Tom Wolfe’s new novel, the Miami-set Back to Blood, has not been particularly well-received by book critics, but at the balmy, prosecco-soaked doorbuster sale and glad-handing jubilee known as Art Basel Miami Beach in early December, attendees armed with e-readers passed around one brief passage with gleeful approval. The scene, which comes midway through the book and is set at the same fair, introduces a character in whom many see an eerie resemblance to dealer Larry Gagosian—the art world’s widely admired, widely feared and widely resented top dog. The character, a gallery dealer named Harry Goshen (the name is perhaps a tip-off) is described as “a tall man with gray hair, although he doesn’t look all that old, and eerie pale-gray eyes like the slanted eyes of a husky.”
A bit mesmerized, Mr. Wolfe’s narrator circles back to Goshen’s eyes a few lines later: “So pale, those eyes … they look ghostly and sinister …”
Several fairgoers who encountered Mr. Gagosian in his booth in the Miami Beach Convention Center took note of his eyes as well. Not sinister, they said, just tired.
“Maybe it’s getting to him,” one art adviser surmised. “The travel, the expansion. At some point, it hits you the wrong way. It’s hard to satisfy everyone and keep all the balls in the air, and when you go to the top like that you become a target. People love to get the giant.”
It’s been an unusually challenging period for Mr. Gagosian, the art world’s silver-maned dealer-emperor, whose sharp eye for talent, business prowess and aggressive style of deal-making propelled an ascendancy from modest beginnings as a Los Angeles street peddler—hawking cheap posters in Westwood—to a position of unrivaled dominance in the international art trade, a sovereignty that some are predicting, a tad eagerly, may soon come to a close.
Even as he grapples with a pair of ongoing lawsuits—one brought by billionaire investor Ronald Perelman and another by art collector Jan Cowles—accusing Mr. Gagosian of enriching himself at clients’ expense, his empire has been rocked by a string of high-profile defections.
As Basel got underway, smartphones began vibrating with a curious piece of news: dealer David Zwirner, the serious-minded German known for shepherding cerebral artists like Neo Rauch to world acclaim, would be mounting a New York exhibition of Jeff Koons, long a prized show pony in Mr. Gagosian’s crowded stable and, perhaps coincidentally, the subject of that lawsuit by Mr. Perelman. Though a Gagosian spokesperson made it clear that the gallery would continue to represent Mr. Koons, who also shows at Sonnabend, the move seemed a noteworthy poke in the eye, and the timing a further thumb-twist.
Then, less than a week later, Damien Hirst—a shrewd market operator in his own right—announced that he was leaving Gagosian after 17 years. Never mind that the dealer had helped turn Mr. Hirst into the world’s richest artist (reportedly worth upward of $300 million) and had recently given over his entire network of galleries around the world to a blockbuster exhibition of Mr. Hirst’s Spot paintings (complete with a zany Amazing Race–type contest prodding jet-setting aficionados to hit all 11 shows).
Hirst was history.
And those Spots of his weren’t the last dominoes to fall. A day later, the dotty Japanese artist Yayoi Kusama—who was recently the subject of a major retrospective at the Whitney Museum—announced her own defection from Gagosian.
Three artists out of more than 75 that Mr. Gagosian works with—a number that includes estates like those of Picasso and Warhol—may seem like small potatoes for a world-straddling powerhouse. But there is a common thread that may make their loss a bit more impactful for the gallery, and portentous for the market as a whole. “Look at what they all provided: unlimited supply,” noted an art consultant who has had numerous dealings with Mr. Gagosian. “How many Hirsts do you think they sold? Thousands. How many Kusamas?” Despite her voluntary residence in a Japanese mental hospital, Ms. Kusama remains highly productive. “‘Forty-eight by forty-eight? Can do! You want red? White? No problem!’” the consultant continued, imagining the gallery’s sales pitch. “There are very few artists like that, and he managed to get them. The question is, who can he push to fill that void? Who will be the next million-dollar artist who can churn out a thousand pieces?”
Such artwork, the consultant said, is “like candy”—a quick hit of acquisitional glucose for collectors, necessitating regular replenishment. “‘You have a Hirst? I want a Hirst.’ ‘You have a butterfly? I want a butterfly and a cow.’ Collectors were buying two, three, four at a clip. Because a million dollars didn’t mean anything to these people.”
If the art market has been experiencing a bubble—and many observers believe that it has—this may signal the beginning of a much-needed correction. “I think the whole business has been slowing down,” said one prominent collector, who cited the disappointing auction results for Mr. Koons and several other of Gagosian’s artists at last November’s contemporary sales, despite record-breaking prices for a number of other artists.
Perhaps the gallery overplayed its hand. “City by city, they saturated the market with [Richard] Prince and Koons,” the collector said. “Instead of working with an artist to have longevity—with a slow output, distributed internationally over years—they blitzkrieged and carpet-bombed each city with the work. Everybody got a Hirst.” Perhaps, the collector speculated, these artists were leaving simply because they’d already sold everything they could to Mr. Gagosian’s clientele and it was time to tap a new user base.
“Larry is quite phenomenal,” the collector added. “He got these collectors to buy anything he put out there. ‘Larry’s going to show it!’ became an instant recipe for money. It was absurd.”
These high-level defections follow the deaths last year of several of Mr. Gagosian’s blue-chip artists, the losses of whom likely will be felt not only personally but financially. Cy Twombly, long a jewel in Mr. Gagosian’s crown (newly launched Gagosian galleries in Rome, Paris and Athens all opened with Twombly shows), died in July of 2011, followed by Richard Hamilton, John Chamberlain, Mike Kelly and Franz West.
And then there are those pending lawsuits. The allegations themselves are not terribly dramatic—let’s see you try selling a billion dollars worth of art in a year, as Gagosian reportedly does, without breaking some crockery—but of far larger consequence might be the unflattering light they have shed on the inner workings of the Gagosian empire. Dozens of emails and hundreds of pages of deposition testimony have been made public, opening the kimono on the dealer’s typically discreet business affairs.
This unusual drumbeat of bad news has the art world muttering about a once-unthinkable possibility: could the invincible Larry Gagosian actually be in real trouble? Could a “post-Gagosian era,” as one longtime art writer put it, be at hand?
Is Go-Go a goner?
“People are saying, ‘The whole Gagosian empire is falling apart!’” the prominent collector said.“‘Oh, the whole thing is going to collapse!’ There’s a lot of jealousy.” Art world sources contacted by The Observer were universal in their praise of Mr. Gagosian’s business instincts and his curatorial acumen, noting with particular approval the many influential museum-quality exhibitions his galleries have mounted over the years. They also called him tough, Machiavellian and hard on his employees, a thick-skinned bunch for whom a ready box of Puffs is nonetheless said to be standard equipment. Many sounded mirthful about his string of difficulties. And they all flatly refused to be quoted by name.
“Look, Larry is not a liar, he’s not a cheat,” said the collector. “But he is a frigging bully. He’s very good at intimidating people and running his social pressure on them, and he’s good at image-making, putting out the idea that everything he touches turns to gold. Which of course is bullshit. It worked for a certain amount of time, but no longer.”
A spokesperson for Gagosian did not respond to a request for comment, but in a 2010 interview with the Financial Times, the dealer defended his approach: “As long as you behave well, there’s nothing wrong with being aggressive,” he said.
“Everyone wants to see Larry fail,” the adviser noted. “I’m not in that camp. I think he’s extraordinary. Maybe it’s just his time, though. One thing after another put a chink in the armor.”
Mr. Perelman, the billionaire investor and chairman of Revlon, has been a client of Mr. Gagosian’s for more than two decades. The two of them are also, as Mr. Perelman noted pointedly in his lawsuit, longtime friends and business partners (both are investors in the Blue Parrot restaurant in East Hampton). “Accordingly,” the original complaint put it, “Gagosian owed Plaintiffs the highest degree of loyalty and fair dealing.”
In other words: this time, it’s personal.
The rather complicated suit concerns a series of deals—both purchases and trades—between Mr. Perelman and Gagosian Gallery, including a $4 million sculpture by Mr. Koons, Popeye,and works by Richard Serra and Cy Twombly. Mr. Perelman alleges that in multiple instances, Mr. Gagosian misrepresented the market value of these works in order to maximize his own cut on various transactions. Mr. Gagosian’s legal team declined to comment on the Perelman case or any other pending legal matter.
None of the art-world insiders The Observer spoke to believed Mr. Perelman would prevail, and some noted that the complaint served mostly to advertise the plaintiff’s apparent, if implausible, naïveté. There is, for instance, the contention that “Plaintiffs depended on defendants, whose knowledge of the market and judgment in these matters were without peer, for their decisions with respect to art transactions,” which is a little like relying on the salesgirl at H&M to tell you whether your butt looks big in that sequined A-line cocktail dress. It’s her job to move merchandise.
“That’s the game,” said one well-regarded art adviser who has worked with both men. “They’re all in the game together—Perelman’s like that, too.” Likening the relationship to a marriage gone bad, the adviser added, “People get along for years, and then they get a divorce and want to kill each other.”
“I think Ron would sue his dog-walker, and he probably already has,” the collector noted.
Despite Mr. Perelman’s well-established litigious streak, the move raised eyebrows because it seemed to violate the omertà that has long prevailed in the art world. “It’s shocking,” said the art consultant. “It’s a very respected collector standing up to Gagosian for the first time, and doing so in a very public way, saying, basically, ‘I’m not going to take this shit anymore. I’m not going to dummy up.’ I think that’s what’s happening here—when somebody’s the king of the world, nobody wants to alienate them, but the minute people start to defect, they all start piling on.”
If so, Mr. Gagosian might want to seek the advice of his onetime boss Michael Ovitz, for whom he worked as secretary for a brief period in the 1970s. Years later, after co-founding CAA, Mr. Ovitz came to rule Hollywood in much the way Mr. Gagosian dominates the art world; when the spell was broken, with Mr. Ovitz’s firing from Disney in 1997, the many enemies he’d made along the way lined up to get their licks in.
Whatever its chances of success, the Perelman suit raises a thorny issue for the art world: what information, if any, must a dealer disclose to those with whom he does business, be they artist, buyer or seller? As Mr. Perelman’s complaint claimed, “Unbeknownst to his customers, Gagosian and the Gallery are often on all sides of the transaction—representing the buyer, the seller and the artist—and they use these multiple roles to their advantage by undervaluing works when purchasing them, overvaluing them when selling them, and pocketing the substantial differential.”
Which sounds like a pretty good definition of the gallery trade, except maybe the part about it being unbeknownst to anyone.
Another recent lawsuit also raised the matter of Mr. Gagosian’s supposed fiduciary duty to a client, and some onlookers believe the case may redefine the way business is done in the art world.
In 1964, Pop artist Roy Lichtenstein’s Girl in Mirror—an “enamel” on steel, made in an edition of eight—was a newly minted, fresh-faced ingenue with a bright future and the world at her feet. Today, a little worse for wear, she has emerged as the unwitting subject of a $15 million lawsuit filed by lawyers for art collector Jan Cowles. Ms. Cowles, 93, suffers from dementia, and the suit filed on her behalf alleges that her son, Charles Cowles, who put the Lichtenstein on consignment with Mr. Gagosian and then sold it to him, did not have the authority to do so—and therefore the dealer had no right to sell it to a third party. The suit further alleges that Mr. Gagosian took advantage of Mr. Cowles, who was in tough financial straits, to obtain an unusually rich commission on the sale.
Mr. Cowles, it should be noted, is no novice in the art trade: a longtime dealer himself, he ran a New York gallery for 30 years until closing it in 2009. What’s more, he has a history of unloading works from his mother’s collection—as it turns out, sometimes without her say-so. Indeed, in a settlement agreement between Jan and Charles filed earlier this year after Jan’s attorneys threatened legal action against him, Charles admitted to selling his mother’s art without permission and agreed to pay her back. How he will do so is hard to fathom, though, since the amount owed is said to be approximately $12 million, and Mr. Cowles has no apparent source of income.
In a November court proceeding, the defense stated its intention to add Charles Cowles to the case, a move that the court seemed to approve of. “Well, I’ve been surprised that the son wasn’t brought into the action initially,” Judge Charles Ramos admitted. The defense also indicated that it was considering adding Lester Marks, Ms. Cowles’s accountant and attorney-in-fact, to the case, on the theory that he may have some liability in failing to prevent Charles from selling the artworks.
In late November, both sides agreed to move forward with voluntary mediation, putting litigation on pause.
The Girl in Mirror controversy began in March 2011 with a suit filed over another unauthorized sale. Art collector Robert Wylde sued Gagosian Gallery for fraud after Mr. Gagosian sold Mr. Wylde a Mark Tansey painting, The Innocent Eye Test, that had been consigned by Charles Cowles. It turned out the painting did not belong to Mr. Cowles, but instead was jointly owned by his mother and the Metropolitan Museum of Art.
Mr. Cowles was quick to take responsibility for the debacle. “I didn’t even think about whether the Met owned part of it or not,” he told The New York Times after Mr. Wylde filed suit. “And one day I saw it on the wall and thought, ‘Hey, I could use money’ and so I decided to sell it … And now it’s a big mess.”
Mr. Cowles, whom Mr. Gagosian referred to in a deposition as “a train wreck,” has claimed in an affidavit that he has been treated for memory problems in recent years. He did not respond to requests for comment.
But Charles Cowles wasn’t the one being sued. Mr. Wylde sought $6 million in damages from Mr. Gagosian for selling him a work without proper title, and Mr. Wylde was sued in turn by Ms. Cowles, who demanded the painting back. The case was settled last October. Mr. Gagosian paid Mr. Wylde $4.4 million, Mr. Wylde returned the painting to Jan Cowles, and Ms. Cowles promptly gifted the painting to the Met, where it is now on display.
For Mr. Gagosian, though, l’affaire Cowles was far from over. The Tansey deal, it transpired, had been part of a larger transaction between Mr. Cowles and Gagosian Gallery in August 2009 that also included Girl in Mirror.
Though the dealer the originally told Charles he expected to sell the enamel for at least $3 million, of which Cowles would receive $2.5 million, he had been unable to do so, eventually paying Charles a total of $3 million for both paintings.
In January, Ms. Cowles filed suit over the Lichtenstein. In addition to taking issue with the unauthorized sale, the suit alleged that Mr. Gagosian falsely claimed the piece was damaged in order to induce Charles to accept a lowball price of just $1 million. Evidence revealed that the work had been restored and showed discoloration and wear, but it remains unclear how much its condition should have affected the price.
In papers filed in March, Ms. Cowles’s lawyer, David Baum—an aggressive litigator whose Facebook posts taunting Mr. Gagosian briefly made their way into the proceedings—brought to light an explosive email. The message was sent to Thompson Dean, the enamel’s eventual buyer, by Gagosian Gallery director Deborah McLeod in July 2009, a month after Charles Cowles announced he was shuttering his own art gallery: “Seller now in terrible straits and needs cash,” she wrote. “Are you interested in making a cruel and offensive offer? Come on, want to try?”
Ms. McLeod had initially approached Mr. Dean about the piece in January, at a price of $3.5 million, but he’d cited liquidity issues, suggesting they get “creative/attractive” on the price. By summer 2009, the recession was in full effect, and Mr. Dean got his Lichtenstein for $2 million. “Approx. half off, so I like it,” Ms. McLeod wrote him. Without disclosing to Charles Cowles that a buyer had made any offer for the piece—and certainly not $2 million—the gallery offered to take both the Lichtenstein and the Tansey off his hands for a total of $3 million. Of that, $1 million was earmarked for the Lichtenstein, which meant a hefty 50 percent commission for Gagosian. Mr. Cowles bit.
The complaint alleges that the gallery breached its fiduciary duty to Charles Cowles by working both sides of the deal without full disclosure—in effect using knowledge of Charles’s desperate financial condition to solicit a lowball offer, then lowballing him further and pocketing the difference. Ms. Cowles is asking for some $15 million, which includes the value of the painting plus interest and $10 million in punitive damages.
The art adviser we spoke to recalled seeing the enamel in Basel, where Mr. Gagosian had placed it on view. “It was a tough year,” the adviser said, noting the recession underway at the time. “But you know Larry got somebody to buy it and led Charlie to the bone and took the most monstrous commission anyone’s ever heard of in the art world.”
That said, everyone knows a smart dealer will maximize his profits, and of course Charles Cowles—whatever his personal circumstances—was under no obligation to accept the $1 million offer.
How one views the case is a matter of perspective. Whereas writer Felix Salmon wrote that the deal smacked of “skulduggery,” Art Market Monitor thought the emails merely “show[ed] a high pressure sales organization working hard to make a deal. Though Gagosian made $1 million on the sale himself, I doubt he rubbed his hands with glee. No one in 2009 was confident they would be able to cover their overhead.” Besides, while Mr. Cowles’s financial situation was in fact dire, that’s hardly an uncommon circumstance for collectors looking to part with works of art.
“Look, Larry’s fine to take a million if he can get away with it,” the art adviser admitted. “But seeing the inner workings of the conversation and the McLeod email casts a very poor light on how business is done. I’ve heard a lot of rumblings from collectors wondering about whether they’ve gotten a fair shake in their deals.”
In the art market there are, broadly speaking, two ways to structure a resale. The first is a consignment. The seller consigns an artwork to a selling agent, who markets it on his behalf, taking a percentage of the sale as commission. The second is a buy/sell, in which the agent buys the work from a seller and sells it on to a buyer. At the time Mr. Gagosian got his offer from Thompson Dean, Girl in Mirror was still on consignment. It subsequently appears to have morphed into a buy/sell.
When the judge denied Mr. Gagosian’s motion to dismiss the Lichtenstein case in September, he noted that “Gagosian, as an agent acting on behalf of its consignor, had a fiduciary duty to act in the utmost good faith and in the interest of Charles, its principal, throughout their relationship.” The standard desk reference on art law—which, as it happens, is co-authored by longtime Gagosian attorney Ralph Lerner—takes the same view: “On accepting works from an artist on consignment,” it reads, “the dealer becomes the artist’s agent, and the law of agency applies.”
Should the case go to trial, it may turn in part on whether Mr. Cowles’s role in the transaction is seen as comparable to that of an artist or consignor, or if he was acting as a fellow dealer instead, and was therefore not owed the same fiduciary duty—as the defense will likely contend.
Nonetheless, in his deposition, Mr. Gagosian indicated that throughout his career he has represented both sides of transactions without disclosure of that fact to either party. “To be honest with you, the question hardly ever gets asked,” he said. “I never get asked the question, ‘Are you representing both sides?’” He said he thought the information was “implicit,” adding that “My objective is to pay the seller and to make a profit for the gallery.”
“Lawyers and past clients of Gagosian’s who are not of good will would definitely find ammunition in that type of testimony,” said longtime art lawyer Thomas Danziger. But Mr. Gagosian, Mr. Danziger added, “is the most important and most successful art dealer out there. If he believes this is correct, it should be no surprise that other dealers feel the same way.”
Fiduciary duty is “not well [enough] understood” in the art trade, Mr. Danziger said. “Larry Gagosian’s view as expressed in the deposition might even be the majority view among art dealers, which is that they are representing ‘the deal.’ In point of fact and under New York agency law, you cannot represent both parties on the same transaction unless there is full and informed consent, and that is clearly what has been missing in a lot of transactions we’ve been reading about.”
Whatever the outcome of the Cowles and Perelman suits, many think change is long overdue. “People are going to have to be regulated,” the art adviser said. “More transparency may just be what everybody needs. Then again, maybe if you regulate the art world, it will fall apart.”
“A lot of people think this is the end of the art world as we know it,” the consultant agreed.
As for Mr. Gagosian, the recent patch of rough ice has exposed him—and the freewheeling industry he has helped to create—to unaccustomed scrutiny.” He puts winning first, and he doesn’t care who he steps on or screws,” the advisor said, “but that’s what it takes. It’s all a snake pit. These people deserve each other. And when you think about it, it’s all quite entertaining and amusing.
“The art world is constant entertainment.”