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At an art fair in Portland, Ore. three years ago, John spotted a watercolor by American illustrator Maxfield Parrish. Erwin Flacks, the ponytailed dealer offering the art, apparently knew his stuff. He pointed out his name on the title page of a book on Maxfield Parrish, which he had nearby. Flacks’ own book, Maxfield Parrish, advises collectors how to spot fake Parrishes.

Impressed, Hammer paid Flacks $3,600 for a Parrish watercolor. Over the next few months he paid the dealer $15,100 for what he thought were three more Parrish studies.

He should have bought Flacks’ book instead. Had they been genuine, the watercolors would have fetched at least $10,000 apiece. But the Maxfield Parrish Family Trust told Hammer that he was holding worthless fakes. The same drawings had been bounced from a Phillips auction in 1981. “I feel so stupid,” laments Hammer, a real estate developer in Eugene, Ore. The art was taken by the FBI in November.

Who can prove that Flacks knew they were fake? It is not a crime in the U.S. to sell phony art and antiques unintentionally.

A burgeoning number of dealers peddle art that turns out to be bogus. And occasionally they hit the jackpot. Just ask actress Whoopi Goldberg. She bought five “Parrish” drawings from Flacks about three years ago. New York art dealer Judith Goffman, and several other art dealers, visited Goldberg at her Los Angeles home and fingered the drawings as counterfeits.

Christie’s and Sotheby’s wouldn’t touch them either. Goldberg promptly sued Flacks and his wife, Gail, for her money back. The dealer responded with his own lawsuit–against Goffman–for “interference of trade.” After a two-year court battle, Flacks collected in excess of $100,000 from Goffman’s insurance company. He and his wife gave Goldberg her money back–a reported $45,000. Not a bad exchange. The art has since been taken by the FBI. Groans Goldberg: “Your dealer can’t tell you whether something they spot on your wall is fraudulent, because they might get sued.”

Fakes are a growing cottage industry. There are now so many forgeries floating around that the American Art Dealer’s Association plans to publish bulletins warning collectors what to stay away from.

One of the more brazen characters in this sector of the art trade is a lawyer, currently suspended, named Ronald Causey. He and his wife, Sandra McElwee Causey, run the Louisiana Auction Exchange in Baton Rouge. Its catalogs offer Degas, de Kooning, Gauguin–at bargain prices.

A New York art dealer Richard Feigen was surprised to pick up one of Causey’s catalogs and see Matisse’s “Fleurs par la fenetre” advertised for an upcoming auction. Feigen, who has sold several Matisses during his career, smelled a fake. He sent a transparency of the painting to Wanda de Guebriant, archivist for the Matisse estate in Paris and the world authority on Matisse. De Guebriant wrote back that the painting was an outright forgery, that the provenance ascribed to it was “utmost fantasy.” Feigen sent a copy of that letter to the Louisiana Auction Exchange, in an effort to halt the sale. Causey responded with a letter to de Guebriant insisting on the legitimacy of the painting and its provenance. “I advise you to refrain from further defamation of this painting,” he threatened. On Dec. 7, 1996 Causey says he hammered down the “Matisse” for $242,000 to a “European buyer.” “It’s highway robbery!” sputters Claude Duthuit, Matisse’s grandson.

Why do people buy artworks at prices that broadcast the art’s essential phoniness? For the same reasons they buy overhyped penny stocks and other worthless goods: greed, and the arrogance to think they’ve stumbled onto a great deal.

Where are the art cops? Outgunned. Shutting down a shady dealer usually requires an elaborate sting. With the help of Manhattan-based International Foundation for Art Research (IFAR), the U.S. postal inspectors did manage to crack one of the world’s largest counterfeit art rings in 1993. But it took them seven years and help from Interpol, the FBI, and dozens of art experts to nail sisters Kathryn and Joanne Amiel, and Kathryn’s daughter Sarina. They were convicted of conspiracy and mail fraud for distributing thousands of phony Dali, Chagall, Miro and Picasso prints. Last month they began serving 33 months to 6 1/2 years each in federal prison. Prosecutors estimated that collectors would have lost $200 million if the Amiel ring’s 80,000 fakes hit the market. Now the government doesn’t know what to do with the prints and may cycle them back onto the market.

Unthinkable? Hardly. The Postal Inspection Service auctioned off about 11,000 fake Dali prints, which agents had seized ten years earlier. The $347,550 take went toward covering the cost of that bust. Because there are so many fakes, neither Sotheby’s nor Christie’s will handle Dali prints any longer.

Auctioneer named C.B. Charles in Pompano Beach, Fla. was all set to auction off 294 paintings attributed to Piet Mondrian, Georgia O’Keeffe, Jasper Johns, and other renowned artists. Charles advertised the sale in national art magazines, with estimates that were far below what paintings by these artists typically fetch. The FBI, alerted by the Manhattan-based Art Dealers Association of America, took possession of the paintings.

Charles pleads ignorance, of course. “I’m no art expert,” he said. However one Florida collector has offered him more than $1 million–the price of a single genuine O’Keeffe–for his entire collection of fakes once the FBI returns the haul, which it probably will.

Condensed from articles in Forbes, Financial Times and Offshore Alert.

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