Spotlight in auction price-fix scandal now on Christie's

Since the US Justice Department rekindled its investigation into pricefixing between the world's leading art auctioneers a year…

Since the US Justice Department rekindled its investigation into pricefixing between the world's leading art auctioneers a year-and-a-half ago, the gavel of public humiliation has fallen more heavily on one glamorous auction house than the other.

Christie's and Sotheby's were forced to split a $512-million (#589 million) tab to settle the grievances of angry former customers. But it was Sotheby's whose most senior officials resigned and subsequently faced criminal charges in court. It was Sotheby's whose share price plummeted to new lows on the news, contributing to speculation that the auctioneer is for sale.

And it was Sotheby's that was forced to plead guilty to antitrust charges and pay the US government a $45-million fine.

How did Christie's manage to avoid such humiliations? In part because, unlike Sotheby's, it is a private company. More importantly, again unlike Sotheby's, it struck a valuable amnesty deal with the government in exchange for its co-operation in the probe. But Christie's luck at avoiding the worst fallout from the scandal seems to have run out.

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Documents that have come to light in the past month are focusing attention on questionable conduct of senior Christie's executives and casting doubt on the way the auctioneer won its deal with the government.

Christie's does not appear to be in danger of losing its precious amnesty. But the disclosures are proving highly embarrassing to the 235-yearold company, particularly in the glossy world of the art auction.

At issue is, who at Christie's knew of the illegal arrangement with Sotheby's and when did they know? The scandal erupted in January 2000, after the government revealed that Christie's had approached it with a trove of incriminating documents handed over by Christopher Davidge, the retiring chief executive. At the time, Christie's told the world that it "took prompt and effective action" soon after it discovered the fraud. This was not just good public relations. It was one of the conditions for the amnesty deal.

But it may not have been accurate. It now seems that a number of executives were aware of the price-fixing well beforehand. Stephen Lash, Christie's chairman in North and South America, expressed dismay over the arrangement in an internal January 1995 memo.

In a December 1997 memo, Lord Hindlip, Christie's chairman, assured Mr Davidge that his severance would be honoured even if he were charged with anti-trust violations. "You need not worry," he scribbled on Christie's stationery, "but I am sure in any case there is nothing to worry about." These disclosures are giving a boost to the legal defence of Alfred Taubman, the shopping mall mogul who stepped down as Sotheby's chairman amid the scandal. Mr Taubman is scheduled to go on trial in October on charges that he was the mastermind behind the scam with his then counterpart at Christie's, Sir Anthony Tennant. His lawyers are expected to use any examples of dishonesty on the part of Christie's and Mr Davidge to question their credibility as witnesses against Mr Taubman.

They said in a recent legal filing that other documents Christie's turned over to the government after winning amnesty reflected that Patricia Hambrecht, the auctioneer's former counsel, and board members Christopher Burge and Francois Curiel also had knowledge of the dealings with Sotheby's.

Whereas Sotheby's very publicly cleaned its house in the wake of the scandal - ousting its chairman and chief executive and turning over its board - most of the equivalent executives still work at Christie's.

More embarrassing details may leak out in the months ahead. Mr Taubman's defence team is pushing for the government to hand over additional evidence gathered at Christie's.

At the top of their wish list is an internal probe of the auction house's involvement in the scheme, which contains interviews with top executives. Christie's has fought to keep the documents under wraps. But Mr Taubman's team has unearthed signs that Christie's executives not only knew about the scandal well before they approached the government, but that they may have also sought to influence Mr Davidge's testimony.

Earlier this month, a New York judge published an e-mail message from Ed Dolman, Christie's chief executive, that suggests the auction house linked payment of a £5 million (#8.2 million) sterling severance package to Mr Davidge's co-operation in winning amnesty for the company. "We expect him to be fully candid in answering the questions of the DoJ . . . and that he will be paid in full on his contract," Mr Dolman wrote, referring to the Department of Justice. He goes on to state that Christie's outside attorney presumed that the agreement was "subject to (Christie's) being included in the amnesty programme".

Mr Taubman's lawyers are expected to argue that Mr Davidge, therefore, had an economic incentive to produce certain testimony that would help the auctioneer to clinch its deal with the government. Christie's refused to comment, except to say that it is co-operating with the government. No doubt, as the trial nears, there will be more questions about the nature of that co-operation.