The Art of Bankruptcy
During the 1980s, American corporate chieftains spent four times more money on fine art than did the United States government. Inspired by sudden wealth and juicy tax breaks, arbitrageurs gobbled up Old Masters, and Wall Street CEOs decked their halls with Expressionists.
But today, with the New York art market and much of the U.S. business world in a recession, one of the nation's oldest and largest corporate art collections is coming home to what may be its final exhibition space: a forbidding ten-story warehouse on NE First Avenue in Miami.
Since the September 20 failure of Southeast Bank, local museum directors, artists, and investors have wondered what will become of the bank's sprawling, 4000-piece art collection. This month part of the answer became painfully obvious when movers rounded up works of art from dozens of South Florida branch banks and started trucking them to The Fortress, a commercial storage building just north of downtown Miami. The Southeast collection, painstakingly purchased over three decades for approximately $5.8 million, awaits liquidation by a federal bankruptcy court.
Confusion over exactly who now owns the collection has led many local art lovers to question the civic commitment of Southeast's successor, North Carolina-based First Union National Bank. Many assumed that First Union took over the art collection along with other Southeast assets in a complex sale brokered by the Federal Deposit Insurance Corporation, then decided to quietly sell the art to the highest bidder.
In fact, says Richard O'Brien, the FDIC's liquidator in charge of Southeast's assets, First Union never had a chance to acquire the collection. The out-of-town financial giant was only allowed to bid on ownership of Southeast Bank. The artworks are the property of a legally separate holding company, Southeast Banking Corp. The two institutions suffered different fates in September: the bank was seized by federal regulators and sold to First Union, while the holding company filed for bankruptcy.
The collection is still owned by Southeast Banking Corp., but not for long. Creditors have filed more than $350 million in claims against the bankrupt holding company, and the art collection, along with other Southeast assets, will be sold to help pay off those debts. "I can't say exactly how much pressure there is to do so," says the FDIC's O'Brien, "but it's in everybody's interest to liquidate the collection quickly."
Lisa Austin is among many who disagree with that strategy. As Southeast Bank's fine arts director from 1977 to 1989, Austin was in charge of acquiring the works of such internationally prominent artists as Frank Stella, Richard Diebenkorn, Robert Rauschenberg, Andy Warhol, Jasper Johns, and Claes Oldenburg, as well as a valuable scattering of Navajo blankets and a century-old wooden cigar-store Indian. She worries that Jules Bagdan, the court-appointed trustee responsible for selling the Southeast collection, may face a bigger task than the court has patience for.
"He does not want to fire-sale it, but I don't know what his method will be," Austin says of Bagdan. "The art world is in a deep recession these days. You can't just dump a collection like this overnight and expect to do a good job. It has to be marketed intelligently, and that takes time."
Diane Camber, executive director of the Bass Museum in Miami Beach, says she doubts any local museum has enough money to buy all or any substantial part of the Southeast collection. But overseas investors might. "Some of the pieces have extrinsic value to this community, and it sounds like we're going to lose them," Camber says. "We've seen a lot of major American works going to other countries in the past few years. These sorts of forced sales don't help retain cultural assets."
Bagdan, director of bankruptcy reorganization for the accounting firm Price Waterhouse, says he won't allow himself to be pressured by Southeast Banking Corp. creditors. In a prepared statement, Bagdan said it would take several months to catalogue and review the art to "determine the best way to liquidate it to bring the maximunm proceeds to the estate."
Bagdan says he hasn't decided whether to sell the collection in parts or in one lump. Nor has he decided whether he will hire a consultant. Any sale of the Southeast collection, he notes, will require court approval. But Bagdan also acknowledges he has received "several" bids on specific artworks. "If people are interested, they are welcome to send us a letter expressing their interest," he says. "However, we are not accepting or reviewing or entertaining offers."
A bid by First Union apparently is not among the eager early offers. "We have no specific plans to bid on the artwork," says spokesman George Owen. "We do not purchase art as an investment as a general policy."
Says Austin of the fate of the Southeast collection: "It's a real blow. We weren't just out shopping for art. We were trying to put together a great collection. You get a sick feeling in your stomach watching something you've put together being dismantled.
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