The High Bidder: Art's Most Elusive Fake?

AT a Sotheby auction in 1987, Vincent Van Gogh's ``Irises'' sold for $53.9 million - the highest ever paid for a painting. It now turns out that Sotheby loaned the buyer half the price ($27 million), and has retained possession of the painting since the auction for all but six months. The sale, if that is what it was, has the art world in an uproar. It raises the troubling question: Was this just a way to kite prices?

The tab on old and new masters generally tends to rise following a benchmark purchase of this magnitude and notoriety; whatever Sotheby ultimately nets on ``Irises,'' the value of the remainder of its vast inventory has increased. As Alan E. Salz, director of Didier Aaron Gallery puts it, ``Every painting sold since then has been measured against it ... [but] maybe that wasn't a real price.''

Lest Sotheby's practices be thought unique, it should be noted that Christie's, the other top dealer in the art auction business, advertises its willingness to assist buyers with financing. Further, there is no reason to think such practices are confined to the biggest art dealers.

For those who have attended prestigious art auctions, certain nagging questions persist: Which of the ostensible bidders represent the house? Who is present merely to bid prices up? To these doubts we can now add two more: Were the paintings sold actually bought? Were the prices paid real?

If auctions are, as economists like to tell us, the most free of free markets, it is sobering to reflect on just how rigged they can be.

The art world is disturbed about more than whether this particular sale was manipulated. New York dealer David Tunick says that ``... the art market has become so monetized ... people have begun to think of art as a legitimate form of investment.''

Richard L. Feigen, another art dealer notes: ``It's exactly like buying on margin ... by extending credit you are further inflating prices, which are rapidly getting out of control.'' And Jeffrey Deitch, former vice president of Citibank in its Art Advisory Service, says that ``at Citibank for nine years, I saw many cases where people used leverage to buy works of art.''

If art is a commodity from which big bucks can be made, leveraged buyouts will be as much a fact of life there as anywhere else in the marketplace.

Sotheby's financing has its defenders. David Bathurst, a former head of Christie's, notes that ``critics of auction house loans say they are a way of artificially pumping up prices. This is no more true than saying building societies pump up house prices when they grant mortgages.''

But mortgages are granted or denied on prices agreed on between buyers and sellers independently of the bank.

The bargaining process is an open one and the buyer possesses the property bought. In the case of ``Irises,'' the seller seems to have covertly ``sold'' himself a property he had and still retains. In fact, the transaction was purely hype that a real sale had occurred at an enormous price.

Art dealers have traditionally extended credit to clients, allowing buyers to pay for their purchases over weeks or even months, often without charging interest.

Although Sotheby's will not disclose the interest charged for ``Irises,'' it usually aims, in large sales, at three percentage points above the prime rate.

Alan Bond, the Australian who bought ``Irises,'' is known as the owner of a ``communications, brewing, and real estate empire.'' Sotheby's loan to Mr. Bond could be greatly reduced or perhaps even repaid in full when another painting he owns, Manet's ``Walk,'' is auctioned at Sotheby's on Nov. 15. The presale estimate on the Manet is between $10 million and $14 million - well above the $3.96 million Bond paid for it in 1983.

Bond stands to be a prime beneficiary of the kiting that resulted from his purchase of ``Irises.'' In this way, justice is served, virtue triumphs, and the circle is closed on the monetization of art.

Well, not quite.

Queried whether Sotheby's has attempted to sell ``Irises'' since Mr. Bond ``bought'' it, a spokesman for the auction house responded: ``We have been approached by dealers, lawyers, bankers, and others asking if `Irises' is for sale. Technically it is not for sale. If they are interested in making an offer, we tell them we will put them in touch with Mr. Bond's representatives.''

Why, one wonders, would knowledgeable dealers, lawyers, and bankers approach Sotheby when Bond's ostensible ownership has been a matter of public record for a year? Sotheby's artful response is up to the highest recent standards of the only truly flourishing art of our time - the art of the deal.