Art Market & Nahmad Family

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Most Read on Forbes12/07/2007 @ 7:20PM

How the Nahmad family made billions trading art, and why so many people in

the art world can’t stand them.

On the evening of Nov. 6, in the packed Rockefeller Center salesroom of Christie’s auction house, four buyers were vying for a 1955 Picasso oil of Jacqueline, the artist’s second wife. As the bidding quickly rose above $20million, five members of a family of international art dealers named Nahmad

watched from their seats in the middle of the expensively attired crowd. DavidNahmad, 60, together with his two older brothers, had purchased the

painting in May 1995 at Sotheby’s for $2.6 million. The winning bid: $30.8million, including the auction house’s 12% commission. The family made atenfold gain over a 12-year holding period. It was a profitable night, indeed,for the Nahmads. Earlier a Modigliani they had bought privately in Londonfive months before for $18 million had also sold for $30.8 million.

Outside the art world the Nahmads are scarcely known. Within it they areadmired and feared, and viewed variously as powerful, greedy and sharp-elbowed. Yet, over 45 years they’ve become influential megadealers of modernand impressionist works by a stable of well-known names, from Monet andMatisse to Renoir and Rothko. Christopher Burge, honorary chairman of Christie’s New York, says: “The Nahmads have sold more works of art than

anybody alive.” If you exclude auctioneers, that statement is probably true.In his day job David Nahmad is a risk-taker, trading millions of dollars incurrencies and commodities, as well as betting hundreds of thousands on

backgammon in Monte Carlo–he holds the 1996 world title. But when itcomes to art, he’s a Vanguard mutual fund. “I like to buy value,” saysNahmad. He eschews contemporary showmen like Jeff Koons and RichardPrince, whose work he dismisses as overvalued “luxury products.” He prefersartists who make art history, focusing on pieces created at crucialmoments–for instance a Monet from 1873, a turning point for impressionism,or a MirÃ³ from 1924, an important date for surrealism.

“Monet and Picasso are like Microsoft and Coca-Cola ,” he says. “We know the

return is less big than on contemporary painting, but at least it’s moresecure.”

The other piece of his strategy: Buy and hold. Most dealers keep their stock of artwork lean, unable to afford to hold more than a few dozen paintings at atime before they sell them. By contrast the Nahmads, sons and grandsons of aprosperous banker from Aleppo, Syria, sit on a literal warehouse of art. Theirtreasures take up 15,000 square feet of a duty-free building next to the airportin Geneva. What’s inside? “It’s a secret,” says David Nahmad. But threesources in a position to know say the warehouse contains between 4,500 and5,000 works of art, worth somewhere between $3 billion and $4 billion. TheNahmads’ holdings include 300 Picassos, worth some $900 million. If that

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“In this business, ownership of the work is key,” explains a New York dealer.“If you’re just brokering the work, you can only mark it up a certain amount.”The Nahmads set their own prices, and they decide when the time is right tosell.

“The only reason we sell is to fuel our ability to buy,” says David’s son Helly,29, who runs a gallery in the posh Carlyle Hotel on Madison Avenue. (Helly’scousin, also named Helly Nahmad after their grandfather Hillel in theSephardic Jewish tradition, runs a gallery in London.) And while there is acost to holding that inventory, the family’s currency business helps supporttheir art strategy. The Nahmads won’t reveal the size of their currency portfolio, but a source close to the family pegs its value at $1 billion.

The Nahmad art inventory is so sweeping that almost everyone who deals inimpressionist and modern work has crossed the family’s path at some point.Some say the experience has been less than genteel. The main gripes: TheNahmads change the terms of deals at the last minute and are slow to pay.One dealer who has done a number of transactions with the family recounts atime when David’s London nephew changed the price of a painting after the

two had agreed on a number. “They don’t stick to their word, and they don’tstick to their deals,” he says.

“It’s extraordinarily difficult to extract money from them,” says anotherprominent dealer, who, like others, won’t allow his name to be used for fear of getting on the Nahmads’ bad side.

Nonsense, says David: “Once we strike a deal, we honor a deal.” Says nephew Helly, about changing the agreed-upon price: “I’ve never done that in my life.”

The Nahmads’ style is also messier, and louder, than more sedate types in theart world would prefer. “They have screaming fights in the gallery,” says asource who has been close to the family for a long time. In the auction room,

where they come out in force, bringing along wives and children whosometimes disrupt proceedings, the Nahmads argue with each other even while they are bidding.

Their size gives them leverage to negotiate special terms. For example, thestandard payment period for a work bought at auction runs 30 days. But onoccasion the Nahmads would lay out, say, 10% of what they owed. For the

balance, they would pledge to consign paintings for the next sale six monthslater, promising the auction house it could draw the money owed when thosepaintings sold. The Nahmads have sometimes carried a debt of as much as$20 million at a single house.

“Every so often a new financial guy would come in and say, ‘What’s with these

people? Why aren’t they paying?’” recalls a former employee of an auctionhouse. “But most of the cards were in their hands.” David’s son Helly insiststhose special arrangements are in the past. “We’ve got a tremendous amountof cash,” he insists. “We’ve sold more than we’ve purchased.”

Unlike most other dealers, the Nahmads buy and sell much of their inventory through auction houses. So auction house staffers do the work of verifyingauthenticity. And if a buyer needs hand-holding and consultations withdecorators, spouses and art advisers, it will be another dealer who will do the

work.

The Nahmads also use auctions to support the price of work they own. InLondon in October, for instance, they spent $3 million at Sotheby’s and

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Fontanas, driving prices up. “It’s called defending your inventory,” explainsDavid’s son Helly. “We have 100 Fontanas in Switzerland, so if you pay a lotof money for one at auction, in theory, it makes the other 100 worth moremoney.”

In the end the auction houses might need the Nahmads more than theNahmads need them. During deep art slumps in the early 1970s and early

1990s the Nahmads acquired art in bulk. In a Kandinsky auction at Sotheby Parke Bernet in 1971 the Nahmads bought half of the paintings. Observes New York dealer Jeffrey Deitch: “They are like a major brokerage firm in the stock market; the market needs a force like this to function.”

It’s this kind of talk, treating art as if it were an oil future, that makes puristsin the art world cringe. Dealers like Daniel-Henry Kahnweiler in Paris usedhis livelihood to champion the early cubists and to showcase Picasso. TheNahmads (who say they bought more than 200 Picassos from Kahnweiler’sgallery) operate as secondary-market merchants rather than supporters of thearts. “There are dealers who present artwork as great human creations, ongalleries with red velvet walls,” notes one prominent New York dealer. “TheNahmads sell their art from a concrete room in Geneva.”

The instigator of the family’s art passion is Giuseppe Nahmad, David’s75-year-old brother. In the 1950s and 1960s Giuseppe, known as Joe, wasliving a lavish lifestyle of Ferraris, Rolls-Royces and glamorous companions,including Rita Hayworth, according to David. (In 1948 the family left Syria forBeirut where they already had a home; they moved to Milan in 1960.) Friendsnicknamed Joe “Farouk,” after the extravagant Egyptian king. Joe decoratedhis apartments in Rome, Milan, Portofino and London with art he’dpurchased, including works by Magritte, LÃ©ger and DalÃ. Eccentric andacquisitive, Joe is a hoarder, says his 31-year-old London nephew Helly: “If Uncle Joe bought a suitcase, he didn’t buy just one suitcase; he bought 20.”

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Joe paid for his pleasures with his financial trades, but in 1963 his bets turnedsouth and he found himself short of cash. So he had his younger brothers Ezraand David, then teenagers, hawk some of his paintings. (In a secondconversation David changes this story, insisting the motivation to sell wasdemand by dealers hot for Joe’s artwork.) In any case, Milan was host to a

burgeoning art scene, and the brothers found plenty of buyers.

Fluent in French from their youth in Lebanon (the family still speak Frenchamong themselves), David and Ezra started traveling to Paris where the artmarket was quieter, picking up Picassos, Chagalls and MirÃ³s on the cheapand then returning to sell them for 50% and 100% gains in Milan. David says

he financed his buyers, allowing them to pay, say, $5,000 a month for a$60,000 painting. David would take out a bank loan against the IOU and usethe cash to buy more art–”Like when you sell automobiles,” he says.

Gregarious, engaging and comfortable in seven languages, David cultivatedrelationships with the likes of dealer Kahnweiler and billionaire art collectorBaron Hans Heinrich Thyssen-Bornemisza, who bought works by Picasso,Kandinsky and Italian futurist Giacomo Balla. Ezra, 18 months David’s senior,often traveled with his brother, but a more introverted personality led him toplay a less public role.

In the 1970s the brothers expanded their travels, trading works among

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capitalized on price differentials between markets. Price transparency in theart market was still years away, so buyers in New York remained ignorant of prices fetched recently in London or Paris.

“Joe is an absolute genius,” says New York dealer David Nash, who used torun the impressionist and modern paintings department at Sotheby’s. “Youcan call him at three in the morning and he will remember what price he paid

for a painting, what currency he used and what the exchange rate was at thetime.”

When the speculative art boom hit Japan in the 1980s, the brothers pounced.Mostly the Nahmads served as wholesalers to clients like the Fuji TelevisionGallery in Tokyo. The Nahmads amassed so much cash selling to the Japaneseduring the 1980s that when the art crash hit in 1989, they kept on buying, atfire-sale prices, boosting their inventory.

Over the years, say friends and family, Joe Nahmad changed, from outgoingand extravagant to reclusive. He has remained unmarried, living at varioustimes in Marbella, Paris and Monte Carlo, leaving it to his brothers and

brokers to execute trades. Though David insists Joe suffers from poor health

and has curtailed his involvement, a half-dozen sources who know the family maintain that Joe remains in charge. Stories about him abound, many of them underlining his aversion to paying for things. London art dealer IvorBraka recalls a breakfast at Les Deux Magots in Paris, where Joe consumed 14croissants. When the waiter tallied the bill and asked Joe how many he’deaten, Braka says Joe answered, “Two or three.” Joe never tips waiters, sayshis London nephew Helly.

Joe Nahmad had his brushes with the law, according to a 1994 feature in ArtNews, the only long story ever written about the family. Joe was arrested,imprisoned and fined in Italy for possession of $70,000 worth of stolenBritish pounds in 1957, the story says, and in 1961 the Italian revenue officeinvestigated him for failure to pay taxes on $92 million in stock market

trades.

Joe only gave FORBES a brief interview, to respond to the charges aired in ArtNews. He unwittingly received the stolen currency in a business deal, hemaintains. He was questioned rather than detained, and he was eventually acquitted of all charges. The Italian revenue investigation? “Not true,” he says.

There have been no allegations of legal improprieties in recent years, save fora salacious sexual harassment complaint filed in 2005 by an employee of theHelly Nahmad Gallery in Manhattan. “Art Dealer in Kinky Sex Suit,”screamed a New York Post headline, “Gallery Big Wanted ’3-Way.’” TheNahmads settled, and both sides agreed not to talk about the case.

Over the last decade, as the eldest sons of David and Ezra have grown up and joined the family business, the Nahmads have raised their profile. David’s sonruns a sleek Manhattan gallery designed by architect Peter Marino, while hiscousin runs an elegant 6,000-square-foot space in London’s tony Mayfairdistrict.

Though the family is close, there are tensions. “My son likes publicity a lot,”says David, frowning. “I don’t like publicity.” David was pained when hisLondon nephew bought 50 paintings by British contemporary superstarDamien Hirst, an artist whose astronomical prices David dismisses asspeculative. Ignoring his uncle’s opinion turned out to be good business. Hemade 500% on his investment in the space of five years. A graduate of

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circles.

Not so David’s son, who dropped out of an art course at Christie’s in 1997. Hedisplays a brash, streetwise manner, frequenting hip nightclubs and hangingout with celebrities like stuntman David Blaine and actor Johnny Depp. “I’m a

businessman,” he maintains. “I sell a lot of paintings to many collectors; thelast few years have been record-breaking for us.”

Manhattan dealer Jack Tilton says he’s done deals with the New York Helly and is in negotiations with him about the family’s stock of Monets. “A lot of this material is drying up,” Tilton notes. “There are very few sources.”

The Nahmads are quite familiar with the law of supply and demand.Summing up his family’s philosophy, David Nahmad says: “There is very littleart, compared to the amount of people who want to buy it.”

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MARKETS 11/13/2012 @ 12:50PM 4,107 views

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Picasso's "Still Life with Tulips" was last week's star -

Sotheby's

The art market is playing its last cards

for the year this week as both major

auction houses host their marquee

events in New York . Sotheby’s is

scheduled to hold its Post-War and

Contemporary auction on Tuesday, while

rival Christie’s is slated do the same on

Wednesday, and both are trying to close

the year with a bang.

Despite a marked slowdown this year after a booming 2011, both auction

houses are going all in, with their top estimates between $441 and $502

million, setting them up for their biggest nights ever or hugedisappointments. It appears that it will all come down to the quality of their

major pieces, which this year include works by Mark Rothko, Jackson

Pollock, Franz Kline, and the always entertaining Andy Warhol.

Last week was a disappointing one for the world of art. Both Impressionist

and Modern auctions came in well-below estimates. Christie’s went first,

seeing sales hit $205 million (estimates called for at least $250 million; even

the top three works, by revered names like Monet, Kandinsky, and Miro,

failed to top estimates. Sotheby’s did even worse, recording sales for $163

million (they expected at least $169 million), despite a solid showing for amarket favorite: Pablo Picasso.

While a 1905 Monet sold at Christie’s took the top spot for the week, selling

for $43.8 million, the Spanish superstar saw six of his nine works make more

than $81 million at Sotheby’s, or half of the total proceeds. The peak of the

night was 1932 work titled “Still Life with Tulips” sold by casino billionaire

Steve Wynn. With bidding by famed billionaire dealer David Nahmad, the

piece went for $41.5 million to an unidentified telephone bidder; still, the

work that hung behind the front desk of the Wynn Las Vegas was expected to

Agustino Fontevecchia Forbes Staff

Bringing You The Bull And Bear Case From The Markets Desk

tie's And Sotheby's Going For Their Biggest Auctions Ever As Art... http://www.forbes.com/sites/afontevecchia/2012/11/13/christies-

8/11/2014 1



fetch between $35 and $50 million.

“The art market is a lot weaker,” explained Thomas Galbraith, head of

analytics at artnet, who expects another lackluster week. The problem is that

the market is, as one commentator put it, “allergic” of second-tier works.

“People are taking less risk and going for works that are proven,” noted

Galbraith, “the market is taking a step back, it’s a self-aware market.”

Art had an amazing 2011, the culmination of a surge in prices that started in

2009. In the aftermath of a brutal global recession and financial crisis, rich

people were looking for a place to park their money, and extreme market

volatility coupled with record-low interest rates didn’t help. As money flowed

into art, the surge continued into 2011, when prices for contemporary works,

according to artnet’s index, were up more than five-fold going into the third

quarter from January. “The art market rebounded too aggressively since

2009, it was too fast, too furious” Galbraith said.

With a flattish market in 2012, sellers aren’t bringing their best pieces to thetable. “Some of the works offered last week weren’t that good,” explained

Galbraith. While in financial markets corrections offer the opportunity to

buy the dip, or, as Warren Buffett would put it, be greedy when others are

fearful, in art, weak markets mean lower quality works, even from top artists.

“If you’re following the Warren Buffett school of thought,” continued

Galbraith, “you should sit this one out: the market isn’t low enough to buy or

high enough to sell.”

The aforementioned Picasso, for example, performed financially pretty much

like a Treasury bond. “[Picasso's Tulips] sold for about $41 million, but sinceabout 2002 it has returned about 3% per annum,” Galbraith analyzed. Gold,

for example, returned nearly 50% per year over those ten years, while a major

bank like JPMorgan Chase would’ve given negative returns of 2.9%.

“This is a necessary, self-aware correction,” according to Galbraith, “not a

crash.” There is still a lot of money tied into the market, particularly in the

contemporary and modern segments, but buyers are getting saturated

(“people are well invested into the art markets, buyers have purchased lots of

good pieces”).

A crisis can also be turned into opportunity. Galbraith believes the market is

setting itself up for a “good rebound” over the next few years. He also

believes major established names with decent estimates should do well this

week. If there happens to be a good piece flying under the radar, it may be a

good time to buy.

It will be an interesting couple of nights over at Sotheby’s and Christie’s. The

two major players in the auction world are going for gold. Christie’s, for


8/11/2014 1



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example, is claiming this week’s is “the strongest sale ever presented on the

market.” They estimate sales should be between $309 and $441 million;

their most valuable auction was held this May, raking in $388 million.

Sotheby’s is going even higher, expecting to sell between $363 and $502

million. It’s a bold bet: with a stagnant market, they could be setting

themselves up for a big disappointment.


8/11/2014 1



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INVESTING 10/18/2012 @ 9:40AM 1,838 views

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The sale of Gerhard Richter's painting

Abstracktes Bild (809-4) for $34.2 million at

Sotheby's last week set a new auction record for

a living artist. (Image credit: AFP/Getty Images

via @daylife)

The beginning of the fall auction season always produces dramatic headlines

about the art works that achieved record-breaking prices and those that

bombed, yet beyond the hype, all auction results can be misleading. During

last week’s contemporary art auctions in London, for example, the top lot

sold was Eric Clapton‘s painting by Gerhard Richter, Abstracktes Bild

(809-4). The painting went for £21.3 million ($34.2 million) at Sotheby’s,

way above the estimate of £9 million to £12 million, and set a new auction

record for a living artist.

In total, Sotheby’s made £69.9 million ($112.1

million) of sales from its contemporary and

20 century Italian art auctions in London

last week, close to its top estimate of £74million. That looked pretty fantastic on the

face of it, yet without the sale of that one

Clapton painting, the auction house would

not have even reached its low estimate of £54

million.

Auction house sales figures are misleading for

another crucial reason. After any auction, the

final sale result published by the auction

house for each lot is not the hammer price forthat work, or in other words, the agreed sale

price reached when the auctioneer’s gavel finally comes down. Instead, the

auction house also adds on the buyer’s premium that was paid to that

hammer price amount.

That buyer’s premium, the amount of commission that all successful bidders

must pay the auction house, is pretty hefty. In New York , the big global

auction houses currently charge 25% of the hammer price up to $50,000,

20% of the amount above $50,000 to $1 million, and 12% of the rest,

th

Kathryn Tully Contributor

I write about art and investing

Opinions expressed by Forbes Contributors are their own.

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8/11/2014 1



although those percentages and thresholds vary from country to country,

depending where the sale is held and the currency it is held in.

Why does this matter? Well, it obviously inflates the overall price achieved

for each lot that it successfully sold. But because auction houses only include

the buyer’s commission in their final sales results, and not their pre-sale

estimates, it also makes the difference between, say, the estimated price for a

Picasso painting and the actual price it sells for, look a lot better than it

actually is.

Auction houses say this practice is a well-known convention, but it’s actually

a big deal for anyone trying to extract price comparisons from auction market

information, which as I mentioned recently , is the only real source of art

price data out there.

Without the buyer’s premium, last week’s results start to look a little

different. Take out the buyer’s premium and Eric Clapton’s Richter was sold

for £19 million, not over $21 million. Christie’s combined sales of post-war,contemporary and Italian art in London last week, which raised £41.2 million

($62 million), compared to its estimate of between £36.6 million and £51.9

million, was pretty weak already. Take out the buyer’s premium and the

auction house barely reached its low estimate.

The buyer’s premium issue makes the record-breaking prices trumpeted by

auction houses and reported in the press pretty misleading. With November’s

impressionist and modern art and post-war and contemporary sales in New

York fast approaching, that’s definitely something to keep in mind. Here are a

few of the star lots up for auction in New York next month:

Sotheby’s is going to try to follow its success selling Eric Clapton’s Richter in

London with the sale of Abstraktes Bild (712), Richter’s first painting from

1990, in its evening sale of contemporary art on November 13. The estimate?

Over $16 million.

Also in its November 13 contemporary evening sale, Sotheby’s will offer No.1

(Royal, Red and Blue), painted by Mark Rothko in 1954, one of the paintings

the artist himself selected to appear in his solo show at the Art Institute of

Chicago the same year. The estimate: $35 million to $50 million.

In its November 14 sale, Christie’s will offer Andy Warhol’s 3D silkscreen

painting Statue of Liberty, produced in 1962. The estimate is also in excess

of $35 million.

Of nine Picasso paintings offered in Sotheby’s impressionist and modern art

evening sale on November 5, Nature morte aux tulipes, painted in March

1932, is expected to fetch $35 million to $50 million.

The star lot of the New York impressionist and modern art evening sale at

Christie’s on November 7 will be one of Claude Monet‘s famous water lilies

series Nymphéas, painted in 1905. The estimate is between $30 million and

$50 million.

Other than collectively indicating that when an auction house isn’t really sure

what a super famous painting will sell for, it sticks a price tag of $30 million


8/11/2014 1



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to $50 million on it, the thing that all these estimates have in common in that

they do not include buyer’s premiums. Whatever Christies’s or Sotheby’s say

these paintings fetch come November, the hammer price will be lower.

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LISTS 12/06/2012 @ 2:20PM 402 views

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"Rum Run," Robert Indiana. Photo courtesy of Art Info.

Art Basel Miami Beach opened to

the public at noon today, unleasing

the first wave of the more than

50,000 visitors who will visit the

fair this year, to witness $2.5

billion worth of art on display

from 260 of the world’s top

galleries. As the art market

continues to pull out of its

financial crisis doldrums, sales are

expected to top $500 million. And

there’s more. Twenty-two satellite

events on the Beach andin Miami proper — those

collections are not included in the

fair’s value estimates.

VIP and press lines were full, with throngs more waiting outside

the Miami Beach Convention Center. A few of those did their best to sneak

past security, resulting in at least one brief skirmish.

Fully anticipating the overwhelming nature of billions of dollars of art on

display, the first galleries inside the convention center entrance had familiar

favorites on display. The Helly Nahmad Gallery, from New York’s 76th Street,

showed off an impressive collection ranging from Calder’s “Tableu Noir”

(1970) (sold at auction in 2010 for $2.5 million), some Rothko color fields, a

small collection of Mirós, and some Picassos, including a “Le Peintre et Son

Modele,” a piece from a series of works from 1963-64 that have captured

anywhere from $2.8 to $13.7 million at auction.

Across the way, the Galerie Gmurzynska from Zurich had similar fare:

Caleb Melby Forbes Staff

I read SEC documents like it's my job. Because it's my job.

atches From Miami Beach: Art Basel Day 1 - Forbes http://www.forbes.com/sites/calebmelby/2012/12/06/dispatches-f

8/11/2014 1



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mixed-media Mirós, Picasso drawings, and a small Calder sculpture, bizarrely

juxtaposed against the debut of Robert Indiana’s “Rum Run.”

Some Highlights From Further In:

Chuck Close Woodburytypes of Willem Dafoe, Brad Pitt and others at Art

Kabinett, courtesy of Two Palms.

Jonathan Horowitz’s photorealistic, partisan, UV ink on vinyl “Coke/Pepsi

(240 Cans)” (2011) (Sadie Coles booth). A 2010 work featuring 230 cans sold

for a mere $30,000 at Sotheby’s in October.

Gerhard Richter’s dizzying digital print “Strip” (2011) at Marian Goodman

Gallery’s booth.

Gimhongsok’s creepy/playful bronze “Bearlike Construction” (2012) from

the Kukje Gallery in Seoul.

More to come.

Follow me on Twitter.

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8/11/2014 1



MARKETS (/MARKETS) 5/20/2013 @ 2:59PM 6,695 views

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'Woman with flowered hat' by

Roy Lichtenstein sold for $56

million - Image credit:

AFP/Getty Images via @daylife)

It seems that it’s not just

the stock market that is

firing on all cylinders,

breaking record after

record. Last week,

Christie’s marqueepost-War and

contemporary art sale

fetched a record $495

million, with more than

nine works selling for over

$10 million. Amid a

stagnating global

economy and high

unemployment, the ultra-rich are raising the stakes on so-called alternative

investments like art and real estate, prompting a prominent Christie’s

executive to speak of “a new era in the market.”

It was truly a record-breaking night, and week, for Christie’s. Its evening sale

totaled nearly half a billion dollars, the highest value ever for any art auction.

16 artists made world auction records, and more than 20 buyers forked over

$5 million or more for individual pieces. What makes the sale all that more

impressive is the context: stubbornly high unemployment in the U.S.,

recession in Europe, and a slowdown in China, which had been the global

powerhouse in economic growth over the past several years.

Agustino Fontevecchia (http://www.forbes.com/sites/afontevecchia/) Forbes Staff

Bringing You The Bull And Bear Case From The Markets Desk

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The trend is clear. The wealthy are increasingly putting their capital into

luxury investments seen as alternatives. Over the past few days, billionaire

hedge fund manager Bill Ackman and a group of investors put down more

than $90 million for a penthouse in the luxury residential tower One57; they

have no intention of moving in.

Another hedge fund hotshot, Steve Cohen, recently paid $155 million

(http://www.forbes.com/sites/afontevecchia/2013/03/26/hedge-

fund-billionaire-steve-cohens-155m-picasso-isnt-his-first-multi-million-piece-

of-art/)for a piece by Pablo Picasso formerly owned by casino billionaire Steve

Wynn, a record according to several reports. If listings are any indication of

price trends, these don’t seem set to fall anytime soon: only a few days ago, the

Cooper Beech Farm became the most expensive U.S. home for sale, listed for

$190 million as my colleague Morgan Brenan reported

(http://www.forbes.com/sites/morganbrennan/2013/05/19/asking-

190-million-this-is-americas-new-most-expensive-home-for-sale/).

Last week’s auction saw impressive demand for

some of the most expensive pieces. Jackson

Pollock’s Number 19 was sold for more than $58

million (including fees) amid aggressive bidding

from several potential buyers. The piece had last

gone for auction in May 1993 when it was bought by

LVMH’s Francois Pinault for $2.4 million, according

to the New York Times (http://www.nytimes.com

/2013/05/16/arts/design/christies-art-auction-

sets-record-at-495-million.html). In other words,

the piece delivered a 2,317% return in 20 years.

A 1969 Gerhard Richter titled Domplatz, Mailand

sold at Sotheby’s’ evening sale fetched $37.1 million, setting a new record for a

living artist. Richter, who was the current holder of that record, can tell

prospective buyers his works are a good investment: the piece had been

bought in 1998 in London for a then-record $3.6 million by the Pritzker

family, owners of Hyatt hotels and resorts. Total return: 931%.

Demand for good quality pieces, and artists with good prospects, was strong at

Christie’s. Jean-Michel Basquiat’s Dustheads “skyrocketed” in value to a

record $48.8 million, according to the auction house, while bidding for his

Furious Man, which went for $5 million before fees, was intense. Other

highlights include Roy Lichtenstein’s Woman with Flowered Hat which sold

for $56 million and Mark Rothko’s Untitled (Black on Maroon), purchased for

$27 million.

Along with three contemporary art auctions, including Leonardo Di Caprio’s

“Eleventh Hour” sale, Sotheby’s saw its spring week sales figure climb to

$638.6 million.

The post-War and contemporary art markets are definitely red hot. As I’ve


8/11/2014 1



previously reported (http://www.forbes.com/sites/afontevecchia/2013/04

/24/global-art-market-down-as-china-tanks-50-while-u-s-and-u-k-sales-

improve/), the total value of contemporary art sales grew from $850 million in

2002 to about $6 billion last year. This trend accompanied a steady decline in

prices for modern, impressionist, and old masters over the same time period,

according to artnet.

Art, along with real estate and other alternative

investments, present a risky opportunity. While

prices have risen exponentially, several pieces by top

artists including Franz Kline and Jeff Koons failed to

find buyers. At the same time, thin liquidity means

prominent collectors with deep pockets, including

the Mugrabis, Nahmads, and megadealers like Larry

Gagosian, all present in last week’s auction, can steer

the market.

Another trend to watch is the rise of China as a

global powerhouse. Chinese buyers, as I explained

here (http://www.forbes.com/sites/afontevecchia

/2013/04/24/global-art-market-down-as-china-tanks-50-while-u-s-and-

u-k-sales-improve/), are concentrated on domestic artists, meaning they don’t

have a massive effect on Western favorites such as abstract impressionism and

pop art. Yet in 2011, China’s total sales assimilated those of the post-War and

contemporary market mentioned above.

If the results from Christie’s record-shattering auction are any indication, art

prices on the top-end don’t seem to be facing much resistance. Other firms in

the luxury sector like Coach and Michael Kors have had a decent 2013 from a

stock market perspective, while gold has been the big loser.

It remains to be seen whether this “new era” for the art world can be

sustained, from a price perspective. But what is clear is that appetite for top

pieces and highly-esteemed artists remains strong, despite the economic

headwinds.

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What would it take to spook the global

art market? (Image credit: Getty Images

via @daylife)

What are the biggest risks to the art market in

2014? What is the very worst thing that could

happen and would that send art prices

plummeting?

These issues were discussed last week at a panel in

New York organized by the Art Investment

Council, founded by the folks at Artvest. The

discussion focused on unexpected events that can

and do shake the art market, such as a fire or a

natural disaster, terrorism, fraud or other criminal

activity.

As Jonathan Crystal, principal of insurance

advisers Crystal & Company, put it, “If you accept the premise, and many people even in this room do not, that art is an asset class… then you should

accept the broader premise of applying disciplines that are actively used in

the investment world. One of those disciplines is stress-testing.”

A few of the most interesting points that came up:

1) A fire or other disaster somewhere with a big concentration of

art, such as the Geneva or Singapore freeport, could destroy up to

$100 billion of art in one go. Ron Fiamma, global head of private

collections for AIG’s Private Client Group, estimated that is the value of artcurrently stored in Geneva’s freeport, although as he said, no one really

knows. He did say, though, that it was enough for reinsurers to want to avoid

it. “Most won’t insure anything going into these facilities anymore because

the aggregation values are so high. Any one of these facilities presents a

tremendous amount of risk.”

2) A dramatic event that affected art prices in one part of the

world could affect prices everywhere. Stuart Feld, president of New

York’s Hirschl & Adler gallery, said that the global breadth of the market

Kathryn Tully Contributor

I write about art and investing


isks To The Global Art Market in 2014 - Forbes http://www.forbes.com/sites/kathryntully/2013/05/30/six-risks-to

8/11/2014 1



should give collectors some protection against an implosion. “That’s not to

say there won’t be some kind of price correction, but I don’t think it should be

a disaster.” But Michael Plummer, co-founder of Artvest, pointed out that the

art market is based on confidence and is easily spooked. “In 1990, you saw it

collapse virtually overnight. The same happened again in the fall of 2008.”

3) There is a very small group of collectors propping up the top

end of several parts of the art market. “For American Art, I would say

that there are really three very high-end players,” said Feld. “If any one of the

three is interested in a work, that work can bring an unprecedented price. If

none of the three is interested, the price fetched is completely different.” And

according to Plummer, the family of Helly Nahmad, currently under

investigation about his alleged connection with a money laundering and

gambling ring, has single-handedly supported the Impressionist and Modern

market through all the market downturns of the last 30 years.

4) In some areas of the market, the withdrawal of one heavyweight

collector could have a devastating impact. “If the Nahmad case goes totrial and he has to pay large fine, that could affect his ability to buy, which

could have a very deleterious impact on the Impressionist and Modern

market,” said Plummer. “The contemporary market has a much larger base of

buyers right now, so I don’t think that if any one buyer withdrew there it

would have the same impact.”

5) Recent allegations of money laundering and fraud in the art

world may be just the tip of the iceberg, given the secrecy of the

market. “Outside the auction market, a lot of private transactions take place

that are never known about,” said Jeremy Kroll, president and CEO of K2

Intelligence, an investigative and risk analytics consulting firm. “People don’t

want to admit they have handled stolen or fake art, but picking through

remains after a fire, for example, at a major freeport, you would start to peel

back the layers of the onion. People could be using freeports to minimize tax

or launder money, you just don’t know.”

6) Given the risk of buying fakes or stolen works in the art market,

buyers need to do a lot more due diligence on the background of

the work and who is selling it. That’s particularly true now that many artist foundations have stopped authenticating art because of the massive

amounts of money and huge liabilities involved. “Otherwise, more people

will just sit on the sidelines,” says Plummer. “If there’s a high concentration

of buyers that are driving the market, what happens if they step back?”

Which is a very good question. And if it’s the case that stress testing the top

end of the art market reveals that it is prone to fraud and money laundering,

illiquid, opaque and easily spooked, and in some cases, propped up by just a

few collectors, is this really an asset class at all?


8/11/2014 1



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Helly Nahmad and his attorney, Ben Brafman, at

yesterday's arraignment (AP Photo)

When you’re sitting at an arraignment– squeezed shoulder-to-shoulder with

alleged Russian mafia members and associates in a 34-defendant gamblingcase — it’s hard not to fantasize how fun it would be to sit instead at a table

playing poker with them.

It took me a half hour to realize that I wasn’t in the press section at federal

criminal court in Manhattan yesterday afternoon. There were three rows in

the front, stuffed with 21 of the defendants, on benches meant to comfortably

hold 15. Plus me. But by then it was too late to move, as there wasn’t a free

seat anywhere in the chaotic courtroom, packed with upwards of 100 people,

many standing, including some of the country’s top criminal defense lawyers.

To my right sits a 45-year-old,

gentle-faced bald man in casual green

slacks, holding a piece of paper and a

pen. I asked if he was a reporter and,

clearly in no mood to talk, he curtly

waved me off. In fact, he seemed utterly

miserable, and with good reason. When

he rose to plead not guilty, I learned that

he was Donald McCalmont, who just

three days earlier FBI.gov had placed on

its fugitives page.

In luckier days, Don once took 7th place

in an Omaha Hi-Lo tournament at the Foxwoods casino in Connecticut,

where the prize pool was 40 grand. Today he faces a maximum of 40 years in

prison for racketeering and money laundering (although it should be said –

high up in this story – that every defendant is of course innocent until proven

guilty, all of them thus far have pled innocent, and maxes are almost never

Richard Behar Contributor

Investigative journalist, at work on a book about Bernie Madoff.


es From An Arraignment: Billionaire Art Scion Helly Nahmad And ... http://www.forbes.com/sites/richardbehar/2013/04/20/scenes-from

8/11/2014 1



"Taiwanchik" (photo: Interpol)

handed down in gambling cases; far from it.)

Prosecutors say that McCalmont, and dozens more, played major roles in a

global gambling racket – it stretched from the U.S to Russia, Cyprus and

Ukraine — that catered to billionaires, Russian oligarchs, Hollywood stars,

Wall Street bankers, and pro athletes. On Tuesday, agents made busts and

raids at numerous locations in New York, Detroit, Philadelphia and Los

Angeles, before declaring they had nailed a $100+ million money-laundering

case operated by Russian organized crime.

While readers may find it hard to get steamed up by a bunch of guys getting

together to play an unlicensed hand of poker and wager on sports, this case

may prove different. If the prosecutors are right, a man at the pinnacle — the

feds say he took a $10 million rake just in a one-month period from the

operation — was none other than fugitive Alimzhan Tokhtakhunov

(nicknamed “Taiwanchik,” or Little Taiwanese.) And that could mean bad

news for many defendants, whether they knew this fact or not.

Taiwanchik gained his notoriety in 2002, when

he was accused of bribing ice skating judges in

the Salt Lake City Winter Olympics. (He was

arrested in Italy, but an Italian court refused to

extradite him to the U.S., instead freeing him.)

The feds call him a “major figure in international

Eurasian Organized Crime” who has been

involved in “drug distribution, illegal arms sales

and trafficking in stolen vehicles.” In the current

gambling case, he’s accused of using his status as

a thief-in-law (or vory v zakone) — a select group

of the highest-level criminals in Russia — to

resolve disputes with gambling clients with

threats of violence.

Taiwanchik, who faces a max of 90 years in the current case, has often been

linked to Semion (“The Brainy Don”) Mogilevich, who the FBI once called the

“boss of bosses” of most Russian mob syndicates — and “the most dangerous

mobster in the world.” Both men are believed to be living today in Russia.

But the man next to me, McCalmont, was way down that chain, according to

prosecutors. (Hell, he may not have known many on the links above him.)

The feds say they can prove, among other things, that McCalmont assisted

other defendants in collecting a $2 million betting debt that a client owed, by

buying 50% of the client’s plumbing company. The gambling establishment

then allegedly used bank accounts and companies such as that plumbing

outfit to launder tens of millions of dollars of illegal betting proceeds.


8/11/2014 1



On my immediate left, my shoulder rubs a friendlier defendant

– 51-year-old Alexander (“Sasha”) Zaverukha of Pennsylvania – wearing a

charcoal sport coat and dark slacks. He has strong hands. He takes my card,

after I suggest that maybe we can have a chat at some point.

“In a couple of years,” he says with a broad smile.

“Promise?”

“No.”

Sasha faces ten years, the minimum of the maximums in this case. He’s

charged with operating a bookkeeping business, as well as an unlawful

Internet gaming operation that extended credit to customers.

To his left sits another Alexander, nicknamed “Marushka,” and surnamed

Katchaloff. He’s 53, jolly, portly and wearing white designer glasses, and is

accused of similar crimes as Sasha’s. “I’m not a lawyer, I’m a defendant,” he

says, smiling, in answer to a question of mine. Next to him: Brooklyn’s

Dmitry (“Blondie”) Druzhinsky. He’s 42 and has a surfer’s good looks. Hefaces 40 years, thanks in part to allegedly laundering millions from his sports

gambling business through shell accounts in Cyprus.

Directly in front of me is Ronald Uy, who is looking at 22 years on a

money laundering “structuring” charge. On Tuesday he was arrested

and his promising career as a branch manager for JPMorgan Chase

went up in flames. Several days ago, his LinkedIn page (no longer

up) boasted that he’s a “highly accomplished Banking Professional

with solid and progressive experience” who has been “repeatedly

promoted into leadership roles based on… leading banks throughcritical transitions.” The feds say he helped a major leader of the ring with

tips on how to structure transactions in order to avoid bank reporting

requirements.

Just 30 minutes into the proceeding, Uy was slumped over, staring at the

yellow stars, suns and (what look like) free birds that are unjustly weaved

throughout the courtroom’s blue carpet. The room was stuffy, but he never

removed his long, wrinkled jacket.

The biggest name in a defendant’s seat is Hillel (Helly) Nahmad, in the firstrow, maybe ten feet away, wearing his trademark white shirt under a slick

black suit. On Tuesday morning, I was tipped off to an FBI-IRS-NYPD raid

that was in progress at his art gallery at Manhattan’s luxurious Carlyle Hotel.

I had the scene to myself for an hour, a reporter’s version of holding aces,

until a photographer named Michael Appleton appeared on behalf of the

New York Times. I took off to publish the scoop, but he stayed long enough

to get the ‘money shot’ — agents hauling Nahmad’s computers from the

gallery. (For my less-impressive photos of the raid, see my Forbes story from


8/11/2014 1



Tuesday .)

The feds claim that Helly, the 34-year-old heir of the billionaire Nahmad art

dealer family, is at the center of the case; in fact, they use his surname in the

title of the two “enterprises” detailed in the 84-page indictment. His family is

one of the richest and most powerful art-dealing dynasties in the world.

Forbes estimated his father, David’s, fortune at $1.75 billion as of last month

(while it’s believed the entire family is worth more than $3 billion). Reached

in London on Tuesday, David Nahmad said, “I know almost nothing” about

the raid that morning of his son’s gallery. As for allegations that the raid is

connected with Russian organized crime, he said, “I think it’s totally stupid.”

Intriguingly, the indictment states that the illegal enterprise “was financed by

a number of different individuals and entities, including… Nahmad’s father.”

It states that Helly made two separate wire transfers, totaling $1.35 million,

from his father’s bank account in Switzerland to bank accounts in the U.S. to

help finance the gambling scam. Reached by Forbes again yesterday on that

specific point, David said that he would ask one of his attorneys, RichardGolub, to talk with me. Hopefully Golub will, but he probably won’t.

[ARTICLE CONTINUES ON NEXT PAGE]

A source very close to the Nahmad family tells Forbes that Helly lives in the

ritzy yet overpriced Trump Tower, enjoys a chauffer-driven car, dates

supermodels, spends a lot of time in Monte Carlo, loves to gamble, and is

close friends with actor Leo DiCaprio.

In a profile of the family in 2007 titled “The Art of the Deal,” Forbes senioreditor Susan Adams detailed how the Nahmads are among the world’s most

influential megadealers of modern and impressionist art. They boast an

arsenal of well-known names, from Matisse and Monet to Renoir and

Rothko. While they conduct most of their buying and selling through the

Sotheby’s and Christie’s auction houses, a good deal of art is also sold though

Helly’s New York gallery, as well as the gallery of a cousin — also named

Helly Nahmad — in London. (While his cousin attended the prestigious

Courtauld Institute of Art in London, the New York Helly dropped out of an

art course at Christie’s in 1997.)

The Nahmads descend from a

prosperous banker from Aleppo, Syria.

Today, their art inventory takes up

15,000 square feet of a duty-free

building next to Geneva’s international

airport. Three sources in a position to


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Helly with billionaire father, David, and a Picasso (photo:Getty Images)

know told Forbes’ Adams that the

warehouse in 2007 contained between

4,500 and 5,000 works of art, worth

between $3-4 billion at the time. (The

holdings included 300 Picassos, worth

some $900 million.) While Helly’s

father, David, uses a buy-and-hold

strategy with the family’s artworks, hetakes big risks by trading millions of

dollars in currencies and commodities –

plus betting hundreds of thousands on backgammon in Monte Carlo, his

permanent residence.

In the courtroom, after looking at my business card, Helly shoots me a sharp

eye — strands of his fashionable hair sweeping across his face. He faces a

maximum of 92 years. That’s 92 years! One of the most noticeable things is

how young and trendy he and so many of his arrested pals are — quite a few

of them sitting in his row or just behind him, or linked together with artsy

photos on Facebook. All of them are clearly pals, bobbing their heads around

to see who else is here. ( Everyone is here.) They look confused, but not very

scared.

To Helly’s right sits Jonathan Hirsch, age 30, wearing his hair below his

shoulders and what looks to be a classy thigh-length thin gray pea coat. He

comes across more like a high school poet or rock star than a (relatively-

speaking) kid facing up to 32 years behind bars. In fact, he’s a math whiz.

Near Hirsch is Moshe Oratz, wearing a pinstripe suit, a pleasant grin, and a black yarmulke atop his collar-length curly hair. He’s 37, looks much

younger, and faces 30 years.

To Helly’s left is a 26-year-old New Yorker named Eugene Trincher, who

wears a movie-star face, while facing 30. His Beverly Hills-based brother,

Illya, seated behind him, is a year older, and is accused of being such a key

player in the ring that he’s staring at a maximum of 97 years. 97 years!

The Trincher family is one of the case’s biggest mysteries, as father Vadim —

a fairly well-known professional poker player — is alleged to have launderedtens of millions of dollars from Russia and the Ukraine through Cyprus and

into the U.S. The feds call his arm the “Taiwanchik-Trincher Organization.”

(In 2009, he spent $5 million for a three-bedroom condo in the Trump

Tower, 12 floors up from the bachelor pad that Helly constructed out of four

separate apartments.)

The show begins at about


8/11/2014 1



Feds name poker pro Vadim Trincher as key player in Russian mob ring

(photo: Cardplayer.com)

Defendant Molly Bloom, on her Facebook page in

2011

1:30pm, a half-hour late,

when a court clerk proclaims,

“I apologize if I say any of

these names incorrectly.” A

gray-haired man in dark

sunglasses is leaning against a

wall. One defendant is

displaying his turquoisesneakers. A stunning Russian

blonde in giant pumps and a white scarf wrapped around her neck was said

to be the mother of a major defendant. One woman wore a blindingly-bright

red dress, another fur.

But the clear winner of the glamour pageant, seated three rows behind me, is

Colorado’s Molly Bloom, age 34. The lightly-tanned, gum-snapping Bloom

(nicknamed the “Poker Princess”) has her brown hair in an innocent ponytail,

and a (presumably real) pearl necklace over a way-tight tan sweater. Many

lawyers couldn’t take their eyes off her. “Her photos don’t do her justice,”

says one local newspaper reporter.

Molly faces up to ten years for operating an

illegal gambling business.

For years she has organized high-stakes

poker salons in lavish homes and hotels on

both coasts of the U.S. (The secret games

were sometimes secured by armed guards,

according to one attendee.) Molly’s allegedstable of players has included celebs

DiCaprio, Ben Affleck, Matt Damon and

Tobey Maguire, and athletes Alex Rodriguez

and Pete Sampras. Whether any of these

stars indulged in games sponsored by today’s busted-up global enterprise

remains to be seen. Perhaps those answers will have to wait until 2014, when

a Harper-Collins memoir by Bloom is scheduled to be released.

Lead prosecutor Harris Fischman explains to the court how “bookies all over

the world” were engaged in a sophisticated money-laundering scheme, withthreats of violence used to enforce gambling debts. He announces he

“wouldn’t be surprised” if there are 25,000 telephone intercepts (in English

and Russian) that were secretly-recorded and that will be used against the

defendants, as well as 300 bank accounts involved in the scam, with more

expected from cooperating countries. The FBI is “imaging” the many

computers seized in the raids, he says, and expects to have them back to the

defendants in two weeks.

One defendant who rose from his seat had a wire dangling from an ear, as he


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Eugene, Vadim, and Illya Trincher (Facebook screen

capture)

tried (unsuccessfully) to understand what a Russian translator was saying

through it. He was short, stocky, suited, had a giant bald spot, and looked a

lot like Danny DeVito in the film “Other People’s Money.” He seemed unable

to plead guilty or innocent, leading rows of defendants to laugh. “It’s not

funny,” said Sasha next to me, but of course it was. And he laughed, too.

I looked around unsuccessfully for a 29-year-old defendant from Staten

Island named Joseph (“Joe the Hammer”) Mancuso, just to see what

someone with that nickname looks like. But at least I got to see his

powerhouse attorney, Ronald Fischetti, who has represented the likes of bad

girl Courtney Love, bad boy Dana Giaccheto (money manager to the stars),

the late Elaine Kaufman (of the famed Elaine’s bar) and Howard Johnson

(baseball’s Mets).

Helly is represented by Benjamin Brafman, who won the acquittal of Sean “P.

Diddy” Combs in his 1999 illegal weapons and bribery charges. In 2011, he

got sexual-assault charges dropped against IMF head Dominique

Strauss-Kahn. “We do not believe that Mr. Nahmad knowingly violated thelaw and are confident that he will be exonerated,” he tells Forbes. A second

super-lawyer, Paul Shechtman, is also on Helly’s team.

The young Illya Trincher is represented by Las Vegas-based attorney David

Chesnoff, whose clients have included DiCaprio, Lindsay Lohan, Martha

Stewart, Britney Spears, Mike Tyson — plus Phil Ivey, arguably the best poker

player in the world.

At one point, Chesnoff rose to tell the court that his client was arrested in Los

Angeles, and then flew with him to the arraignment with just one form of identification: a passport card. Prosecutors wanted him to surrender it, but

Chesnoff requested they hold off until after the weekend so that Illya could

get an alternative form of ID – a New York driver’s license. “We don’t think

we want him moving around,” countered the prosecutor. The judge agreed,

and ordered Chesnoff to chaperone his client to the Dept of Motor Vehicles

on Monday.

In fact, Judge Jesse Furman seemed

committed to showing the defense who

the boss is now. “We live in a democracy,

but this courtroom is not a democracy,”

he proclaimed. The 40-year-old judge set

a “firm” trial date for ten months from

now, a herculean deadline for defense

lawyers who will have to review a

mountain range of documents produced

by the government. After some gentle

protests, Furman extended the date, in stone, for June 2014. The


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government estimates it will be a one-to-two month trial. And it promises to

be a dandy.

After 90 minutes in the courtroom yesterday, the spectacle is over, for now.

Outside the courthouse, one major defendant lights a cigarette just a few feet

from a newspaper photographer, who shoots photos of him in rapid

succession. The young man doesn’t seem to mind one bit. “I can always tell

when defendants are dying to have their photos taken,” says the cameraman.

Another defendant who maintains his innocence, a

Florida-based poker champ named Abraham (“EazyPeazy”)

Mosseri, is also hanging out a few feet from the cameras. He is

wearing trendy five-toed brown sneakers that he announces

he’d purchased on 57th Street. The photographers sense that

Abe — ranked #10 among online money earners by HighStakes

Database — really wants his photo taken. But there’s no need;

his picture had already been disseminated a few days earlier by

the FBI.

The fugitive alert (see right ) and indictment does not sit well

with EazyPeazy’s girlfriend, Lisa Lombardi. “They [FBI] did not search his

house and did not tap his phones and must not have done a [sic]

investigation of him too much because they did not even know where he

lived,” writes Lombardi. “He is a professional poker player that bets sports

and was caught in the crossfire….Not that anyone really reads your articles

anyways since I see you only had 18 shares Facebook. lol…BTW, his ‘trendy’

brown shoes cost $75 on sale. I know because I purchased them and

everyone knows what a trendy fashionable guy he is. If you would like to

come by and take another picture of any of his shoes just let me know and I

will set a real interview up for you. Maybe we will invite Leo [DiCaprio],

Tobey [Maguire] and A-Rod over at the same time. lol.”

Deal me in.

[This story was updated to include information from additional sources.]

###

Richard Behar is the Contributing Editor, Investigations, for Forbes

magazine. He can be reached at [email protected]


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