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Art-Leasing Giant Cries Foul Over Backdated Invoice

The art-leasing company Artemus claims in court that a New York City gallery fraudulently induced it into buying an encumbered artwork by the American artist Frank Stella.

MANHATTAN (CN) - The art-leasing company Artemus claims in court that a New York City gallery fraudulently induced it into buying an encumbered artwork by the American artist Frank Stella.

Co-founded in 2014 by the Durst Organization, Artemus is represented in the July 6 suit by the firm Walden Macht & Haran.

It brought the complaint in Manhattan Supreme Court against the Paul Kasmin Gallery regarding the 1984 Stella piece “La Scienza Della Fiacca.”

PKG did not sell the Stella to Artemus itself, but Artemus says it relied on the gallery’s backdated and falsified invoice in striking a 2016 deal to purchase the piece.

The sellers — Anatole Shagalov and his gallery, Nature Morte — are not parties to Friday's complaint, but they sued Artemus and co-founder Asher Edelman in the same court on Aug. 28, 2017.

Under an injunction in the 2017 case from Justice Eileen Branstein, Artemus is barred from selling "La Scienza" and other artworks that were part of the 2016 transaction.

Though Shagolov disputes that its transaction with Artemus was a sale, the new complaint by Artemus alleges otherwise. It claims to have asked Shagalov in April 2016 to document its ownership of “La Scienza,” and says Shagalov in turn went to PKG, which had sold it a 60 percent interest in “La Scienza” two years earlier.

Though Shagalov could have acquired the full title to the piece for an additional $168,000, according to the complaint, “Shagalov had not paid off the full balance due on ‘La Scienza’ (which also had not been sold to any other buyer in the preceding year).”

Artemus says that PKG gave Shagalov two invoices in 2016 that were backdated to 2014 and were “calculated to mislead.”

“Upon information and belief, PKG understood or expected at the time that had it created or provided truthful documentation, which correctly reflected (a) its own 40% retained interest in La Scienza, (b) that it had transacted solely with Shagalov, not with Nature Morte, and (c) that title would not pass without payment of an additional $168,000, such a document would impede Shagalov's ability to pursue a transaction involving La Scienza with a third party,” the complaint states. “PKG consciously chose to create a phony document rather than jeopardize any such transaction between Shagalov and a third party.”

Artemus says it went through with the purchase on April 26, 2016, only to learn last year that PKG had filed a financing statement against “La Scienza.”

“This was the first notice Artemus received that the invoices were false,” the complaint states. "Prior to July 24, 2017, PKG never informed Artemus about its claim to 40% of 'La Scienza' or about the outstanding $168,000 balance owed by Shagalov to acquire full title.

“When Artemus learned of this fraud, Artemus informed the Shagalov parties that were in breach of various express warranties set forth in the lease agreement.”

Shagalov, whose Nature Morte has no relation to a New Delhi gallery of the same name, is represented by Manhattan attorney Neil Saltzman.

“At the time that Edelman contracted with Shagolov and Nature Morte, the Kasmin Gallery had no ownership interest in the painting,” Saltzman said in a phone interview.

Branstein will preside over a hearing in the 2017 case on July 12. In addition to “La Scienza,” this case implicates another Stella titled “Guifa e la Berretta Ross,” as well as various artworks by Keith Haring and one piece titled “Homage to the Square: Golden,” by Joseph Albers.

Artemus explains in the new suit that the 2017 case involves a dispute by the Shagalov parties “that they had breached any warranties or representations concerning their possession of title to ‘La Scienza’ at the time they entered their agreements with Artemus in April 2016.”

The investment banker David Storper is a co-founder of Artemus but not a party to either action. The Durst Organization, a fellow co-founder, is controlled by the brother of accused killer Robert Durst.

Representatives for the Paul Kasmin Gallery have not returned an email seeking comment.

Artemus seeks punitive damages for fraud. It is represented by Walden Macht attorney Jim Walden.

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