ART THEFT

by Peter H. Karlen, Attorney at Law

In the last installment we discussed Holocaust art theft, but individual thefts of art also occur, though infrequently. The problem for the collector is that the piece is gone, and collecting from an insurance company is often an arduous and unpleasant task.

In our experience, the great majority of art thefts occur not with ordinary thieves but rather involve art dealers or common carriers. That is, the risk of art theft is vastly greater when leaving a work with a dealer on consignment or with a shipping company compared to leaving a work at home with the alarm system off. This does not mean that dealers and shippers are likely thieves - the vast majority are not - only that when theft does happen, these are the likely circumstances.

DEALER THEFT
The reason for dealer theft is that the dishonest dealer often wins all around. When the work is stolen, the dealer files a police report, while at the same time the work is wending itself from a person acting as a "fence" through various underworld channels to a foreign or otherwise non-local buyer. The dealer then also collects on his own insurance policy and in extreme cases may even bargain with you, the consignor, with regard to what you might get, if anything.

Please note that collectors leaving their works on consignment in some jurisdictions will not enjoy the same protection that artists may have in the same situation. In some jurisdictions, when an artist's work is lost, stolen, or destroyed, the artist may be entitled by statute to recover from the dealer the fair market value of the work. In those same jurisdictions a collector may have no such rights.

There are a number of ways to avoid, deter, or ameliorate this problem area. First, avoid unscrupulous dealers. A dealer who is a member of a reputable dealers' association which screens membership, e.g., the Art Dealers Association of America (www.artdealers.org), is more likely to be trustworthy. All things being equal, a better bet is usually the "bricks and mortar" dealer who has a physical gallery. Such a dealer is more likely to have proper insurance covering loss, and because s/he is tied to physical premises, is more likely to have a stable business against whom a claim can be made.

Second, get a signed agreement with the dealer ensuring payment to you of a specified amount in the event of loss, destruction, or theft. A dealer should be fully responsible regardless of cause. The contract might also restrict the dealer in relation to loans or approval sales to prospective customers.

Get appropriate insurance. Your homeowner's policy may not protect works in transit outside the home or on others' premises. You may need extra "floater" coverage.

For valuable works which can be forged, always "tag" your works so that you can detect if your original work has been switched for a copy. Before doing this you probably should consult with an outside art expert to ensure that a tiny marking you put on the piece will not affect its value. This tagging should always be photographically documented.

SHIPPER THEFT
The other considerable risk for theft is giving your piece to a shipper. Some of the same considerations mentioned above for dealers also apply for shippers. Always read the shipper's terms and conditions to determine liability for loss, and always update and expand your insurance to cover loss during shipment. You may find it difficult to get a shipper to sign a special contract which you draft. Screening shippers is more difficult than selecting reputable dealers since theft during shipment can be effected by any number of employees or independent contractors.

BUYER THEFT
Perhaps a third major risk of theft is theft by fraud and false pretences. Here the culprit doesn't take the piece by stealth but rather by deception. The principal risk is the dishonest buyer. A vulnerable situation is where you have lent the work to a potential buyer "on approval." The buyer merely has to say that the piece was stolen from his house/apartment or somehow disappeared, and you have all the same problems as you do with the dishonest dealer, and probably worse. A buyer who has no local connections and no recommendations can just simply disappear with a work. Switching problems can also occur.

But one of the worst problems with a buyer is when the buyer gives you no valuable consideration for purchase of the piece, e.g., a bad check or property that isn't worth anything. In such a situation where the piece has been voluntarily handed over, you may have problems with insurance coverage.

Some of your legal remedies may be to rescind the transaction and get your piece back, sue for breach of contract, fraud, and other torts. Criminal proceedings are also a possibility, though criminal proceedings should never be threatened because you can be liable for extortion.

In short, never let a piece out of your possession "on approval" unless you know who the buyer is, that they are covered by insurance, and that your insurance coverage will also apply.

ACTIONS FOLLOWING THEFT
In the event of loss, a police report may be required, especially in relation to insurance. This may involve your own local police department such as the Los Angeles Police Department which says it has the "only full-time law enforcement unit in the United States devoted to the investigation of art crimes." (www.lapdonline.org). It may also involve the FBI if theft in interstate commerce has occurred (See www.fbi.gov/majcases/arttheft/art.htm promoting the "National Stolen Art File.") Interpol is another possibility with international thefts. (See www.jouve-diffusion.com, the Interpol database of stolen art.)

The collector should also consider listing the work on registers of stolen art. For instance, the Art Loss Register maintains a list of over 100,000 stolen art items and can be contacted at www.artloss.com. The International Foundation for Art Research (IFAR) is also a listing possibility at www.ifar.org. Such a listing might alert you to a piece when it resurfaces. Helpful information might also be available at the National Association of Collectors website at www.collectors.org which publishes theft reports.

RECLAIMING PROPERTY
As mentioned in the previous installment about Holocaust art, reclaiming a piece years later can be a difficult process. In your favor is that probably a majority of jurisdictions may not bar your claim based on the passage of time because the statute of limitations may not begin to run in those jurisdictions until the whereabouts of the artwork is discovered. On the other hand, many jurisdictions have "bona fide purchaser" rules which can prevent you from reclaiming a piece. Under these statutes, bona fide purchasers who remain in possession of the work for a specified period of time (e.g., six or ten years) might be immune from a claim by the original owner. Similarly, bona fide purchasers in some jurisdictions who purchase in the open market, e.g., at public auction, may also be immune from claims.

To maximize the odds of sustaining your claim, even against a bona fide purchaser, early registration of the stolen piece on a stolen art register is often advisable. The Art Loss Register (www.artloss.com) claims that it screens up to 400,000 auction lots annually for purposes of detecting stolen art.

To avoid the problems with bona fide purchasers, collectors should advocate legislation which shifts the legal burden from them to the bona fide purchasers. In particular, such legislation could state that any purchase of a stolen work made after the work has been registered on a specified art loss register shall not be considered a "bona fide" purchase. In other words, instead of the owner having to frantically search for the piece in the collections of various people who might hold on for the statutory period, buyers perhaps should be required first to scan on the Internet a single register to see whether they are acquiring a stolen piece.

ACTIONS AGAINST THE THIEF
If you can find the actual thief, in addition to criminal remedies there are also civil ones. Costs expended in pursuit of the property might be recovered, even perhaps including attorney's fees. Other remedies may include the fair market value of the property and/or damages caused by lost use of the property. Where the collector also happens to be the copyright owner, injury to or loss of the copyright perhaps may also be compensated. In addition, claims for punitive damages may be made.

The judgment debtor in a theft case may find it difficult to discharge the claim in bankruptcy.

Some cautions. Don't accuse anyone of theft without first consulting an attorney. Accusations disseminated to persons other than the alleged thief may be considered defamatory and result in claims against you. Never institute civil or criminal proceedings without probable cause because ill-founded proceedings can result in malicious prosecution claims against you.

© 2000 Peter H. Karlen, A Professional Law Corporation. All Rights Reserved.

Mr. Karlen practices art, publishing, and intellectual property law (including the law of, trademarks, copyrights, moral rights, and the Internet). He can be contacted at (858) 454-9696 or email him at- karlenpc@aol.com His website is: www.publishinglaw.net.

Mr. Karlen started the Art Law series in 1979 in Art Week, and it has appeared in a number of print publications including Art Cellar Exchange Magazine and Art Calendar.

For more information, contact us at ace@artcellarexchange.com.

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