The court battle over the legal fees owed by the Andy Warhol Foundation has evolved into a bitter war of appraisals. At issue in Manhattan Surrogate's court (which presides over trusts and estates) is the value of works of art and other property which the late artist willed to the foundation that bears his name. The estate's former lawyer has used the trial to raise questions about the Warhol Foundation's management practices. He also accuses Christie's of appraising the estate in a way that guarantees assigning it an unrealistically low value.
In April 1992, Edward Hayes, then the lawyer for the Warhol estate, filed for $14 million in legal fees. Mr Hayes, a dapper former Bronx prosecutor with keen antennae for publicity, maintained that his compensation was based on a 2% rate applied to an estate that he estimated to be worth more than $600 million. The Foundation, however, maintains the estate's value is only $220 million, a figure reached through the 1991 appraisal by Christie's of works of art from the Warhol estate. Relying on that figure, the Foundation argues that the $4.85 million it has already paid Mr Hayes has been more than enough.
Mr Hayes charges that the Foundation has cooked the books by applying an approach called "blockage discount", which estimates prices individual works would bring if the entire estate were placed on the market at the same time. Blockage discount is an accounting method used by United States tax law to reduce the value of certain assets for estate purposes. In the case of the Warhol appraisal, the prices reached by such a valuation are 30% to 90% lower than those that might be determined by an item-by-item appraisal. Mr Hayes predictably rejected the Christie's figure, and countered with a private dealer and a former photography specialist from Christie's who valued the estate at somewhere between $558 million and $698 million.
With a low appraisal, Mr Hayes said, the Warhol Foundation stands to gain more than a reduced fee for its former lawyer. Since the law requires the Foundation to distribute 5% of its assets annually in grants, a Foundation worth $220 million has a much lighter burden of generosity than an institution valued at three times that amount.
In its defence, the Warhol foundation's expert witness, Victor Wiener, Executive director of the Appraisers' Association of America, endorsed the methodology used to reach the $220 million figure. Wiener maintained that the blockage discount had been used to determine the value of the estates of Georgia O'Keeffe, Jean Michel Basquiat and Alexander Calder. Wiener characterised the value reached by Hayes witnesses as "indefensible", adding that if he had offered such an estimate, "I'd be the laughing stock of my profession".
But Edward Hayes argues that the $220 million figure reflects more than methodology. Christie's conducted its appraisal of the Warhol assets, he alleges, after the Warhol Foundation agreed to consign some $60 million worth of art there. The Foundation denied that any such deal was made.
Mr Hayes also accuses Christie's of duplicity, citing the auction house's $228 million item-by-item appraisal of the Robert Mapplethorpe estate, in which blockage discount was not applied. Christie's was denied a motion to strike the Mapplethorpe appraisal from the court record. Then, in a sworn affidavit, the auction house's general counsel, Patricia Hambrecht, downplayed the Mapplethorpe valuation, which she said "was never intended to be, and was not, a fair market appraisal".
Ms Hambrecht's testimony was contradicted by Michael Ward Stout, the executor of the Mapplethorpe estate, who received a $2 million fee from that estate for his legal services. Ms Hambrecht had stated that Stout had told her he would not be drawing a commission based on the Mapplethorpe estate's appraisal. Stout maintains that he never told Christie's what method to use in valuing the estate. In another sworn affidavit, the Christie's official who handled the appraisal also rejected Ms Hambrecht's account, supporting Stout's version of events.
Proceedings reached a ridiculous point when judge Eve Preminger noticed the disparity between Christie's valuation of some 20,000 black and white photographs ($107,000) and Mr Hayes' estimate ($11.6 million). Mr Hayes suggested that he simply be given the photographs as a settlement of the case, a suggestion that the impatient judge seized upon as a way to put the case to bed. The Foundation, however, moved for a mistrial when "sub rosa" discussions of a deal involving the photographs were entered into the court record. That motion was denied, and proceedings are set to reconvene on 12 January.
As the war over the Warhol Foundation widens to include parties not involved in the litigation, the invective has fiercened. "No executor should entrust an estate to Christie's until Christie's has purged itself of all executives with flexible ethics", declared Michael Ward Stout.
Originally appeared in The Art Newspaper as 'The Warhol estate: more than fifteen minutes in court'