Famous last words

Andy Warhol died in 1987. In the few years since his death his Estate has been beset by no fewer than three serious and complex legal wrangles. In Britain the death of Henry Moore in 1986 has also been followed by a wave of legal disputes concerning his Estate. The deaths of both men have resulted in sad, but classic, artlaw tales.

The Protagonists
These include art dealers, critics and a former Assistant District Attorney of the Bronx. Some of the more important are:

Frederick Hughes: an art dealer who met Warhol in 1966 and became one of the menagerie of characters at Warhol’s Factory. In 1968 Hughes probably saved Warhol’s life by giving him mouth to mouth resuscitation after the artist had been shot by Valerie Solaris. Deeply grateful to Hughes, Warhol committed himself to a trusting personal and business relationship with him. Hughes then created and marketed Warhol’s image, and managed his business affairs. According to Victor Bokris, Warhol’s biographer, Hughes saw more than anyone else that Warhol would achieve financial success like Picasso.

Eddie Hayes: a Manhattan lawyer who had started his career as an Assistant District Attorney in the Bronx. Tom Wolfe knew him and drew upon his personality and lifestyle when writing his best-seller, The Bonfire of the Vanities. After Warhol’s death, Hughes hired Hayes to advise and assist with the extensive responsibilities of executing Warhol’s will and managing the huge Estate.

Archibald Gillies: was a financial consultant who had worked for Nelson Rockefeller in the 1960s, then for the World Policy Institute. When Hughes needed financial and administrative help in running the Warhol Estate, Gillies was hired as financial adviser.

The Will
Warhol did not state in clear and unequivocal terms what he wanted to happen to his considerable Estate after his death. A close friend spoke to the artist shortly before his death, and recalls that Warhol talked endlessly about his will but did not really have one. He did have a document which loosely described the Andy Warhol Foundation, but he could not be more explicit, simply saying ‘Fred is my heir, Fred is like my son’. Frederick Hughes thus became the Principal Executor of an Estate worth hundreds of millions of US dollars, charged with the task of implementing Warhol’s vague ideas for a Foundation.

Under the terms of the will, after payment of expenses, everything went to Warhol’s charitable Foundation. Hayes put a value on the Estate of $600m. Archibald Gillies saw the situation this way: ‘Everyone has in their own mind the notion of what Andy Warhol might have liked to do. It is obviously very difficult for any group of people, certainly any one person, to be able to divine what Andy Warhol might like to do today as opposed to when he was alive’.

At the time Eddie Hayes had a more straightforward view of the task: “We’re not in business here so that I can have a nice office on 66th Street and Fred [Hughes] can have a huge office over there between Madison and Park. We’re in the business of raising money to give it away to people who want to make good in their lives, to some greater or lesser extent as Andy Warhol did’. As soon as he was appointed, Hayes began by securing the Estate. Warhol’s town house on 66th Street was bursting with valuables. Hayes posted guards to exclude anyone except Hughes and himself and, in Spring 1988, at Hughes’ behest, Sotheby’s sold Warhol’s collection of antiques. Described as ‘The Auction of the Season’, the sale raised around $4m to establish the Foundation.

The Foundation
The Andy Warhol Foundation For the Visual Arts ‘supports and awards grants to both cultural institutions and organisations (as well as to park and landmark preservation in the US and abroad)’. These are the opening words of the documentation establishing the Foundation. The anarchic days of The Factory were now over.

Hayes and Gillies were running a business, albeit a charitable one, with Hughes as Chairman of the Board. David D’Arcy, of the Art Newspaper, described it well: ‘A foundation is a contract drawn up to abide by a certain mission and to provide the funding so that that mission can be fulfilled. Now what this enables the Warhol Foundation to do is to in some sense function as a mini Getty Foundation for contemporary art’.

The Foundation’s Board was eventually enlarged, but by 1992 Hughes had resigned, having been given an ultimatum by the Board. Gillies was appointed President with Brendan Gill (architectural critic of New Yorker) as the new Chairman. The Foundation had been beset by three major legal disputes. The first involved a contract with Eddie Hayes, the second a licensing deal and the third the sale of Interview magazine.

The Contract
Eddie Hayes has received payment of around $5m from the Estate, but he says that he is owed a further $9m; not surprisingly the Board refutes his claim and, in fact, states that the legal services provided do not exceed $3m and that Hayes should repay the Estate.

When Hughes hired Hayes to do legal work for the Estate and the Foundation, he agreed to pay Hayes by way of a percentage of the Estate (Hughes would then hire other lawyers as needed). Hayes valued the Estate at around) $600m which would yield him around $14m in fees. He says that he is entitled to this money having, in his view, fully and successfully carried out the required legal services.

In 1993 a new element was introduced: negotiations between Hayes and the Estate came to a halt. The Attorney-General of New York State (responsible for overseeing charities and charity law) became involved. David Samuels, Assistant Attorney-General, said: ‘.. .the role of the Attorney-General’s office is to make sure that the charity receives the proper amount. He [Hayes] is basing the request exclusively on the size of the Estate. But there are a number of factors that should be considered under the law of the State of New York, including: how much work he did; how difficult the case is; and what his own abilities are. And we believe that all these factors and not merely the size of the Estate should be factored into the equation.’

Needless to say the Foundation is also disputing Hayes’ valuation of the Estate. They say it was worth no more than $100m. Colin Gleadell, writing in Art Monthly (167) June 1993 about Spring sales in New York said: ‘What is clear is that buying is still extremely selective and unpredictable, making accurate valuations problematic at all levels. Nowhere has this been clearer than in the much publicised farce surrounding the valuation of the Warhol estate which over the last four years has fluctuated from anything between $90m and $600m’.

The Foundation, backed by the Attorney-General for New York, is confident that the case will go their way and that Hayes may well have to repay some of the fee he has already received.

The Licensing Deal
Roger Schlaifer is a product licensing agent who achieved great success in merchandising the children’s cuddly toys called ‘Cabbage-Patch Kids’. Just before Warhol’s death, Schlaifer realised the commercial potential of marketing Warhol’s name and images and proposed to Warhol and Hughes a substantial licensing deal. After Warhol’s death, Hughes and Hayes took up the proposal and sold Schlaifer’s company the exclusive world-wide licensing rights to reproduce and merchandise the – works and name of Andy Warhol. Warhol’s copyrights became the property of his Estate when he died and would last for 50 years. Schlaifer then embarked upon what he called ‘the premier licensing project in the world’, an extensive programme of commissions with mass manufacturers to incorporate Warhol’s designs and images into badges, scarves, sweaters, books, paper products and perfume. The perfume deal between Schlaifer and Siseido, Japanese cosmetics company, was said to be worth $40bn; the paper products produced over $10m sales in the first three years. And, since Warhol’s copyright runs until the end of 2037, it was in Schlaifer’s interest to raise and invest substantial sums of money in the venture.

However, the licensing agreement quickly fell apart; Hughes and Hayes withdrew (in breach of contract) on the grounds that the manufactured products were ‘tasteless’. An arbitration panel in Atlanta awarded Schlaifer damages of $4m – this included $lm as punitive damages to compensate Schlaifer for the bad behaviour of the Estate. The deal, its breach and the arbitration award had all been ‘a disastrous mistake’.

The Magazine
Warhol started Interview magazine so that he could go to movie screenings, get to know and indeed interview movie stars. By his death the magazine had a circulation of 160,000. Two years later Hughes and Hayes agreed to sell it to Peter Brant, a wealthy entrepreneur, for $12m. Payment was to be made by instalments: $5m initially with the balance being a promissory note backed by Brant’s personal guarantee. The money would be paid not to the Estate, but to a related company ‘Andy Warhol Enterprises Inc’.

Once again there was disaster, this time when the legal formalities went very badly wrong. One week before the final legal documents were signed Hayes dissolved ‘Andy Warhol Enterprises Inc’. Brant’s promissory note was duly corrected to be paid to the Estate, but his personal guarantee – for some inexplicable reason – was not corrected. This meant that the personal guarantee was not to the Estate but to a now non-existant company. Another costly legal wrangle ensued. The court held that the promissory note in favour of the Estate was invalid and could not be enforced – the Estate thus lost its $7m!

Hayes explained that the mistake at the root of the legal problem as a ‘typing error’. The court’s decision is subject to appeal.

The creation of the Andy Warhol Museum has been the Foundation’s one success. Due to open in Spring 1994, the museum will be based in Pittsburg, PA, Warhol’s birthplace. It is hoped that the museum will stand as a lasting memorial to Andy Warhol’s artistic contributions and that his works, his true legacy will, in contrast to the legal disasters, benefit everyone as he intended.

The Lessons

Banks and solicitors are frequently appointed as executors in wills. Many solicitors provide a moderately priced service (about £50) to actually draw up a clear will which will ensure, as far as possible, that the maker’s intentions are abided by after his/her death.

Artists who are seriously concerned about what happens to their ‘works and name’ after their death should consider setting up a foundation or trust during their own lifetimes. The advantages are clear: the artists’ detailed ideas and wishes can be translated into the necessary legal documentation, discussed at length, understood, tested over time with adjustments being made to the legal structures and documentation to the artists’ satisfaction while they are still alive. The disadvantage of simply relying on a will is that the artist is no longer around to check that the will is actually being implemented as she/he intended!

However even Foundations are not free of all legal disputes, as Henry Moore’s ghost must be well aware. Moore created a foundation in 1977, nine years before his death; by 1993 there had been two legal wrangles. The first was in 1992 when Henry’s daughter Mary, and others, objected to the Foundation’s plans to build a £4m visitors centre in the grounds of Moore’s Perry Green home in Hertfordshire. Mary’s principal objection was that the centre would significantly change the landscape that Moore had carefully created for his works. Sadly, Moore was not alive to say whether the Trustees of the Henry Moore Foundation were, in planning the centre, properly fulfilling his wishes and the responsibilities he had given them. In the event the matter was resolved by the Department of the Environment who rejected the proposal on planning grounds.

The second legal bout occurred in 1993. This time Mary sued the Foundation claiming ownership of sculptures and drawings by Moore valued at around £200m. Mary would have inherited all of Moore’s Estate (as Moore’s heir) had he not established his charitable Foundation. Ironically, Mary had played a key role in setting up the Foundation and had strongly supported her father in his efforts to protect his artistic legacy and avoid ever-increasing taxes. Moore had been considering emigrating because of taxes and he was deeply concerned that further editions of his sculptures might be cast after his death – as had happened to Rodin.

Moore had transferred ownership of a large part of his Estate to the Foundation (except his studios and home at Hoglands) and in return recieved an annual salary of £45,000. Mary contested the ownership of works created between the establishment of the Foundation and his death claiming that these were not owned by the Foundation. The High Court in London recently decided against Mary and said that the documentation clearly showed that the artworks belonged to the Foundation. Mary is now considering an appeal, but faces thousands of pounds in legal costs.

Legal Fees
Common sense dictates that any percentage fee agreement should relate to a specific sum and not to an ambiguous notion, eg the value of an Estate, as happened in the Warhol case. This is especially so where the value of that ambiguous notion is bound to change year by year, even expert by expert. It is hard to fathom why the Foundation agreed to pay Eddie Hayes on this basis. Lawyers, or other workers, under such an agreement can properly do as little or as much work as the client instructs and at different rates of pay depending on the type and quality of work required. The arrangement made between the Foundation and Hayes was courting disaster – for both sides! It would have been far safer and more realistic to have set up an in-house legal team paid annual salaries by the Warhol Foundation.

Licensing Deals
Had Warhol been alive there is no doubt that he would have been involved personally in ‘quality control’, at which he performed masterfully; had he established his Foundation during his lifetime, the Trustees might perhaps have been better equipped to perform necessary ‘quality control’, having been trained by Warhol. Even without the question of quality control the Foundation would have been wiser to enter into a more limited licensing deal with Schlaifer, at least in the beginning. Granting world-wide rights at the outset was, to put it mildly, rather rash, as was giving right to reproduce Warhol’s ‘works’ rather than only specific images. To control quality the Foundation could, among other things, have defined methods, technology and medium of reproduction.

Promissory Notes
The lesson is don’t make typing mistakes. If a lawyer makes such a fundamental legal error which causes a client financial loss then the position is generally simple – the lawyer will be responsible for compensating the client. It is not clear whether the Foundation’s lawyers will be responsible for compensating their clients in this case.

Sadly, it is unrealistic to draw up a simple, clear check list of do’s and dont’s for artists concerned about their works and name after death. Every artist’s wishes will differ, indeed some artists do not care about what happens to their artworks after their death. Those artists who are concerned would be wise to consult with lawyers versed in trusts, wills and artlaw matters. There is much that can be done to help order an artist’s affairs, including saving inheritance tax*, but it should be done while the artist is still alive and not left until they are dead!

* An index of ‘art treasures’ in the United Kingdom artworks whose makers have set up trusts/foundations and so avoided inheritance tax, is kept by the Inland Revenue and can be seen by the public.

© Henry Lydiate 1994

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This article is from the Artlaw Archive of Henry Lydiate's columns published in Art Monthly since 1976, and may contain out of date material. The article is for information only, and not for the purpose of providing legal advice. Readers should consult a solicitor for legal advice on specific matters. Artists can get free online legal information from Artquest.