The Truth About Art Auctions at Sea:
What an Art Auction is Not!
by
Theresa Franks, for Fine Art Registry®
Many consumers boarding cruise ships for exotic destinations are likely to be subjected at some point during the cruise to the snares of an onboard auction, advertising art work and other collectibles at unheard of prices. For the vast majority of cruise goers, it will be the first experience they have with what the cruise lines call "Fine Art Auctions." For many, it will be the first time they will have ever experienced an auction of any kind, so it is important – and in keeping with the Fine Art Registry® mission – to inform the public about what an auction is not.
Park West Gallery and Global Fine Arts, Inc. (Princess Cruise Lines)
Currently, there are two companies that peddle commercial, mass-produced art aboard cruise ships in what is represented and claimed to be a "Fine Art Auction" format: Park West Gallery (aka Park West at Sea) and Global Fine Arts, Inc.* (believed to be owned and operated exclusively by Princess Cruise Lines). While both art merchants have somewhat similar bad business practices, Park West Gallery is the art dealer that stands far and above the other as the most egregious in its deceptive trade practices.
[*Note: Global Fine Arts, Inc. is not connected in anyway with Global Fine Art Registry, LLC! – Ed.]
About twelve years ago, on April 11, 1996, a joint "Art Sales Program" was formed between Park West Gallery and Cruise Management International. Together they signed a deal to provide cruise ships with art work for auction to cruise passengers. The Securities and Exchange Commission S-1 filing for Miami Cruiseline Services Holdings memorializes the agreement. The SEC filing is a public record and can be accessed by anyone.
Fine Art Registry has recently published numerous articles on the topic of art merchants operating aboard cruise ships, specifically Park West Gallery/Park West at Sea. What the masses of would-be cruise passengers don’t know is that the art sales conducted aboard cruise ships are far from a typical or standard auction setting. Rather, Park West mimics a large commercial retail sales operation whose colossal profits are driven by the sales of art prints and multiples (see the article Truth in the Fine Art Limited Edition Reproductions Industry). But onboard ship, Park West operates with a twist. The bulk of the "retail commercial merchandise" that is sold to passengers by Park West is not usually physically located aboard ship and the "art" may not in fact exist in the physical universe at the time an offer to purchase is made by a cruise passenger. In other words, what passengers believe they are bidding on is rarely what they receive at home some six to eight weeks later. In nearly all cases, cruise passengers are bidding on a Park West Gallery catalog art print or other commercial print or multiple – decorative or poster art that can be ordered online from a home computer or purchased at a big box store like WalMart for significantly less.
The carnival-like sales extravaganzas conducted by Park West are nothing more than glorified retail (catalog) sales disguised as an "art auction" with free flowing booze and silver-tongued auctioneers who are constantly at work manipulating cruise passengers, all in an effort to get them to spend and spend BIG on the "put your kids thru college – you'll-never-see-a-deal-like-this-again – don't-let-it-pass-you-by – risk-free-investment-deal-of-a-lifetime" pitch.
Our continuing investigation into the current business practices of Park West has revealed what are, in our estimation, serious and extreme abuses, especially in the multiples market, that range from blatant and intentional misrepresentations to outright fraud. The victims of these abuses cover the entire spectrum and, make no mistake about it, no one is immune to the scam of a confidence artist. No matter how well educated or intelligent or savvy you believe yourself to be, the con man expertly finds the fulcrum in people and uses human weaknesses against them – mainly greed. After all, we would all like to cash in on a great art bargain at sea, duty free, and arrive home on terra firma and sell that same art object at a huge profit. Wouldn't it be grand if all that were true? But that's not reality. Yet we can all fall prey to it: doctors, lawyers and other professionals, the newly married young couples on their honeymoon and sadly, in many cases, the elderly who are on fixed incomes who can least afford it.
What an Auction is...and is Not!
For our readers and potential cruise goers who might consider participating in one of these sham auctions, it is critically important to understand what an auction is and how it operates and maybe even more importantly in this case, what an auction is not.
There are two types of auctions: the Dutch auction and the English auction – the latter being the most common form of auction sales in America (online auctions and silent auctions are other variations of English auctions.). Each format has the objective of obtaining the highest possible bid for the property being auctioned, but each is distinguished by a different set of rules.
The Dutch auction begins at the high end of an estimate and if no bids are offered, then the price is reduced accordingly until an offer is finally made and accepted by the auctioneer, altogether ho-hum and boring with the mystery taken out of the equation, and therefore not a popular auction format.
The English auction format on the other hand is where the action and excitement are and where real competitive bidding occurs. Most auctions are conducted by the auctioneer starting the bidding at a low or minimum low bid and accepting increasingly higher bids until the last offer by a bidder is made and the hammer is struck, thereby ending the sale with the highest bid.
Key components of a true auction are:
- Catalogue is issued ahead of the auction listing and describing the exact items being auctioned, including a low/high sales estimate.
- Prospective buyers are given full information in advance regarding the item being auctioned and can carry out research before the auction.
- Items being auctioned are consigned by a third party and do not belong to the company holding the auction.
- The item being bid on is the actual item which the winning bidder will acquire, and is not just an example or sample.
- All terms and conditions are disclosed in writing before bidding is commenced.
- Auctioneers are trained and licensed professionals, regulated by the applicable laws.
The above outlines what an auction is. What follows below is the summary of nearly a year of investigation and research into the business practices of Park West and the cruise lines they serve. It has become increasingly clear that the cruise line executives are as blameworthy as Park West for permitting these types of sham sales to continue and profiting from them. The fact that the cruise line companies across the board have ignored and/or remained silent on this growing public concern begs the question: why is it that cruise line officials have not taken swift action against companies like Park West and demanded accountability? The answer is obvious when one stops to consider the financial gain for the cruise lines in allowing Park West to continue without reform or change. We do not believe that the cruise line executives are blind to the abuses and we do not believe they are unaware of Park West Gallery's continued bad business practices aboard these ships. But 20% or more of the revenue (reported in excess of $600 million in sales in 2007) is a powerful argument in favor of turning the blind eye.
One of the missions of Fine Art Registry is to help eradicate abuse in the art market, and especially the print and multiples industry, by educating living artists today about the paramount importance of creating their permanent catalogue raisonnée today while they are still living and producing, which should include the permanent registration of prints and multiples they produce or that others are authorized to produce for them (see the article Truth in the Fine Art Limited Edition Reproductions Industry). The artist is the primary source of information and there is no better person to make the initial record of the existence of the art work than the living artist who created the object. Fine Art Registry proffers that the type of commercial sales of multiples and other mass-produced art being sold in bulk aboard these cruise ships is detrimental to the already abused art print and multiples industry.
In our continued discussions and interviews with victims of Park West Gallery's sales at sea, it has become abundantly clear that Park West and the cruise lines do not want the average cruise-going passenger to discover the dirty little secrets about the so-called "auctions" they conduct shipboard. Ironically, Park West Gallery could in fact conduct a legitimate and honest shipboard auction and provide a unique and valuable service to the cruise-going public and the art sales industry as a whole if they truly had a mind to. Granted, perhaps the coffers of Park West and the cruise lines wouldn't be as full, but who can put a price on the value of integrity, good will and customer satisfaction?
You know you are NOT at a legitimate auction if any one of the following or a combination of the following applies:
Absence of Detailed Auction Catalogs
Absence of a detailed auction catalog describing the specific lots of auction property to be offered at the sale, including a low-high estimate of the value of the art work offered.
Without an auction catalog, a prospective buyer is unable to perform any reliable due diligence. Park West does not properly identify or disclose to its buyers prior to purchase any details or other information regarding the art work's provenance (the history of the piece), especially in the case of multiple prints and art claimed to be on the secondary market such as Dalí, Miró, Chagall, and Rembrandt, etc. It has been reported to Fine Art Registry that Park West discourages prospective buyers from conducting due diligence aboard ship in a variety of ways. Conducting Internet searches on board, the only practical and realistic way to carry out any due diligence when one is hundreds of miles out to sea, is difficult and expensive. This should be a free service to all participants who plan to attend the sale events conducted by art dealers aboard ship so that those that intend to participate can perform the necessary research needed, especially as it relates to those art objects offered for sale that exceed $500.
Absence of Disclosure of Detailed Sales Terms and Conditions
The sales company does not disclose in writing and in advance of the sale, specific auction sale terms and conditions.
None of the Art Work Offered for Sale is Consigned
The art work offered for sale aboard cruise ships is wholly owned by the merchant, Park West Gallery. Our investigation has revealed that none of the art sold to victims was consigned to Park West by a third party as is typical at reputable auction houses. If the so-called auctions conducted aboard these ships were in fact legitimate, any interest (financial or otherwise) in the auction property would be fully disclosed in writing to the prospective buyers prior to the sale. This disclosure would appear in the auction catalog (the one that they don't provide!) and in connection with any descriptive information about the lot being sold or in any other printed materials published or distributed in connection with the sale of the subject art. Park West does not transparently disclose its interest in the "auction property" to prospective buyers. The failure to disclose to prospective buyers the existence of reserve prices and the dollar figures of the reserve prices of art work, wholly owned by the dealer/auctioneer, is deceptive and not acting in good faith and fair dealing with the cruise-going public.
Alcohol Consumption is Encouraged
In every single case we have investigated, booze is offered and encouraged at every so-called auction event. It is provided gratis and it is free-flowing. The consumption of liquor, an important common denominator in the Park West business practice, is promoted in sales materials and is highly encouraged from the moment the passengers step into the art sales event and throughout the sale being conducted. Prospective bidders are encouraged to drink to excess, from the free offering of champagne to dirty martinis. The Park West Gallery auctioneer is responsible for the delivery of the booze and it is paid for out of the auctioneer's pocket – a booze budget that is set by Park West Gallery. The cruise lines obviously condone this activity as the stock is likely purchased from the cruise lines’ inventory.
Merchandise Offered at the Sale is Not Located Aboard Ship
Passengers or buyers are often unaware that they are NOT bidding on the actual item being auctioned. In fact, most victims are shocked to learn they were bidding on an "example" of what would be shipped to them at date uncertain in the future or, as is typical with Park West, an estimated six to eight weeks post cruise. The Uniform Commercial Code (U.C.C. 2-328) is crystal clear on what constitutes an auction: in an auction, the item for sale is the one that is being bid on. In the USA, the UCC is the most common legal code that governs the sale of goods.
Unregulated, Unlicensed, Inexperienced Auctioneers
The individuals aboard ship claiming they are auctioneers or art directors working for Park West are in nearly all cases, not in any way regulated nor are they licensed as required by U.S. statutes. Most, if not all, of the sales staff assigned to ships that sell for the Park West art merchant are not trained or skilled auctioneers. In fact, many of the Park West auctioneers are ex-cruise employees (ex-disc jockeys, dance instructors, sales people, etc.). All Park West auctioneers are contracted with Park West Gallery through a company in the Turks & Caicos Islands known as Plymouth Auctioneering. In other words, all of the Park West auctioneers/sales staff assigned to these ships operate as independent third-party contractors to Park West Gallery, an agency relationship, presumably set up to insulate Park West and probably the cruise lines, too, from potential litigation.
Other Suspected Irregular Practices
Our investigation and discussions with numerous Park West victims and former Park West employees has led us to believe that there are or may be other abuses not so readily identifiable that occur at sale events that Park West designates as "Fine Art Auctions". We have had reports of the following:
Sham Bidding
"Sham bidding" refers to a bid made by or on behalf of the seller, which in this case is Park West, who also happens to be acting as the auctioneer, the owner of the artwork or auction property, and the house bidder.
Puffing
"Puffing" up the sale price by the seller (Park West) is unlawful in New York City, for example, and is expressly forbidden by the Uniform Commercial Code (U.C.C. 2-328(4)). In other words, an auctioneer may not knowingly receive a bid on the seller's behalf, nor may the seller make or procure such a bid, without prior notice to the buyer that the seller has retained the right to do so. There are options for buyers who find themselves victims of puffing. The U.C.C. provides that the buyer may rescind the sale or take the goods "at the price of the last good faith bid prior to the completion of the sale." There may be additional remedies available to victims of puffing based on local or state regulations.
Shill
The use of a "shill" or "shills" is yet another technique practiced by Park West auctioneers. Wikipedia defines a shill, in part as "an associate of a person selling goods or services…who pretends no association to the seller/group and assumes the air of an enthusiastic customer. The intention of the shill is...to encourage others unaware of the set-up to purchase said goods or services...Shills are often employed by confidence artists..."
Shills can falsely increase interest in an item or its apparent desirability, and they [shills] often have a level of access to the seller's item information not available to the general community of prospective buyers, similar to inside trading in the stock market, for example, which is illegal. The use of shills and shill bidding is prohibited at reputable auctions.
Offers of Risk-Free Investment Opportunities
We have discovered that in the majority of cases, the art sold by Park West is worth exceedingly less than what is represented by Park West auctioneers. None of the art sold by Park West that has been brought to our attention can be considered "investment quality" art, much less "risk free" by any stretch. Further, we have not heard from a single individual that has had any success with resale of Park West work on the secondary market for a substantial profit or any profit at all for that matter. Despite our requests, Park West has not provided evidence of a single buyer who has made any kind of a profit at all from the purchase of these purported "investment opportunities" promised to cruise passengers.
The Con
Park West at sea auctioneers manipulate the cruise goers and prospective buyers prior to the sales event and while outside of the so-called auction setting and often in common areas of the ship. This can include all manner of representations, "comped" bottles of wine, and other incentives. There have also been cases where personal invitations by the Park West auctioneers are made to prospective buyers to drop by the personal cabin of the auctioneer in order to conduct Park West Gallery business.
Colored Markers or Stickers Designated to Art Inventory
Before the so-called auction commences, the Park West auctioneer and assistants request that prospective buyers attach colored stickers or markers to the displayed artwork samples they wish to bid on (as not every piece on display is auctioned), giving the owner of the art work (in all cases Park West) and the auctioneer (agent of Park West) an unfair advantage, resulting in a sure sale.
No Opportunity to Inspect
Cruise passengers and prospective buyers have no opportunity to fully inspect the actual sale property offered by Park West because the Park West property is not aboard ship at the time of the sale (with the exception of the poster art that Park West uses as a promotional give away) and in fact may not even be manufactured or produced at the time of the sale. In other words, the art offered by Park West and the cruise lines may not yet exist. Inspection of the auction property and due diligence by the buyer is impossible aboard a cruise ship when in fact the property being auctioned is not the property the buyer ultimately receives.
The Absence of any Disclosure or Documentary Evidence
There is no reliable documentation of any kind aboard ship that would in any way support the authenticity, quality and edition run of the art work offered and sold by Park West to cruise goers. Park West certificates of authenticity and appraisals are prepared and signed by the owner of the artwork, Albert Scaglione, who is the CEO of Park West, or by one of the agents of Park West, and most often are not provided at all unless an additional fee is paid to Park West. The fact that Albert Scaglione regularly executes certificates of authenticity for the art work his company sells is very unusual and irregular. In the absence of an agreement to the contrary, the certificate of authenticity should always be signed by the artist if living, not Albert Scaglione. As for the certificates of authenticity that Scaglione executes for works by deceased artists, such as Rembrandt, Salvador Dali, and the rest, they too are worthless, and would not be recognized by any art industry authority as reliable instruments to prove or support authenticity. Since Park West has a pecuniary interest in all of the work it owns, it is in Park West's interest to wildly inflate appraisals. Adding insult to injury, Park West charges $35.00 a whack for those worthless pieces of paper.
High-Pressure Sales Tactics and Techniques
After the Park West auction is completed, the buyer is required to set an appointment for a meeting later with the auctioneer. This practice of requiring buyers to attend post-sale appointments to settle their account is not at all in keeping with a reputable auction format. These post-sale meetings are held one on one, in private with the Park West auctioneer/art director and the winning buyer. The result is high pressure sales tactics and techniques which include an attempt to convince the cruise passenger/buyer to upgrade to "investment quality" art or the sale of additional pieces of art work. This type of practice is extremely suspect and not at all typical of any legitimate auction house.
The bottom line is that many thousands of cruise goers can save themselves a lot of grief by simply doing some homework prior to going on a cruise. The best advice is to stay clear of the shipboard "fine art auctions" and you will come away unscathed. -
See these related Fine Art Registry articles:
— by Theresa Franks
| January 22, 2008
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