New York art dealers charged with fabricating provenance information and impersonating deceased collectors

On 22 September 2020, Erdal Dere and Faisal Khan of Fortuna Fine Arts Ltd (‘Fortuna’) in New York were arrested. They are alleged to have falsified and/or fabricated provenance documentation concerning antiquities they offered for sale in a sophisticated scheme which spanned more than ten years. Furthermore, Mr Dere was charged with aggravated identity theft, having used the names of deceased collectors as the supposed previous owners of the antiquities in question. In so doing, the dealership has allegedly concealed dubious ownership histories and misled buyers.

The New York authorities are now seeking information from those who may be able to help further their investigation and potentially provide additional evidence in the case against the two art dealers. The New York authorities have issued a stark warning that collectors and dealers who may have dealt with Fortuna or its owners, may hold illicit antiquities and are urging them to come forward. Those individuals who were in business relations with Fortuna (directly or indirectly) should review their transactions with legal counsel and then consider approaching the New York authorities if they have any reason to suspect that the provenance provided may be false.

Background

FBI agents raided the New Jersey home of Mr Khan, Mr Dere’s ‘associate and co-conspirator’ on 22 September 2020, having already arrested Mr Dere in New York. Mr Dere’s family have been in the antiquities trade for generations and are the founders and owners of Fortuna. The two men are alleged to have used the identities of dead collectors – yet to be named – to create fake provenance chains and sell works through Fortuna. The gallery did not have a detailed website and unlike many competitors, did not list objects offered for sale with provenance information as part of the description, so the allegedly fake provenance, will have been a matter between the buyer and Fortuna and is unlikely to have been publicly disclosed in most cases. 

To date, authorities in the UK, Germany, France, Italy and Spain have all assisted the FBI with collating evidence against the defendants. Of particular note in this case are the charges of wire fraud and identity theft. U.S. Attorney Audrey Strauss stressed that ‘the integrity of the legitimate market in antiquities rests on the accuracy of the provenance provided by antiquities dealers, which prevents the sale of stolen and looted antiquities that lack any legitimate provenance.’

Public call for information

The case against Mr Dere and Mr Khan is being handled by the D.A. Office’s Money Laundering and Transnational Criminal Enterprises Unit, led by Assistant U.S. Attorney Jessica Greenwood. The unit focuses on money laundering offences and the actors who facilitate criminal activity through money laundering and other forms of illicit finance. This includes the use of federal forfeiture laws to recover and return stolen art and cultural heritage property. These forfeiture provisions may be applied to the antiquities held and traded by Fortuna, should Mr Dere and Mr Khan be convicted. New York law does not allow a thief to pass on good title. The rights of the original owner often trump the interests of the good-faith purchaser, even when there is a chain of good faith purchases.

Information about the deceased collectors and the antiquities affected by the fraud scheme are yet to be publicised.

What you need to do next

While the scale and severity of the fraud scheme have yet to be determined by the courts, this scandal will likely affect art market participants in various jurisdictions. The fact that authorities in the UK and other European countries have assisted the FBI in their investigations suggests that dealers, collectors, galleries and anyone else who has had dealings with Fortuna or the defendants should urgently have their transactions and/or collection or stock audited. Any references to the Dere family and Fortuna in provenance chains should be treated as a red flag to investigate. Moreover, once the details of fake provenance and stolen identities are public, those details should also be considered a red flag in a chain of provenance, since they may conceal fraudulent activities.

While the scale and severity of the fraud scheme have yet to be determined by the courts, this scandal will likely affect art market participants in various jurisdictions. The fact that authorities in the UK and other European countries have assisted the FBI in their investigations suggests that dealers, collectors, galleries and anyone else who has had dealings with Fortuna or the defendants should urgently have their transactions and/or collection or stock audited. Any references to the Dere family and Fortuna in provenance chains should be treated as a red flag to investigate. Moreover, once the details of fake provenance and stolen identities are public, those details should also be considered a red flag in a chain of provenance, since they may conceal fraudulent activities.

The broader picture – what is the extent of due diligence expected by art market participants?

The fraud scheme by Mr Dere and Mr Khan came to light at a time of increased emphasis placed on the role of provenance, with some regulators aggressively driving forward higher standards of due diligence expected of dealers and collectors of antiquities. Focusing on provenance to establish authenticity is no longer sufficient.  The expectation now is that dealers and collectors must exercise reasonable endeavours to establish the circumstances in which the antiquity was found, when and how the antiquity travelled from the source country to the country where it is now located and whether this occurred lawfully.  Due diligence can require extensive research.   Simply making enquiries with other experts in the field, and superficial investigations, will unlikely suffice. 

In recent years, the New York courts have become the setting of a number of provenance-related claims. We have seen an increased divergence between what art dealers would generally presume constitutes a ‘reasonable inquiry’ into provenance due diligence and the stricter approach taken by law enforcement (at least in New York).

This is not simply a New York issue.  On 28 December 2020, Regulation (EU) 2019/880 of the European Parliament and of the Council of 17 April 2019 on the introduction and the import of cultural goods became law throughout the EU and in the UK.  The Regulation prohibits the introduction of cultural property referred to in the Annex of the Regulations that was removed from the territory of the country where it was created or discovered in breach of the laws and regulations of that country. For certain types of cultural property more than 250 years old, an importer statement confirming that the conditions set out in the Regulation are met, and therefore the property can be imported, will suffice.  Other types of cultural property will require a formal import license. They are products of archaeological excavations (including regular and clandestine) or of archaeological discoveries on land or underwater and elements of artistic or historical monuments or archaeological sites which have been dismembered.

Going forward, it will become increasingly difficult to import antiquities into the EU unless one can show that they were lawfully exported from their country of origin.  This, in turn, will require significantly greater efforts in establishing the provenance of antiquities.  Great Britain has not yet resolved the issue as to how they will apply this EU Regulation which now forms part of English law.

By Fionnuala Rogers, Till Vere-Hodge and Anastassia Dimmek