Philbrick Case Sparks Discussion of Sentencing For Art Crimes
04/18/2022The criminal case involving disgraced art dealer Inigo Philbrick has now progressed to the sentencing phase, where a judge will decide what punishment is appropriate for Philbrick. In the process, the court will likely consider larger questions about how the justice system should approach sentencing for art crimes, particularly in light of a string of high-profile art fraud prosecutions in recent years.
By way of background, Philbrick’s downfall began in 2019 when rumors began swirling of loan defaults, angry customers, and allegations of shady dealings. He fled to the Pacific Island of Vanuatu, but was arrested in June 2020 and ultimately pled guilty to federal wire fraud, arising out of a complicated web of deceit involving multiple works of art (for example, selling interests in the same work to multiple buyers, and pledging his clients’ works as collateral on his own loans). Civil lawsuits have also been filed in multiple jurisdictions, as various bilked clients and creditors try to sort out their competing claims to funds and artworks. Grossman LLP is representing victims in some of those cases.
The Sentencing Memoranda
Philbrick’s sentence is likely to be handed down this spring, long before all the civil litigation spawned by his crimes is resolved. The government and Philbrick have already submitted their positions and supporting materials to the court, with Philbrick’s attorneys urging leniency and the government seeking a more severe sentence. And in the process, they have raised arguments and questions about how the court should view Philbrick’s crimes in the context of the art industry as a whole, and how they compare to other art fraud cases and to other types of criminal behavior.
The court will look to federal sentencing guidelines, which assist a court in calculating sentences; here, they take into account the nature of Philbrick’s crimes, including the sophisticated means he used to carry them out; the amount lost by his victims, which the government has calculated at $86,672,790; and the fact that “the offense involved 10 or more victims.” All factors considered, Philbrick faces an advisory sentencing range of 121-151 months imprisonment, but that is not binding on the judge, who may also consider many other factors in deciding the sentence.
In his sentencing memorandum, for example, Philbrick’s counsel notes that he “immediately accepted responsibility for his conduct” and provided information to law enforcement related to his crimes. The government’s sentencing memo, on the other hand, notes that Philbrick only “accepted responsibility” after first fleeing the country to hide for nine months in a jurisdiction he knew had no extradition treaty with the United States.
The government and Philbrick take differing views of how his crimes should be understood in the context of the larger art market. Philbrick’s memo notes that he provided the government with information about “various questionable practices in the art market” by others as well as himself. And indeed, after his guilty plea, Philbrick (in a statement through his counsel) noted that “he’s part of an industry sick from top to bottom where this sort of behavior is sadly commonplace.”
Comparisons to Other Recent Criminal Cases
Both the government and Philbrick to discuss the significance of two other recent major art scandals., where the courts imposed relatively lenient sentences.
Philbrick’s counsel points to the February 2017 sentencing of Glafira Rosales, who pled guilty to charges related to the infamous forgery ring that sold dozens of fake works through the once-respected, now-defunct Knoedler Gallery (more on that here). After cooperating with the government, Rosales was sentenced only to the time she had already served, a full 148 months below the bottom of her guidelines range. Philbrick notes that Rosales’s scheme ran for years longer than Philbrick’s, caused a similar amount of monetary loss, and also involved money laundering and tax fraud. The government, however, argues that the Rosales case involved “mitigating factors not present” in Philbrick’s case, including the fact that Rosales was in an abusive relationship with the mastermind of the operation (who fled the country).
Philbrick’s counsel also cites the September 2018 sentencing of art dealer Ezra Chowaiki, who defrauded customers with respect to dozens of works of art (more on that here). He too was given a relatively lenient sentence of just 18 months, well below his federal guidelines range of 51 to 63 months. Again, however, the government says this case is not a good comparison to Philbrick’s, where “Chowaiki’s fraud lasted half as long and involved a much smaller loss amount,” and did not involve forged documents and fabricated identities as Philbrick’s did.
A Larger Conversation About Art Fraud
It remains to be seen whether the judge handling Philbrick’s sentencing will continue the trend of sentencing art criminals to relatively lenient sentences (as compared with federal guidelines). But Philbrick’s case is certainly part of a larger conversation about art fraud and what the law should do about it. We have written before (see here and here) about how governments around the world, including in the United States, are exploring ways to crack down on money-laundering and other illicit practices that seek to take advantage of the culture of confidentiality and secrecy in the art market. And the rise of art-backed loans has also changed the art market in recent years, creating potential issues where art may be serving as collateral for lenders—sometimes unbeknownst to others who are transacting regarding the same work. And generally, we continue to see situations where civil litigation regarding art deals sometimes intersects with criminal proceedings. We will continue to follow these important issues as they develop.
Art Law Blog