever one buys what he or she believes to be a valuable piece of art only to find out later that the piece of art was not what it was believed to be, they are a victim of fraud and have lost a lot of money. They can, at that point, go to the police or the FBI, report the crime and then sue the individual or organization from which they purchased the painting, precipitating years of costly litigation. Or they can mitigate their loss by selling the painting using the same provenance that was used to sell the painting to them.
To proceed with selling the painting with the same provenance, however, constitutes fraud, because although the seller believed the provenance to be true when they purchased the painting, they knew it to be false when they sold the painting.
Whenever fraud is suspected in any transaction involving the arts, the best course of action is to retain counsel familiar with fraud, and, in particular wire fraud and mail fraud. That attorney can then assemble an appropriate team to investigate the authenticity of the artwork involved under the guise of the attorney-client privilege and then develop a strategy for resolving the issue.
[4] This problem is not limited to painting. Any item of art—from ancient statuary to pre-Colombian art or even coins with numismatic value are subject to being faked and can be the subject of fraud litigation or criminal prosecution.
Dennis Boyle
Founder / Partner
Mr. Dennis Boyle is an accomplished white-collar criminal defense and complex civil litigation attorney who practices throughout the United States and internationally.
