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Knoedler Trial Breaks Unexpectedly Ahead of Key Witness …

February 9, 2016

Knoedler Trial Breaks Unexpectedly Ahead Of Key Witness ...

The trial of the Knoedler & Company gallery over the sale of a forged Rothko to Domenico and Eleanore De Sole was unexpectedly paused until Wednesday morning ahead of what had been anticipated to be the Tuesday afternoon testimony of two key witnesses: Knoedler owner Michael Hammer and former dealer Ann Freedman. As a full house packed the third floor US District Courtroom in downtown Manhattan after the lunch recess, attorneys for both sides appeared to meet briefly in chambers. Moments later, after judge and jury had emerged and been seated, Judge Paul Gardephe announced that due to unforeseen circumstances the trial would break until tomorrow morning.

Ann Freedman was expected to testify despite having been dropped as a defendant after settling with the De Soles over the weekend.

Judge Gardephe announced Monday morning that she would remain as a witness, since the case against Knoedler & Co. still involved her conduct and state of mind.

Given the Freedman settlement, chatter among observers in the courtroom suggested that today s break in proceedings may be linked to settlement negotiations between the De Soles and the remaining defendant, Knoedler & Co.

The decision to break came after testimony from Knoedler chief financial officer Ruth Blankschen continued through the morning from Monday afternoon. The in-house accountant s turn at the stand included aggressive questioning regarding how she dealt with a significant discrepancy between the amount the holding company for the gallery received from Knoedler & Co. (approximately $59 million) and the amount it attributed to Knoedler (approximately $36 million) between 2001 and 2012.

In the same period, according to a financial document marked confidential and shown to the court as evidence, the holding company, 8-31 Holdings, Inc., reportedly received $106.2 million from its subsidiaries (which also include Knoedler Publishing and Hammer Galleries).

Also at issue was alleged personal spending by Knoedler owner Michael Hammer on an American Express card paid for by 8-31 Holdings. These expenses included an apparent $10,000 trip to Paris for Hammer s wife and two vehicles purchased for his supposed use a $482,000 Rolls-Royce and a Mercedes-Benz of comparable cost. Hammer allegedly resold the Rolls-Royce and pocketed the proceeds as income from the business, with Blankschen testifying that he was issued a wage statement grossed up to cover the sale price as well as his tax liability.

Another revelation in today s testimony was the apparent amount of a previously undisclosed 2012 settlement, reached in what appears to have been Lagrange v.

Knoedler, a case brought by collector Pierre Lagrange over a forged Jackson Pollock2 sold by the gallery. According to financial records stamped confidential and discussed in court, the gallery paid out a legal settlement of $6.4 million in 2012.1

(Photo: Former Knoedler Gallery director Ann Freedman. Patrick McMullan.)

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References

  1. ^ Lagrange v.

    Knoedler (itsartlaw.com)

  2. ^ Jackson Pollock (www.blouinartinfo.com)

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