In reality, the company was heading into one of the most difficult and damaging periods in its history. The years ahead were not going to be rosy for me, either. A storm was gathering that would ultimately cripple Sotheby’s, rock the art market, and send me to federal prison.
About a year earlier, in February 1993, Michael Ainslie had come to me with a strange proposal. He wanted to buy me out of Sotheby’s. He explained that it had become intolerable for him to work with me. Michael felt that I rode him as if he were a junior executive and gave him little real authority to run the organization. Oh, and he had a tentative agreement with First Boston to assist with a management buyout, using my stock as collateral. That’s right, Michael was proposing that I allow him to buy Sotheby’s using my stock.
I was more surprised than hurt by Michael’s proposal. It was beyond naïve of him to think that I would go along with such a deal. But the deterioration of our working relationship did bother me. I liked and trusted Michael. He had been good for Sotheby’s, and I respected his leadership abilities. I never kept office space at Sotheby’s for myself, and I thought it had been clear to investors, customers, and employees that Michael was running the show. With so many other businesses to look after, I wanted it that way. He was the public voice and face of Sotheby’s, and with our public offering, Michael had become a very wealthy man. He deserved every penny.
Many of my closest friends and advisers agreed with Michael that I had been rough on him. I had noticeably changed the way I dealt with him over the previous year or so. I had become impatient with what I interpreted as a deteriorating work ethic. He was constantly traveling, often absent for weeks at a time. Much like Ed Hoffman at Woodies, who had perfected his golf stroke while in my employ, Michael’s tennis game was improving by leaps and bounds as he found his way onto the courts of Manhattan, Westchester, and Greenwich at every opportunity.
What I didn’t know at the time was that Dede Brooks, who was always nipping at Michael’s heels, had put in place an elaborate office intelligence network to alert her to every Ainslie absence. The minute Michael departed from 1334 York Avenue, Dede was informed. After an hour or so—just long enough to let Michael get into his tennis shoes and get onto the court—Dede would call me with an issue requiring immediate attention. I would always ask to get Michael on the line. Of course, Michael was never available. That would set me off and give Dede the chance to be indispensable.
When I informed Michael that I was not interested in facilitating (that is, funding) his “management buyout,” he made it clear that he would have to leave the company. When I asked him who would be best to take his place he recommended Dede Brooks without hesitation. She certainly had the talent and drive, although Michael was concerned she might need a bit more maturity and would have to gain respect with colleagues outside the United States.
When I discussed the situation with Jeffrey Miro, my attorney and Sotheby’s board member, he offered an observation I should have taken to heart. “Al,” he said, “Dede is a high-risk executive.” Max Fisher, who was also on the board, agreed with Jeffrey’s prescient warning. No one questioned her smarts, guile, and dedication. But there was something about her character that troubled people. I have to admit that I didn’t share or take heed of their concern.
For the most part I had been blessed with honest, ethical partners and associates. In my real estate business, Richard Kughn, followed by Robert Larson, had managed the day-to-day operations of the Taubman Company with impeccable moral standards. Dick and Bob were recognized throughout a rough-and-tumble industry as shining examples of personal integrity and professional competence. I also could trust Bernard Winograd, president of the Taubman Investment Company (the entity whose assets included A&W, Woodward & Lothrop, and Sotheby’s), to always take the high road.
In the late 1960s, when we were completing a deal to bring Prudential into the partnership developing Woodland Mall in Grand Rapids, Michigan, I noticed that the good folks at Pru had overpaid us by $400,000. We pointed out the mistake, and it took us several phone calls and meetings to get Pru to understand the error and take their check back. But what’s right is right, and we always conducted our business that way.
In 1990, I addressed the Greater Detroit Chamber of Commerce annual conference on Michigan’s beautiful Mackinac Island. A focus of the session was ethics. To kick off my keynote remarks with some humor, I told this quick (made-up) story highlighting my relationship with Dick Kughn, who served on the chamber’s board of directors:
The first test of my professional ethics took place very early in my career, when Dick Kughn and I were managing one of our first shopping centers, a project in Flint. In those days, Dick and I visited tenants personally to collect rents.
One day we dropped in on a kind old lady who ran a small family-owned delicatessen. This was my favorite stop for two reasons: the exceptional pastrami and the family’s preference for paying the rent in cash.
Dick and I had just handed her a receipt and were on our way out of the store when I looked in her envelope and realized that several crisp $100 bills had stuck together. This struggling deli owner had inadvertently overpaid us by $300.
It was at that moment, as we stepped out the door, that I confronted the first major ethical question of my young career: Do I tell Dick?
The only reason I got away with this (it got a big laugh even at eight in the morning) was the fact that everyone in the audience knew Dick and me to be ethical people. My partners—people like Max Fisher, Les Wexner, Henry Ford II, and Milton Petrie—also were pillars of respectability in their industries and communities. I guess I had developed a blind spot when it came to Dede that even my closest advisers couldn’t break through. If the people around you have the courage and comfort level to express honest opinions, you should always listen. And I kick myself whenever I think back on the opportunity I had to avoid disaster. For in this case, trusting the wrong person would turn out to be disastrous—not financially, but personally. My reputation, my family’s good name, the company I had spent a lifetime building, my freedom—all would be placed in jeopardy because of my misplaced trust in a key executive.
Dede, who had been heading U.S. operations since 1987, was put in charge of worldwide auction operations in April 1993. That assignment would give her the opportunity to demonstrate her abilities with the intention of giving her Michael’s job upon his departure a year later. She did in fact assume the chief executive officer’s position—right on schedule—about a month after our 250th anniversary celebration.
Christie’s, meanwhile, was going through its own management transition. Christopher Davidge had been promoted to chief executive officer, and Lord Carrington, Christie’s highly respected chairman, was to step down in May 1993. Replacing him was Sir Anthony Tennant, who had been a very successful chairman and chief executive at Guiness. Shortly after the announcement of Sir Anthony’s Christie’s appointment, I met him by chance at a reception at the Royal Academy of Art in London, where we both served on committees. He introduced himself, I wished him the best of luck in his new role, and he asked if I would mind if he called me in the coming weeks to see if we could get together to discuss the auction business. I said sure, and we parted company.
A few weeks later Sir Anthony called my New York office to arrange a meeting. He asked my assistant when I would be in London again, and a breakfast meeting in my London apartment was scheduled for February 3 at 8:30 a.m. Given that Sir Anthony had essentially no experience in the world of art or auctioneering, I was not surprised that he would want to get my perspective on the industry. He was not due to join Christie’s for another three months, so I agreed to the meeting with little hesitation. Executives of Sotheby’s and Christie’s had met together numerous times over the years for very legitimate reasons. For example, every year the two houses coordinate auction schedules in New York and London for the convenience of customers. During Asia Week in New York, Sotheby’s and Christie’s hold their sales of
Asian art in conjunction with art shows, conferences, and cultural exchanges. Committees are formed with representatives from both companies to assure the least possible overlap.
I was also comfortable with our breakfast because I had a clear understanding of and deep respect for our nation’s important antitrust and fair trade laws and regulations. The Sherman Antitrust Act was no mystery to me. I had benefited from its enforcement.
Without such government intervention, specialty stores—the lifeblood of my shopping centers—would never have been able to compete with department stores for resources.
Back in the 1970s, when I was attending the annual convention of the International Council of Shopping Centers, I stopped in on a session about rents. I was floored to learn that developers were exchanging details of the leases they were signing with national retailers in their malls. When someone asked, “Hey, Al, what’s the Gap paying you in your Bay Area centers?” I made quite a scene. I left the meeting, I told everyone about the illegality of their actions, and resigned from the ICSC—prohibiting participation by my company—for more than a decade. I am told this illegal sharing of information never happened again at an ICSC conference, in large measure because of my forceful protest.
I also understood the meaning of “conscious parallelism,” a concept in law that explains why it is acceptable for two gas stations on opposite corners of an intersection to offer gasoline at exactly the same price per gallon. Conscious parallelism also allows essentially every residential real estate broker in the country to charge sellers a 6 percent commission to market a home. As long as the parties do not reach an agreement to establish and hold to these prices, the fact that they arrive at the same price is okay with the law. If real estate brokers and gas station owners met to discuss pricing, that would go beyond conscious parallelism and enter the dangerous world of price-fixing.
Traditionally, Sotheby’s and Christie’s operated with identical commission schedules. That was nothing new. For decades, one house would adjust its rates for buyers and sellers, and the other would follow within weeks to stay competitive—just as the Shell station matches the Mobil station’s price for unleaded within a few minutes of an adjustment. And they do it for the same reason: to stay competitive. I knew that it would be both unethical and illegal to discuss pricing with Anthony Tennant or anyone else from Christie’s (even though price-fixing was a civil, not criminal offense in the UK). So I welcomed Sir Anthony to my London flat on February 3, 1993, with tea, orange juice, scones, and a clear conscience.
We exchanged pleasantries and discussed the fascinating art market for about an hour. Sir Anthony and I shared a deep respect for the Royal Academy, an expertise in marketing beverages (Guinness for him, A&W root beer for me), and a love for the English countryside. Beyond that, we had little in common. Unlike most of my British friends, Sir Anthony was not an avid sportsman and rarely went on shoots (a polite term for killing birds).
I remember an occasion in the late 1990s when I was walking through an exhibition of Audubon bird prints in Sotheby’s New York galleries. Diana Phillips, head of our press office, came around the corner with a group of visiting art journalists. I took advantage of the occasion to opine as to the idiosyncrasies of the various feathered species illustrated on the prints.
One of the reporters asked, “Mr. Taubman, do you collect Audubon prints?”
“No,” I replied, “I don’t think I have ever purchased an Audubon.”
“Then how is it that you have come to know so much about these birds?”
“I’ve shot every one of them.”
Diana abruptly terminated the impromptu interview and skillfully shepherded the journalists away.
When my breakfast discussion with Sir Anthony turned to the spirited and often underhanded competition between our two firms, I took a moment to explain the antitrust laws under which we operate in the United States. Sir Anthony, no stranger to international business, agreed immediately with my insistence that we stay far away from the subject of pricing. That was off the table.
Instead, we agreed that things like bad-mouthing each other in the press, misstating market share, poaching each other’s experts, and not following regulations regarding the disclosure of guarantees (a practice we at Sotheby’s referred to as “Christie’s guarantees”) were damaging to both companies and our clients. On a more positive note, we agreed to work together to open the lucrative French market to international auction houses. Because neither Sotheby’s nor Christie’s was a French company, neither could conduct auctions in France. Political support for this arcane prohibition had been fading, and we had operated an office in Paris for years—a major investment—to demonstrate our commitment to France and keep pushing for change. Christie’s had not been as active, and I made it clear to Sir Anthony that we would appreciate their help.
I suppose if Christie’s and Sotheby’s had formed a trade association for international auction companies, we would have been discussing the same subjects—not in my flat, but in a hotel conference room with PowerPoint presentations and lousy food. Looking back, that certainly would have been smarter for both of us. In the absence of such an organization, Sir Anthony and I met intermittently in London and New York over the next several years. Twelve times in four years, to be exact. Sir Anthony called my office every time to set these up. I never called him. Not once. I must admit that after the first few meetings, I really did not understand why he found the sessions useful. I certainly didn’t. Oh, they were pleasant enough, but we had little to talk about (other than the Royal Academy’s programs and strategies to overcome political threshold resistance in France).
I would brief Dede Brooks on my discussions with Sir Anthony, and he informed me that he was briefing Christopher Davidge as well. There was no reason to keep our thoughts from them, and with several issues it was important that they follow through on our understandings. For example, our agreement to tone down the public bad-mouthing between the two companies would have been pointless without the CEOs passing our notice of détente on to the troops.
Now, I do not pretend to know what Sir Anthony and Christopher Davidge talked about in reference to these meetings. I do know, however, what Dede and I discussed. And never once did we address the subject of pricing or commissions in this context. It hadn’t come up in my meetings with Sir Anthony, so there was no reason to re-hash the issue with Dede. Nevertheless, Dede and Davidge at some point (allegedly in 1995, almost two years after my first breakfast with Sir Anthony) decided to go well beyond the legitimate subjects Christie’s chairman and I discussed. They proceeded to collude on the setting of new, nonnegotiable commission schedules for sellers at both houses. Dede participated in this illegal act without my knowledge, and certainly without my instructions.
When caught by the authorities in 2000 (and confronted with the fact that her accomplice, Davidge, would testify against her) Brooks would insist—after a number of rejected proffers—that she had been directed by me to break the law. Cleverly, she and Davidge would use the meetings between Sir Anthony and me as proof of my involvement. Certainly, one did not necessarily lead to the other. But the mere existence of the meetings (which I readily admitted to and documented in the voluminous personal diaries and daily office records I turned over to authorities) provided an enticing nexus for the perpetrators looking for an out and the prosecutors looking for a trophy to hang on their wall.
So on the evening of March 10, 1994, as the Scots Guards were marching and the trumpets were sounding in celebration, storm clouds were gathering high above New Bond Street—clouds as dark and ominous as any the company had weathered in its illustrious 250 years. The forecast didn’t look too promising for me, either.
FIFTEEN
Standing Alone
The headline on the front page of the January 29, 2000, Financial Times changed a lot of lives around the world: “Christie’s Admits Fixing Commissions: Auction House Tells the U.S. Justice Department That It Made Deal with Sotheby�
�s.” A photograph of Dede Brooks accompanied the story.
The shocking revelation hit on a Saturday, the day I was celebrating my seventy-sixth birthday in Palm Beach. I heard the news for the first time from my friend art dealer Bill Acquavella, when he and his wife, Donna, arrived at my home that evening for the dinner party Judy had arranged.
“Al, have you heard what’s going on? Christie’s is admitting to price-fixing with Sotheby’s,” Bill announced in a low, concerned voice. “It’s front-page news in the Financial Times.”
I remember being shocked and thinking how irresponsible it was for a respected publication to print such an accusation that was so inaccurate and, for Christie’s, self-serving. Impossible. Inconceivable. The U.S. Justice Department had been investigating the art market since 1997, but the consensus was that the probe was going nowhere. And besides, we would never make such a “deal” with Christie’s, our archrivals. I know I didn’t. And certainly Dede, one of the most competitive people I had ever met, would not have anything to do with such an illegal and destructive arrangement.
My first thought was that those bastards at Christie’s, which had been acquired by a private French company in 1998 must have been nailed by the U.S. Justice Department in something sinister and were now throwing false charges at Sotheby’s, a publicly held American company, to damage us and negotiate a lesser penalty. I called Dede the next day to hear what she knew about this mess. Instead, I got her husband, who explained that Dede would not be able to speak with me. That’s when I really started to be concerned.
Early the next week, I kept a previously arranged appointment with Dede to discuss other matters. When I arrived at our headquarters at 1334 York Avenue, Sotheby’s respected in-house general counsel, Don Pillsbury, accompanied me to Dede’s conference room, where we could meet in his presence. He thought it best that he sit in on our conversation. Given the circumstances, I agreed. Dede assured us that there was no truth to the charge that Sotheby’s had fixed prices with Christie’s. She dismissed the Financial Times story with subdued confidence. I felt much better hearing her denials.
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