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Bankrupt Manhattan Art Gallery Accused of Defrauding Clients

Bankrupt Manhattan Art Gallery Accused of Ripping Off Clients

(Bloomberg) -- Paintings by Marc Chagall, Wassily Kandinsky and the Italian surrealist Giorgio de Chirico were allegedly used by a New York art dealer to lure investors and collectors into paying hundreds of thousands of dollars for works he never owned or didn’t have a right to sell.

At least three lawsuits filed this week against the dealer, Ezra Chowaiki, accuse him and the Park Avenue gallery in which he’s the president and a minority shareholder, of carrying out a variety of frauds. The gallery, Chowaiki & Co. Fine Art Ltd., filed for bankruptcy on Nov. 13.

David Dangoor, the gallery’s Swedish director and majority owner, was also sued with buyers accusing him of knowing about Chowaiki’s frauds and failing to warn them.

"For years, Dangoor has presided over a gallery that has stolen its clients’ money, sold interests in phantom artworks, and conveyed overlapping ownership interests in the same artworks," according to one of the lawsuits.

Carpenter Fine Violins and Collectibles LLC, a boutique seller of musical instruments based in Manhattan, claims it was duped into a joint venture with Chowaiki to acquire a 50-percent share of Kandinsky’s 1928 watercolor "Schichtenweise" for $312,500, which was supposed to be resold for a profit.

But Chowaiki never bought the Kandinsky after getting Carpenter’s money, the boutique claims. The current owner of the painting says he didn’t sell it because Chowaiki had defaulted on a payment, according to the lawsuit. In a twist, the boutique said Chowaiki claimed the work was being bought for $625,000, when the actual price was later revealed to be 337,640 euros ($397,706).

Fraud Claim

"Defendants and their gallery have perpetrated a fraud not only on Carpenter but on a host of their other clients as well," the boutique said.

Chowaiki didn’t respond to a text and a voicemail seeking comment on the lawsuits. The gallery, which is open by appointment only, didn’t return calls. Its bankruptcy lawyer, Clifford Katz, also didn’t return a call.

Total losses will amount to "many millions of dollars," said Judd Grossman, the attorney for the alleged victims in all three cases.

"In the art world, reputation is paramount, and the defendants here abused their standing to defraud dozens of collectors and advisers alike," said Grossman, whose Manhattan-based law firm specializes in art law.

Dali Painting

In another lawsuit, collector Naftali Leser says he sold the Salvador Dalì painting "Femme Avec Papillon" to Chowaiki in 2015 after he purchased it for $1.135 million from another gallery a few years earlier. In exchange, Chowaiki paid Leser $50,000 and gave him title to two paintings, including a 1960s version of "Ettore e Andromaca" by Giorgio de Chirico.

According to the lawsuit, Leser left his new painting with the gallery on consignment in 2015, and can’t get it back.

Robert Rimberg, the manager of RH9 Group LLC accused the gallery in another lawsuit of fraudulently selling a 100-percent interest in Chagall’s "Scene de village" to RH9 and another entity, Grands Capital NY LLC, for a combined $750,000, with a promise to then quickly sell it to a buyer the gallery had lined up for a quick $75,000 profit. In reality, Rimberg claims, Chowaiki had sold interests in the work totaling totaling 150 percent of its value, even though he’d already sold it to an art gallery in London in September.

The gallery "absconded with plaintiffs’ $750,000 investment,” and failed to return any money despite repeated demands, according to the suit.

Fraud Victim

The gallery says it was also a victim of fraud. It sued a former partner in 2010, claiming she opened a secret Swiss bank account, siphoned money from the sales of paintings and stole commissions when she worked for Chowaiki.

Luba Mosionzhnik "was the principal contact person with the gallery’s accountants and bankers, a role that allowed her freedom to engage in improper practices that later came to light," the gallery alleged in the complaint against the former partner. The lawsuit was settled.

The Chapter 7 bankruptcy filing for Chowaiki & Co. Fine Art in Manhattan estimated the gallery’s assets at $1 million to $10 million, with liabilities of $10 million to $50 million.

--With assistance from Katya Kazakina

To contact the reporter on this story: Erik Larson in New York at elarson4@bloomberg.net.

To contact the editors responsible for this story: David Glovin at dglovin@bloomberg.net, Joe Schneider, Paul Cox

©2017 Bloomberg L.P.