Wednesday, May 12, 2010

Collector Sues Martinez as Rothko Painting Goes on Block for $25 Million

Marguerite Hoffman, a prominent Dallas art collector, filed suit this week against Mexican financier David Martinez for failing to keep her 2007 sale of a star Mark Rothko painting a secret. The suit stems from the painting’s public sale tonight at Sotheby’s, estimated to fetch as much as $25 million.
Three years ago, after her 59-year-old husband’s death, Hoffman sold the painting to an undisclosed buyer, with the proviso that the details of the sale remain a secret, according to her lawsuit, filed in a Dallas, Texas, district court.
Hoffman sold the Rothko in April 2007, just as the painting came off the walls at the Dallas Museum of Art where it had hung in an exhibition titled “Fast Forward: Contemporary Collections for the Dallas Museum of Art,” featuring promised gifts to the museum. Hoffman is a trustee at the Dallas Museum of Art.
Marguerite and her late husband Robert Hoffman were among three Dallas couples who in 2005 announced a pledge to donate their art collections to the Dallas Museum of Art upon their deaths. The terms of the gift permit the patrons to buy and sell works of art during their lifetimes, according to Roger Netzer, Hoffman’s lawyer with Willkie Farr & Gallagher LLP, which is also general outside counsel for Bloomberg LP.
“The reason she wanted to keep it a secret was because it was a time of grief, and she didn’t want the public scrutiny,” said Netzer.
In pursuit of privacy, Hoffman chose to sell the painting through dealers, rather than at auction, “sacrificing the substantial premium” she could have reaped from a high-profile auction, according to the suit.
‘Millions Less’
The painting “would have sold at public auction for $30 million to $40 million” in April 2007, according to Sotheby’s Tobias Meyer, quoted in court papers. Hoffman sold the painting “for millions of dollars less,” according to the suit.
In May 2007, David Rockefeller’s Rothko sold at Sotheby’s in New York for a record $72.8 million.
Now Hoffman’s former painting, a luminous 1961 Rothko “Untitled” with two red rectangles, is to be sold tonight as one of the marquee lots at Sotheby’s.
Sotheby’s and Meyer, its worldwide head of contemporary art, are named as defendants in the suit.
“The lawsuit neither challenges our consignor’s title to the painting, nor its right to sell the painting, and the sale will go forward as planned,” said Sotheby’s spokeswoman Diana Phillips. “The lawsuit is entirely without merit.”
Contractual Promise
Hoffman’s suit accuses Martinez of breaking his contractual promise to “make ‘maximum effort’ to keep confidential ‘all aspects’ of the transaction through which he acquired it,” according to Hoffman’s suit. This agreement meant that Martinez “could not turn around, sell the painting at public auction, then pocket the premium that plaintiff had forgone,” according to the suit.
Martinez declined to comment. The suit also names Studio Capital Inc., a Belize company controlled by Martinez “for the purposes of maintaining the secrecy of his purchases and sales of art,” according to the suit. Martinez is founder of Fintech Advisory.
The 2007 agreement was made with dealers representing the buyer and seller. L & M Arts, owned by former Goldman Sachs partner Robert Mnuchin, represented the buyer. Greenberg Van Doren represented Hoffman, according to Netzer. L & M Arts is also named as a defendant.
Hoffman alleges that L & M owner Robert Mnuchin “expressly promised that the painting would ‘disappear’ into his undisclosed buyer’s ‘very private’ collection.”
“Every action the gallery has taken in its dealings with Rothko ‘Untitled’ of 1961 is consistent with the highest ethical standards for which the gallery stands,” Robert Mnuchin said in a telephone interview.
Mnuchin’s gallery acquired the painting for $1.87 million in 1997 at Christie’s International and then later sold the painting to the Hoffmans.
Hoffman’s late husband Robert was a co-founder of National Lampoon magazine and an owner of one of the biggest Coca-Cola bottlers in the country.
“She is suing to vindicate her honor and to set a standard for what is not to be tolerated in the art world,” said Netzer.

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