Tight Lips Won't Reveal Rothko-Madoff Connection

by Tom Johansmeyer (RSS feed)
Aug 14th 2009 at 6:01PM

Last month, J. Ezra Merkin Ascot Partners LP sold his art collection, which included a hefty dose of works by Mark Rothko, for $310 million. The buyer still isn't known, which is the norm in the art market. But, there are some breadcrumbs along the way which Bloomberg News considered worth following. Interestingly, Merkin's Ascot Partners LP had invested a considerable amount of cash with Ponzi scam artist Bernie Madoff.

Along the way, Merkin's agent, TLIA, LLC, picked up $26.5 million of the $37.5 million in fees. The company is registered to a retired art collector and advisor, Ben Heller, age 83. He isn't talking. PaceWildenstein, which represents the Rothko estate, nabbed the other $11 million. Again, no comment. Yet, TLIA's piece of the commission is a bit high, according to art advisor Liz Klein, but she notes that answers are impossible without the full set of facts. Given the generally silent art market, we're unlikely to get all the facts anytime soon.

Like Merkin, Heller was a Madoff victim - $3.4 million in a charitable trust and $10 million of his own cash went down the drain.

Merkin, unlike Heller, concealed his investment with Madoff, and NY State Attorney General Andrew Cuomo has frozen the collector's assets and is suing Merkin for hiding his $2.4 billion Madoff investment. Cuomo approved the sale, with the proceeds going to compensate Merkin's investors for their losses. The art sale, which Cuomo approved, generated $191 million for Merkin (after fees, taxes and legal expenses).

The Heller-Merkin relationship goes back to 2003, when the former helped the latter get his collection going. By 2008, Merkin had the largest private Rothko holding in the world. It occupied several rooms in his Park Avenue apartment. Meanwhile, the Heller-Rothko collection is much older. Heller was friendly with the artist in the mid-1950s and began to collect his work, owning seven Rothkos at one point.

To get their hands on the Rothkos, Heller reached out to Arne Glimcher at PaceWildenstein. Merkin bought seven pieces for around $90 million in a sale by Rothko's heirs. Since Rothko always wanted his work shown in groups, the multiple-piece sale worked for his kids.

Somehow, the money didn't flow through as fully as expected. PaceWildenstein put a lien on five of the Rothkos in June 2004, doing the same with two more two months later. The folks at Pace gave Merkin some flexibility with the terms. But, by 2008, Merkin had only paid for half the paintings. The $42 million lien was noted in court, along with the $19.3 million Merkin borrowed from HSBC, collateralized by the art.

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