ART AVARICE Wanna Buy A Monet?

Selling art to meeting budgetary shortfalls is a tradition in North Rhine-Westphalia. Now in Essen, the Folkwang Museum collection could be at play.
The ship might have sailed for saving Essen's finances.

The plan to sell two famous Warhols from the collection of the Westspiel Casinos in Aachen, North Rhine-Wesetphalia, is nothing new. There seems to be a tradition in North Rhine-Westphalia of plugging budgetary shortfalls by selling works of art.

In 2006, the city of Krefeld wanted to sell a painting by Monet and use the €20 million proceeds to renovate the dilapidated Kaiser-Wilhelm Museum. Later the same year, WestLB sold a 1932 painting by Max Beckmann, “Self-Portrait in a Hotel,” to a private art dealer for €13.9 million. A few months later, the same painting was offered at the art fair TEFAF in Maastricht for €30 million.

Now the Warhols will be sold at Christie’s in New York on November 12 for an estimated €100 million, or about $124 million.

The fact that the state government of North Rhine-Westphalia has taken no steps against repeated sales of its artworks owned (at least indirectly) by the public is convenient for the politically motivated budget strategies of Essen. In 2007, the city included the internationally recognized Museum Folkwang art collection on its municipal balance sheets – as assets valued at €250 million.

But according to the contract that Essen signed with the museum association, only 50 percent of the collection’s worth belongs to the city. That supposedly means the city can only dispose of its share if the museum association agrees.

Communities can very well go bankrupt, when the federal state allows it. Christoph Paulus, Professor, Humboldt University, Berlin

In 1922, the municipality and the museum association went in together to buy the collection of art patron Karl Ernst Osthaus. Mr. Osthaus, a notable collector of European avant-garde art and architecture, had died a year earlier. The citizens of Essen collected 15 million reichsmarks for the co-purchase, and the contract was supposed to guarantee the investment permanently.

Now neither the museum association nor the city will release details of the contract and nerves are raw. The museum association is tight-lipped and declined to give written answers to questions by Handelsblatt. Ulrich Blank, the association’s treasurer, refused to comment on whether the €250 million listed on the municipal balance sheets reflect only a proportion or the full insured value of the collection.

In the meantime, citizens in Essen fear the collection could be used to pay creditors of the city, which owes more than €3 billion.

“The city did not offer any collateral for the credits…in the form of art objects,” said city spokeswoman Nicole Mause, in response to repeated inquiries by Handelsblatt. “(Essen) is responsible for the liabilities with all its assets and its entire revenues. But there is no bankruptcy procedure for the community’s assets.”

Christoph Paulus, an expert in bankruptcy law and professor at Humboldt University in Berlin, disagrees with the city’s response. “Communities can very well go bankrupt, when the federal state allows it,” he said, adding, “This is not excluded by bankruptcy regulations.”

And Mr. Paulus was surprised that the city of Essen had incorporated the collection in its books with around €250 million. “If this value is given, then that is a political signal,” he said. “Regardless of the legislative objective, the message of that sort of entry into the account books is confusing, because potential creditors of communal bond issues are misled and might believe that there is an equivalent value of €250 million.”

When the museum was set up, its founders saw a need to protect the collection against being taken over by the city of Essen. According to the 1922 contract – which Handelsblatt possesses in excerpts – the city is “not authorized to sell, mortgage or otherwise make financial use of the museum without approval (of the museum association).”

If the city endangers the fundamental collection of the museum, the association can demand that the city transfer it to another public co-owner or to the association itself. Nothing in the contract says that such a move must be compensated.

“I don’t deny that there are risks … in guaranteeing the ongoing financial support of the museum,” said Mr. Blank, the association’s treasurer. But he emphasized that in 2010, the city increased the museum’s budget.

It would be a disgrace to endanger the cultural legacy. Lars Martin Klieve, Treasurer of the city of Essen

Now, however, the city’s capital reserves are gone. “Unless a miracle happens, Essen will be found over-indebted on December 31, 2014,” said city treasurer Lars Martin Klieve. And legal provisions of the state government oblige the city to include all assets on a balance sheet.

“The fact that we can’t sell the collection does not mean that it isn't worth anything,” said Mr. Klieve. That’s why the city lists the collection’s insured value, he said.

Theoretically, the state of North Rhine-Westphalia could force Essen to sell its share of the collection, Mr. Klieve conceded. “But that would violate the contract with the museum association,” he said.

The museum association might not get very far though if it demanded an end to co-ownership with the city of Essen or a transfer of ownership. According to law, the city can only transfer ownership of its assets at their full value. So the museum association or another institution would have to come up with the money, which seems unrealistic.

“It would be a disgrace to endanger the cultural legacy,” said Mr. Klieve. “There are other assets, such as participation in companies, with which we could part and which would be easier to liquidate.”

One would like to have confidence in his words and to believe that the contract with the museum association stands in the way of a sale. But in other cities, there has been no such guarantee.

For example, the art collection of the Kaiser-Wilhelm-Museum is included as an asset worth €70 million on the balance sheets of the city of Krefeld. A report concerning an examination of the opening balance clearly states: There is no prohibition against selling works of art, because they are not required for fulfilling communal responsibilities.

Lucas Elmenhorst is a lawyer and art historian based in Berlin. To contact the author: [email protected].