Misery Loves Company

A story in which everyone comes out badly. Come January 25th of next year, Sotheby's will hold an auction of more than 200 works of American folk art from the collection of former gem dealer Ralph Esmerian. The collection has a presale estimate of between $6.4 million and $9.5 million, but even the highest prices won't offer much satisfaction to Esmerian, who current sits in jail now, convicted in 2011 of wire and bankruptcy fraud. (He pled guilty to stealing from creditors, hiding money and lying to a bankruptcy judge, and was sentenced to six years.) Nor will it come close to satisfying Esmerian's creditors, which include Christie's, Sotheby's, Merrill Lynch and a number of owners of jewelry, who are owed something north of $140 million.

Esmerian had been a board member at the folk art museum and had promised much of his collection to the institution but, once his bills came due, he withdrew his promise and actually took back a number of pieces that were already displayed in the museum, most notably Edward Hicks' "Peaceable Kingdom," putting them up for sale at Sotheby's in 2008.

"Peaceable Kingdom" did well at that sell, earning $9.673 million (above its $6-8 million estimate and setting a new record for both the artist and for American folk art in general), but then the next shoe dropped. The buyer of that painting, California entrepreneur and art collector Halsey Minor, was experiencing his own financial downturn -- earlier this year, he filed for personal bankruptcy, claiming debts of $100 million -- and refused to pay.

Sotheby's brought a lawsuit against Minor (it won); Minor countered with a lawsuit against Sotheby's, claiming the auction house failed to disclose critical financial elements of the consignment (he lost). However, even Sotheby's win was tempered by the fact that the 2010 judgment required Minor to pay the auction house only $4.4 million, plus interest, late charges and legal fees, the reduced amount reflecting the drop in value of the Hicks painting as a result of the recession.

Meanwhile, the American Folk Art Museum, which defaulted in 2009 on its $32 million loan to erect its 53rd Street building in Manhattan, sold the building that year to the neighboring Museum of Modern Art for $31.2 million (covering its debt but not providing any additional cash to rebuild), putting most of its collection in storage and operating out of its old Lincoln Square branch, resulting in a loss of 70 percent of its exhibition space.

Nancy Druckman, head of Sotheby's folk art department, promoted the upcoming sale in an auction house press notice, lauding Esmerian for:

his profound connoisseurship, discernment and passion for the best in American folk art... Esmerian applied his refined sensibility to form a superbly curated collection, in which each piece is an artistic gem in its own right.