Priceonomics

Art museums are a criminal’s dream. They house objects worth tens of thousands to millions of dollars that can be as easy to transport as a large piece of paper. Yet they are often nonprofits with modest budgets that cannot afford adequate security systems. Hollywood enjoys filming sequences of art thieves dodging mazes of laser sensors and replacing security camera footage, but actual thefts look much less high tech. 

An employee at the Louvre hid in a closet overnight and walked out of the museum with the Mona Lisa hidden under an artists’ frock the next day. A thief burst into the Museum of Modern Art in Stockholm with a sledgehammer and stole a million dollar Matisse. The men who recently stole works by Gauguin, Picasso, and Lucian Freud from the Kunsthal - a Dutch museum - broke through an emergency exit door using pliers. One of the thieves, who is now in custody, plans to sue the museum for negligence, claiming that it made his robbery too easy. Robert K. Wittman, the retired head of the FBI’s Art Crime Team, told the New York Times that he struggles to enjoy art museums because all he sees are “crimes waiting to happen.” 

The arrest of the men behind the recent Kunsthal burglary has led to a number of articles on stolen art with contradictory messages. Most declare art theft a lucrative enterprise whose billions per year proceeds are second only to the profits of drug dealing. But a few declare profiting from stolen art to be so difficult that, in the words of a former art thief, “Nobody breaks into a museum and steals paintings and wants to sell them. It’s impossible.” So who’s right?

Too famous to sell

When a famous artwork is stolen, the press like to report the top estimates of the stolen goods’ financial worth. “Thieves got away with $65 million worth of art,” a Newsweek journalist wrote of the Kunsthal theft. Other articles quoted higher estimates, while many experts settled on a value around $10-$15 million

But any valuation this high assumes the artwork will go to auction at Sotheby's or Christie’s, where competition between art foundations, Russian oligarchs, and Chinese nouveau riche will drive up the price. And that is not an option once a theft has made headlines around the world. The problem with selling stolen art is that the source of its value - its fame - also makes it impossible to sell for its full worth.

Today, this is equally true even of artwork whose theft does not make the front pages. Art thieves could previously move stolen artwork across continents and sell it to art dealers who wouldn’t recognize it as stolen. Thanks to the Internet, however, it is now easy for auction houses and dealers to check whether a work has been stolen on databases of stolen art maintained by Interpol or the Art Loss Register.

So how do criminals profit from art theft?

Profiting from stolen art

One solution is to steal artwork on commission for a private collector. The collector is unlikely to offer the full price, but stealing on commission removes all the risk for the thieves of trying to find a buyer. Which in the art world, where pliers have been used to steal million dollar paintings, can seem like the only risk. (For this reason, investigators believe museum employees and curators who steal pieces for personal enjoyment to be a major source of art theft.)

There are, however, two major players in the art world who continue to see the stolen work as extremely valuable: the museum from which the art was stolen and the insurance company on the hook for covering the full cost of the stolen pieces. 

According to an excellent article in the New York Times Magazine, it is the desire of the original owners (and their insurers) to reclaim stolen artwork that makes them valuable. The author notes that the going rate for stolen art on the black market is around 7% to 10% of its full value. This could be seen as the equivalent of buying a stolen iPhone or bike for a fraction of its value, but the author argues that the buyer is really acquiring the original owner’s desire to reclaim the artwork. 

Officially, art museums and their insurers keep to a “we don’t negotiate with terrorists” policy when thieves try to ransom back stolen artwork. In practice, it seems that they quietly pay from time to time under the guise of offering a reward for “information leading to the return” of stolen works of art. The aforementioned Times article notes the example of the Tate Gallery in London paying a lawyer $5.6 million to “negotiate” the return of stolen paintings. The managing director of the Art Loss Register, which itself negotiates the return of stolen artwork in return for a commission, toldThe Guardian that he suspects as much. Experts advised the Kunsthal not to publish a monetary value of their stolen paintings because thieves often demand 10% of the value of a painting for its safe return.

The difficulty involved in successfully profiting from the return of a well-known piece of art means that the optimal strategy may be in stealing expensive but lesser known works. An art dealer in legal trouble for dealing stolen artwork - and a self-described former art thief - told the Times that he never stole a painting worth more than $100,000. His ideal theft was off the wall of a playboy’s penthouse rather than a museum’s salon. Although the market price of such works is lower, the lack of publicity means it has a higher chance of entering the legitimate market to earn its market price. 

One obvious reason why is that six figure paintings attract less legal attention than their more lucrative cousins. A review of the memoir of the head of the FBI’s Art Crime Team described the intricacy of the sting operations to recover famous works of art:

Investigative details dazzle: a Miami yacht at the ready to entertain a group of thugs; a gym bag filled with 500,000 euros in cash to “buy” a Breughel in Spain; an unnamed Hollywood starlet who helps the bureau by pretending to “know” an undercover agent in his alter ego, cementing his reputation as a player.

In contrast, less famous art, even if expensive, is treated as a low priority, especially in the United States:

Most art crime investigations are run by the same local F.B.I. unit that handles routine property theft. Art and antiquity crime is tolerated, in part, because it is considered a victimless crime.

Dealers who would introduce fleeced artwork to the legitimate market also enjoy some protection from the unclear legal jurisdiction of stolen art. Even if a piece is stolen in a country like the U.S. or Britain, which favors victims, it is likely flipped in European countries where the law makes it “possible to obtain titles for stolen works of art.” When a stolen artwork is discovered, it can take a long, expensive legal battle for the original owners to reclaim it. This gives an owners an incentive to negotiate a deal that involves paying a nominal fee, or even the black market value, for the return of the artwork, and makes legal action against dealers less certain.

It's hard to say how much money is being made stealing art. We know that billions of dollars worth are stolen each year, but not how much money criminals convert that into. Museums, collectors, and insurers keep quiet about paying for the return of their art. Only a small percentage of stolen art is recovered - 5% to 15% according to various sources. Of the unrecovered pieces, it's hard to say how much is destroyed, neglected in storage, or hanging in the penthouses of private collectors.

But criminals can profit from a stolen piece of art without ever selling it. Even if a thief struggles to find a buyer for an artwork, its potential worth allows it to play a useful role as a piece of collateral. Banks long accepted paintings as collateral, giving criminals credit lines usually unavailable to those without legitimate income sources, although banks now check the same stolen art databases as auction houses and art dealers. But paintings can still be used as payment or collateral with other criminals for drug deals or borrowing money. The Times reports the use of one set of stolen paintings in the criminal underworld:

One painting was sent to Istanbul, where it was used as part of a payment for a heroin deal. Four other paintings — including a Gainsborough, a Goya and a Vermeer — were taken to Antwerp, where a diamond dealer accepted them as collateral and advanced [the thief] a large sum of money, with which he tried to start an offshore bank in the Bahamas.

But the most creative means of profiting off stolen art is the plan of a con man named Eduardo who went by the name Marqués de Valfierno. In 1911, an Italian man named Vincenzo Peruggia walked out of the Louvre with the Mona Lisa. Its theft inspired a national scandal that rocketed the painting to fame: The French accused JP Morgan of commissioning its theft, as well as the Kaiser and Pablo Picasso. Peruggia made several attempts to sell the painting, until a dealer contacted the police and turned him in two years after the original theft. 

In 1932, however, a journalist published a story relating a remarkable confession he had received from the Marqués de Valfierno - with the promise that he not publish it until Valfierno's death. As is related in an excerpt of the book The Crimes of Paris in Vanity Fair, the Marqués made his money selling forgeries of famous paintings from the Louvre to wealthy Americans. The con man always told his customers that the museum had replaced the painting with a copy to “avoid scandal.” 

At one point, however, he decided that he actually needed to steal the paintings. He had sold a forged Mona Lisa to an American millionaire, but the man boasted about his stolen masterpiece so much that a Parisian newspaper wrote an article about the theft of the Mona Lisa. According to Valfierno, he hired Peruggia to steal the Mona Lisa so that his buyers would have no doubt about the originality of their purchase.

Except that the Marqués had no interest in selling or even touching the actual Mona Lisa. Instead, he had a forger prepare six copies of the Mona Lisa, which he then sold to six different people once news of the theft broke. Thanks to the publicity the burglary received, Valfierno felt sure that his customers would neither boast about their purchase nor risk hiring an expert to examine their Mona Lisa. 

No further evidence has emerged to corroborate Valfierno’s claims. The Italian thief, Peruggia, who defended himself in court by claiming that he stole the Mona Lisa out of a patriotic duty to reclaim Italy’s cultural heritage, denied being hired to steal the painting. And all these years later, no one has spoken up to say that he or she was one of Valfierno’s fleeced customers. It seems likely that the Marqués, who was a con man skilled in talking his way into high society, simply made the whole thing up over a drink in Casablanca.

But it seems entirely appropriate in the crazy world of fine art, where people regularly spend millions of dollars on paintings that they can’t distinguish from a $100 reproduction, that the best way to profit from stolen art may be by selling forgeries.

This post was written by Alex Mayyasi. Follow him on Twitter here or Google PlusTo get occasional notifications when we write blog posts, sign up for our email list.


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