Identifying the owner – how shell companies allow anonymity in restitution claims

Stephenson Harwood 21 February 2018

The ongoing US restitution case, Maestracci v. Helly Nahmad Gallery, Inc., concerns a Modigliani painting allegedly looted by the Nazis. It highlights the practice of using corporate shell companies to allow collectors to anonymously hold art, and is an example of the recently enacted United States legislation 'the Holocaust Expropriated Art Recovery Act' in action.

When the Jewish art dealer Oscar Stettiner was forced to flee the Nazi invasion of Paris in 1939 he left behind his art collection that included Modigliani's Seated Man With a Cane (1918). Subsequently, a Nazi appointed administrator sold the Modigliani in July 1944, without Stettiner's consent.

Stettiner filed a claim against both the administrator and the buyer of the painting in Paris in 1946, to try to reclaim the Modigliani. Stettiner was successful and the court ordered that the work must be returned to him. However, court records from 1947 show that the buyer said he had given the painting to another man who had subsequently sold it in 1944 to an unknown American. The painting was not returned to Stettiner and he died in France in 1948.

In 1996 the painting re-emerged and was sold in London on behalf of sellers who were the descendants of the 1944 buyer. The International Art Centre ("IAC") (a Panamanian corporation) bought the painting. The painting is understood to be currently held in the Geneva Freeport, having been there since 1997, save for its inclusion in exhibitions at the Helly Nahmad Galleries in London and New York, as well as the Musee d'Art Moderne in Paris and the Royal Academy of Arts in London.

The most recent sighting of the painting was in 2008 when it was unsold at auction at Sotheby's New York. The catalogue for the sale noted that the painting had "possibly" been owned by Stettiner in 1930. The owner was described as "private collection".

Following the inclusion of the painting in the 2008 sale, Philippe Maestracci, the grandson of Stettiner and Stettiner's only remaining heir, contacted the Helly Nahmad Gallery and demanded the return of the painting. Despite the otherwise European-centric nature of events, it was because of this attempted sale in New York that the New York courts had jurisdiction in the subsequent legal proceedings.

Maestracci first started legal proceedings against Helly Nahmad and the Helly Nahmad Gallery in 2011, but withdrew his case after he was told that the IAC was the sole owner of the painting, and that the IAC was not controlled by the Nahmad family.

Maestracci filed a new claim in 2014, this time naming the IAC and David Nahmad as additional defendants. Maestracci argued that that IAC was merely a shell company for the Nahmad family and its London and New York Galleries.

David Nahmad continued to deny any connection with the IAC and the painting in question until the Panama Papers leak in 2016, where it was revealed that David Nahmad was indeed the principal of the IAC. He subsequently said in an interview with the New York Times; "the International Art Centre is me personally" and that he used the company for security purposes to mask his identity.

In November 2017, the New York Appeal Court decided against the Nahmad parties on two important issues.

First, the Nahmad parties had previously argued that Maestracci, a French resident, lacked the standing to bring his claim in the US as he had not proven he was the representative of Stettiner's estate. The lower court agreed. The Appeal Court, however, found that Maestracci could follow an alternative procedure by filing documents demonstrating proof of French inheritance rights. This meant his right to pursue the claim on behalf of the estate was reinstated, and he no longer needed a court-appointed administrator to bring the action on his behalf.

Second, the court rejected the defendant's argument that the claim was barred by the statute of limitations. The Nahmad parties argued that the laws of France or Switzerland, where the painting was sold and stored, should determine the statute of limitations, in which case Maestracci's claim was out of time. The court disagreed. They cited the recently enacted 'Holocaust Expropriated Art Recovery Act' ("HEAR") in which the statute of limitations to recover art looted by the Nazis is 6 years from the date of the actual discovery of the identity and location of the artwork. The court rejected the argument that HEAR could be "displaced by choice of law analysis". Maestracci, of course, did not know the location of the work until IAC's ownership came to light, so this decision gives him the green light to pursue his claim in New York.

Today, Seated Man With a Cane is reported to be worth upwards of $25 million.
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