An Artistic Dive into Due Diligence Through the Brush of Art Fraud
Art. The word has spawned the question: “What is art?” It is a fairly modern question. As Sir Roger Scruton says in his documentary Why Beauty Matters, “At any time between 1750 and 1930, if you’d asked educated people to describe the aim of poetry, art, or music, they would have replied beauty.” That changed in the 20th century. Scruton explains, “Beauty stopped being important, art increasingly aimed to disturb and break moral taboos. It was not beauty, but originality, however achieved, and at whatever moral cost.” So, while the answer to the question of “What is art?” varies among individuals today, the amoral and illegal act of forgery remains the same. On June 25th, the Federal Bureau of Investigation (FBI) seized 25 pieces of art from a Florida exhibit where the reigning question was, “Are they authentic?” They are now the subject of investigation for possible conspiracy and wire fraud.
Days later the CEO of the museum was let go.
The 25 paintings were part of the Orlando Museum of Art (OMA) exhibit on the life and legacy of Jean-Michel Basquiat entitled “Monsters and Heroes.” The paintings were said to have been retrieved from a storage unit in Los Angeles where they had purportedly been stored for 30 years before being discovered when the contents of the storage unit were auctioned for nonpayment of rent and then sold. The mixed media artwork done on scavenged cardboard was said to have been painted by Basquiat in 1982 and sold for $5,000 to Thad Mumford, the Emmy award-winning screenwriter and producer of M*A*S*H and such shows as Good Times, and Home Improvements. Mumford passed away in 2018.
Mumford’s stored items were bought, according to a New York Times article, by art and antique dialer William Force and retired salesman Lee Mangan for $15,000. If authentic, the paintings would be worth around $100 million dollars. Pierce O’Donnell, a trial lawyer based out of Los Angeles bought an interest in six of the 25 pieces of art.
The authenticity of the paintings came into question when it was discovered that on the back of the cardboard canvas paintings there was printed on it “Align top of FedEx Shipping Label here” in a typeface not used until 1996, six years after the artist’s death, as published in the New York Times.
Red Flags and Due Diligence Investigations
The two main sources for the alleged origin of the paintings are Lee Mangan and William Force. They both served time, under different names, in federal prison for felony drug trafficking.
As reported in the Times, Force, in 1973, going by the name William Parks was arrested and “pleaded no contest to conspiring to import more than half a ton of marijuana from Jamaica to Miami by boat.”
Lee Mangan, or Leo Mangan, in 1991 and 1979 was convicted twice on federal cocaine trafficking charges. Then in 1996, Mangan, along with 6 others, including a former Securities and Exchange Commission (SEC) attorney, was arrested for securities fraud. According to The Wall Street Journal, their goal had purportedly been to “gain access to stock of two publicly traded companies, inflate the market price by getting favorable television coverage and then sell the stock to the public at a significant profit,” while attempting to avoid “regulatory scrutiny by taking advantage of securities regulations allowing unregulated stock to be sold overseas and issued by consultants.” In 1999, Mangan was convicted and banned for life from securities trade work.
In February of 2008, Mangan and his wife Michelle Tucker agreed to a $390K settlement with the Federal Trade Commission (FTC) for “charges alleging that they violated federal law by falsely claiming that they could reduce consumers’ credit card interest rates or the amount of their credit card debt.”
The third owner, attorney Pierce O’Donnell, as reported in the Times, has a criminal record as well. In 2006, he pleaded “no contest to violating campaign finance laws in 2006 and pleaded guilty to a second such charge in 2011, resulting in a 60-day prison sentence.”
While it is true, that past criminal conduct or civil litigation is not proof of current, as the lawyer Richard LiPuma who represents Mangan explains in the New York Times piece, “the fact that the owners were once in trouble with the law was irrelevant to the question of whether the works are genuine,” it does raise substantial red flags and begs the question of whether or not the OMA conducted any due diligence investigation on Mangan and Force. Anytime a business partners with someone, due diligence investigations are the first step in protecting against fraud and malfeasance. It is important to know who you are doing business with, who you are partnering with. Uncovering a history of malfeasance should also underscore the need for deeper levels of due diligence on the people, or in this case the history of the artwork. It is not enough to identify whether the art is an original work.
In a reply to the New York Times, O’Donnell, expressed he was willing to cooperate fully with the FBI and noted it was over 20 years ago that “[his] misdemeanors for campaign finance law violations occurred.” He also stated in his email to the Times that “the paintings are authentic. Five experts conducted extensive due diligence.” But, did he conduct any due diligence investigation on Mangan and Force?
While O’Donnell is assured of the authenticity of the paintings and supported in that claim by now ex-museum director and CEO of Aaron De Groft, the FBI, and others, are not.
CEO Aaron De Groft
On June 28th, within days of the FBI raid on the OMA, De Groft was fired by the museum’s board.
The FBI found in searching De Groft’s email correspondence found he had told academic art historian Jordana Moore Saggese at the University of Maryland to “shut up” when she said she did not want her name associated with the exhibit and would consider it defamatory if they continued to use her name.
De Groft replied to Saggese via email writing, “You want us to put out there that you got $60 grand to write this? OK then. Shut up. You took the money. Stop being holier than thou. You did this not me or anybody else…. Be quiet now is my best advice. These are real and legit. You know this. You are threatening the wrong people. Do your academic thing and stay in your limited lane.”
De Groft was only appointed in February 2021 to head the OMA, but how much did they know about De Groft 16 months ago when they hired him? Did the OMA do an executive background check on De Groft? Executive due diligence investigations look into behavioral patterns in addition to many other areas of concern. His behavior and actions have subsequently caused significant reputation damage for the museum.
According to an affidavit in the FBI warrant Elizabeth Rivas, an FBI special agent, stated in the affidavit that Thad Mumford, who Mangan and Force claim bought the artwork from Basquiat, told her he “never purchased Basquiat artwork and was unaware of any Basquiat artwork being in his storage locker.” Mumford had told Rivas that one of the owners of the artwork had, according to the affidavit “pressured him to sign documents” claiming that he had owned the collection, which would help establish the paintings’ authenticity, and offering in an email to give him a “10% percent interest in the net proceeds.” A 2017 affidavit he signed stated he never had met Basquiat. In 2018 Mumford passed away.
Mangan, however, claimed to have met Mumford with Force in 2012, according to the Times, and Mumford had purportedly told the pair about his 1982 purchase of the Basquiat paintings and it was such a memorable encounter that he had typed up a poem that Basquiat had initialed. The poem allegedly penned by Mumford was included in the exhibit at the OMA. Relatives and friends of Mumford say he never expressed an interest in contemporary art, and Sheldon Bull, fellow screenwriter, and producer, who had worked with Mumford say Mumford wrote on a legal pad, never typed, and didn’t own a computer.
The Indispensability of Due Diligence
Had a suitable risk management program been in place, a due diligence investigation firm could have discovered any potential behavior risks before OMA onboarded De Groft and made investigations into Mangan and Force with whom they partnered
A due diligence investigation would certainly have uncovered the litigious backgrounds of Mangan and Force.
It could have also uncovered the discrepancies between the various experts asked to authenticate the artwork that came up in the reports and which purportedly De Groft had not disclosed to the board.
Due diligence investigations are designed to detect hidden and unclosed information. An executive background would check criminal history, financial and legal issues, civil litigation issues, relationships with other companies and entities, reputation issues, shell company involvement, evidence of fraud, signs of money laundering, financial impropriety, conflicts of interest, drug, alcohol and human trafficking, anti-competitive behaviors and numerous other serious issues. Open-Source Intelligence (OSINT) investigations are an important source of information in addition to publicly available records.
Business entities of any type are not safe from bad actors from within or without. Identifying these bad actors helps to protect any for profit or nonprofit enterprise from the harm they can cause. Due diligence on key executives and business partners will help to protect your organization from criminals and fraudsters.
While perhaps the definition of “What is art?” is up for debate, the question of “How do you define integrity?” should never be. Integrity will always remain the most important quality of anyone you hire or do business with. Just like the title of the exhibit “Heroes and Monsters,” you always want to go with the heroes and forgo the monsters.