On March 18, a famous American attorney lost the largest single claim for art acquired by the Nazis in WWII based on independent research by another American with the same name. The attorney Eric Schoenberg practices in Los Angeles. The finance professor Eric Schoenberg teaches at Columbia University in New York. After the case was decided in favor of the purchaser, former dictator Adolph Hitler, another painting acquired in a similar “offer you can’t refuse” transaction was sold privately for approximately $275 million, making it the highest price paid for artwork in a commercial art sale in history. Thousands of other families have been affected by these cases.
Professor Schoenberg presented his research in California at Chapman University in 2008. His years of research made a convincing case that the comparable sales valuation method used by most American real estate appraisers and transactional attorneys is faulty and unreliable. By contrast, my own copyrighted “Step-Function” valuation metric has demonstrated consistent accuracy.
One of the best examples of Professor Schoenberg’s findings are the art price estimates presented by the attorney Schoenberg in the landmark case in which his client, Maria Altmann, sought to inherit six paintings previously owned by her aunt, Adele Bloch-Bauer. A renowned beauty, Mrs. Bloch-Bauer was the subject of two portraits. The Austrians presented information indicating that the documents issued to take possession of the artwork had some basis in fact. Adele Bloch-Bauer’s records reported that the paintings were sentimental objects with no measurable market value and therefore not subject to inheritance tax. While that claim is not unusual for family portraits, the portrait artist, Gustav Klimt, has ranked as one of the world’s most expensive artists for the last century. This motivated a recommendation by mediators to award Austria one of the six paintings as compensation.
When the other five paintings were sold later, the results confirmed the assertions of Professor Schoenberg that the comparable sales valuation method is faulty and unreliable. The value estimates presented to the Austrian federal court in 2004 for all six paintings added up to $15 million. This figure was used to calculate the filing fee for the case, which is a set percentage of the claimed damages in Austria. The approximate total fair market value based on actual sales during 2006 was $260 million. Adding a similar estimate for the sixth painting, the actual market value was TWENTY times more than the value estimate based on the outdated and often faulty comparable sales valuation method.
This large discrepancy is now playing a new role as the world’s largest corporate art owner, Deutsche Bank, contests valuation claims made by the Los Angeles District Attorney’s office, which is also the fiduciary for the Los Angeles County Museum of Art. The repeated refusal of the Los Angeles County Museum of Art and its museum affiliates to present alternatives to the comparable sales valuation method, or allow Professor Schoenberg’s research to be shared in LACMA publications, is likely to result in a decision in favor of Deutsche Bank.
The American media has stayed away from this story in droves. The Montreal Gazette did a respectable job of publishing a summary in Canada, but no news source issued entirely in the United States has touched it. (lodeplus.com merged with NowPublic of Vancouver, Canada.) The reason American media have not reported the acquittal of Adolph Hitler for extortion of WWII art loot is not a good one. Budget cuts have made multi-lingual international correspondents a rarity. The substitution of poorly proofread computer translation programs has been a huge failure. The Italian version of Wikipedia actually published an erroneous translation claiming that the San Diego Padres baseball team was an intra-mural club in the United States Army.