Big Auction Houses Take Closer Look at Issue of Ethics

A litmus test of whether a new ethic is taking hold in the art world is to watch what happens when a stolen or smuggled work is offered to one of the big auction houses.

Sotheby's is still struggling with a public-relations meltdown, after an agent in Milan was filmed offering to smuggle an 18th-century portrait to London, in violation of Italy's export laws and explicit company policy. British journalist Peter Watson planned this sting operation, which he documents in "Sotheby's: The Inside Story," published by Random House this month.

The book argues that Sotheby's has been smuggling old masters out of Italy since the early 1980s, as well as trading in illegally excavated and smuggled antiquities from India, Cambodia, Iran, and the Mediterranean.

"Prior to my investigation, there were lots of rumors, but no one had any names or dates," Mr. Watson says. "This brought home to people the extent of the shabbiness that winds up in the glitzy auction world."

Watson says he focused his investigation on Sotheby's because he had access to suitcases of stolen company documents from a former employee that suggested wrongdoing. But, he adds, the sale of smuggled and undocumented antiquities is widespread in the industry. "Any antiquity recently on the market [for the first time] is almost certainly illegally excavated and exported," he says.

The charges against Sotheby's, which first surfaced last February in a TV series and the British edition of the book (serialized in the London Times), took the world's largest auction house by surprise. "We first learned of these charges at 10:30 the night before the articles appeared," Sotheby spokeswoman Diana Phillips says.

Sotheby's current management, which was not in place at the time of most of the abuses alleged in the book, insists that incidents are isolated and do not reflect company policy or practice. But they took the charges seriously enough to launch their own $11 million investigation, including audits of some 8,000 individual lots auctioned at Sotheby's.

"We had the needed regulations in place, but we have a lot of employees and you can't police all their behavior at all levels. What we've done now is to really add muscle to our corporate practice," says Walter Curley, a member of Sotheby's board of directors.

New directions at Sotheby's include a new compliance department, reinforcements in the legal department, and training programs to ensure that employees respect local export laws and question the provenance of the art they sell.

"An element of our policy is that you don't violate local laws. Further, if we have actual knowledge that an object has been illegally exported, we won't sell the object," says Kevin Bousquette, Sotheby's chief operating officer.

"We do nearly $2 billion a year in 70 collecting categories. No set of objects is worth jeopardizing that franchise. It isn't worth what we went through last year, and it's not worth risking the company's reputation," he adds.

Peter Watson welcomed Sotheby's announcement. "If they're going to do all that, that's a definite advance. Now the other auction houses will have to think hard about what they do to fall into line," he says.

Thirteen blocks south in Manhattan, officials at rival Christie's say that they have had no experience with stolen or smuggled art and that existing policies and staff are adequate to deal with potential problems.

"It is Christie's policy and practice not to sell any item that we know or have reason to believe is stolen or has been imported or exported improperly," says Jo Backer Laird, Christie's general counsel.

In dealing with undocumented antiquities, "we ask when the object came into the country," says G. Max Bernheimer, the head of Christie's antiquities department. "Clients who consign goods sign papers saying that no export laws have been violated."

Christie's has no separate compliance department, but officials say that they check with stolen-art databases, such as the Art Loss Register, as well as other "contacts in the industry," to make sure that objects have not been reported as stolen. Looted antiquities are rarely included in such databases, because most are stolen before authorities can document them.