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While Harcourts continued to make its deals, the 1989 recession, the savings-and-loan meltdown, and the collapse of the junk-bond market that had fueled the merger craze of previous years combined to end the art boom. And as these macroeconomic forces began to squeeze the art market, and as art prices that had risen so regularly suddenly stabilized or fell, Fred Banks made a spectacularly lousy business decision. He moved Harcourts into an exorbitantly priced new location on Bush Street, creating a 10,000-square-foot gallery that was equidistant from his old Union Square site and the Montgomery Street investment bankers whose excesses had helped fuel the white-hot art market of the early and mid-'80s.
Kim Eagle-Smith, the curator who left Harcourts last summer, now characterizes Banks as an "autocrat" who overspent in good times and was utterly unprepared when the art market's bubble burst.
"This guy has very few skills. He was not an art academic. He was not a salesperson," Eagle-Smith says. "He was an art impresario."
Now the San Francisco District Attorney's Office is trying to determine whether Banks -- or any of his associates -- was also a thief.
Dr. Paul A. Ebert is a surgeon and art collector who lives outside Chicago. In early 1995, Ebert hired a Bay Area lawyer to recover a painting he had consigned years earlier to Harcourts. "I had kind of forgotten about it, but saw something similar in a gallery that was commanding a pretty high price," Ebert says.
The consignment agreement between Ebert and Harcourts was similar to the one Paul Villierme had signed. Under such an agreement, an art gallery holds an artwork in trust while trying to sell it. When the work does sell, the proceeds are split with the owner, usually on a 50-50 basis.
It turned out Harcourts had not kept its end of the bargain with Ebert. It had long ago sold his Theodore Butler painting for $35,000, without informing the doctor. And once the doctor discovered the unreported sale, Harcourts began playing for time.
Jo Rogers, Banks' wife and his gallery bookkeeper, wrote Ebert's lawyer on March 22, 1995: "Had hoped to send a check with this letter, but find we are still waiting for payments that were promised to us last month." The letter also offered other reasons the payment had been delayed: She'd been "bedridden" for three weeks, and the gallery was in the process of moving to a new address near the modern art museum.
These explanations could not change what Harcourts Gallery had done: Legally speaking, it had sold Ebert's Theodore Butler painting "out of trust." It's the kind of behavior that can land an art dealer in civil court, facing a breach-of-contract lawsuit. If the selling out of trust was done willfully, it goes by another name: grand theft. The potential criminal penalty gets heavier as the number of victims and dollar amount grow.
There are plenty of Harcourts Gallery victims, and they are out plenty of money.
While Harcourts was trying to mollify Dr. Ebert -- and as it was signing with Paul Villierme to market the works of his father, Henry -- the gallery was also receiving inquiries from Gary and Sally Batz, a Kansas City, Mo., couple. The Batzes wanted to know the fate of several works they'd consigned to the gallery, including three etchings by surrealist and 20th-century master Joan Miro that had been listed for sale at $32,700.
When Sally Batz arrived at the gallery in November 1995, she discovered that her Miros been sold months, perhaps years, earlier -- without her knowledge. She learned that the gallery could not pay her before the first of the year -- if then. And, according to court papers filed on Batz's behalf, she unearthed even more disturbing information during her visit: Hanging on display at Harcourts Gallery were a trio of etchings, also by Miro, that had been stolen from her years earlier by a St. Louis art agent.
Although Paul Villierme couldn't have known it at the time, when he kicked in the front door to Harcourts Gallery in June 1996, he was thrusting himself into the middle of the collapse of an elaborate Ponzi scheme.
Court records reveal a list of dozens of art collectors whose works Harcourts had sold out of trust. The victims include amateurs, galleries, and museums; they hail from all corners of the continental United States, and as far away as Melbourne, Australia. And the losses are enormous.
Harcourts, for example, had neglected to inform the Rachel Adler Gallery of New York that $137,000 of consigned art had been sold. Similarly, the Lenoir & Associates gallery of San Antonio did not learn until after Harcourts filed bankruptcy July 3 of last year that $65,000 of its art had been purchased.
But there were victims who lost money and their own creations -- artists who had consigned their work directly to Harcourts. Some were fairly well-known: Roland Petersen, another California figurist whose works were a mainstay at Harcourts, lost $92,000. Less established artists from the Bay Area were not spared: Jonathan Barbieri ($7,500), Bruce Beasley ($1,700), and Nancy Genn ($8,300) all took significant hits.
And Henry Villierme, the artist with a son who cared, has filed a claim against Harcourts for $26,000.
"I do not believe Fred Banks is a crook," says Kim Eagle-Smith, the Harcourts curator who inked Villierme to an art consignment agreement. "Nobody set out to defraud anybody. It was a combination of bad management, marketing, and ultimately talent drain."
Eagle-Smith, however, has been feeling the heat himself since Harcourts filed bankruptcy in July and the gallery's victims started pouring out of the woodwork. When sculptor and collector John Battenberg sued for breach of contract over The Rose, a hand-colored etching by Wayne Thiebaud priced at $35,000, Eagle-Smith was a named defendant.
