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Sotheby’s hid interest in $10m Hicks says buyer

20 October 2008Written by ATG Reporter

An American collector has filed two lawsuits against Sotheby's, alleging they concealed a financial interest in and inflated the price for an Edward Hicks' Peaceable Kingdom that he bought in May for almost $10m.

Halsey Minor, a dotcom entrepreneur, filed his case against Sotheby's on September 22 in reply to the auctioneer's legal request (on September 2) for payment of the Hicks and two other paintings. He now claims that "Sotheby's actively conceals information concerning its own economic interests in property it places at auction" and that "Sotheby's intentionally deceives its clients into bidding more for auctioned property than they otherwise would have, and more than Sotheby's believes the property to be worth".

It was an open secret that the 'vendor' of the Peaceable Kingdom with the Leopard of Serenity was troubled jeweller and folk art collector Ralph Esmerian who - while promising the picture to the American Folk Art Museum that houses much of his collection - had also pledged it to Sotheby's as collateral for a loan that was not repaid.

When Sotheby's failed to find a buyer by private sale earlier this year, it was entered for sale in a specialist American pictures auction in New York on May 22 with a $6-8m estimate. It sold to Minor's premium-inclusive bid of $9,673,000, a record for Hicks and for American folk art.

Court papers state that Minor was not told - personally or in the auction catalogue - that Sotheby's had an interest in the Peaceable Kingdom over and above the normal vendor-auctioneer relationship. Disclosure of an interest in a lot is required by New York City law and is typically denoted by a symbol (in Sotheby's case a triangle) next to the lot number with an explanation of its meaning in the conditions of sale.

In this case Sotheby's did not put a symbol next to the Peaceable Kingdom in the catalogue.

Minor says it is for this reason that his bill remains unpaid. He does not ask that the sale be made void - instead he wants the contract to "be reformed to reflect the amount a reasonable buyer would have paid to purchase the Peaceable Kingdom had Sotheby's disclosed its economic interest".

Minor claims his winning bid for the picture - that came following competition with at least one other party - "grossly exceeded the figure at which Sotheby's had internally valued the artwork".

In October, Minor invited others to join in his crusade with the launch of a separate class-action suit in California that "seeks to put an end to - and to obtain redress from - a custom of deception practiced by Sotheby's".

The class-action suit asks for an injunction requiring "disclosure in its catalogues of all economic interests Sotheby's holds in any auctioned property… and identities of all counter-parties whose indebtedness to Sotheby's has resulted in an economic interest being held by Sotheby's in the auctioned property". The suit asks for money for each class member (persons who, within the last six years, purchased property at auctions in which Sotheby's held any economic interest) as well as damages for "wrongful conduct".

Another Peaceable Kingdom by Edward Hicks - thought to be of comparable quality to the Esmerian picture - was unsold against its estimate of $4m-6m at Christie's New York at an October Americana sale blighted by the financial crisis.

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ATG Reporter

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