What do billionaire Ken Griffin, a Hamptons fire and Cy Twombly’s painting Untitled (1971) have in common?
(Bloomberg) — What do billionaire Ken Griffin, a Hamptons fire and Cy Twombly’s painting Untitled (1971) have in common?
The answer: Ron Perelman’s three-year dispute with a group of insurers about a portion of his extensive art collection.
Perelman, 80, submitted some of the most highly valued art at his residence in New York’s Hamptons for insurance claims in 2020 on the grounds that a fire two years earlier damaged them, adding under oath that he’s never offered to sell them.
Now his insurers claim a visit to the estate from Griffin is evidence Perelman lied about putting the works up for sale.
And they’re seeking to amend their answer to the complaint to offer a defense of “false swearing,” according to a court filing. If approved, it would go to the judge and may allow them to deny Perelman’s claim.
The assertion hangs on Griffin, along with his art dealer, coming to the 57-acre estate in 2020 to view the Twombly painting. The insurers filed a petition asking a judge to compel the Citadel founder to testify about his time at “The Creeks,” which occurred a month before the claims were filed.
Griffin, who ultimately purchased two of Perelman’s paintings but not the Twombly, has so far resisted. He’s offered to answer questions in writing, but the insurers have “inexplicably” refused the offer, his spokesperson Zia Ahmed said in a statement.
The amount at stake for the two Warhols, two Ruschas and the Twombly: $410 million.
“This is more than enough to keep a couple of firms busy and trying to find grounds for denial of coverage,” said Judith Wallace, a partner at Carter Ledyard and chair of the firm’s art practice. “It will be well worth the time to litigate whether a misstatement is material in a dispute of this size.”
Perelman’s counsel said the bid to add the defense is the “latest attempt to distract from the sole issue” of whether the five pieces were damaged in the fire. The insurer group comprises certain underwriters of Lloyd’s of London, Great Lakes Insurance SE, Swiss Re International SE, AIG Property Casualty Co. and Federal Insurance Co.
“Even if the Gallery showed Mr. Griffin the Twombly and Mr. Perelman knew about the visit, or if other members of Mr. Perelman’s staff made inquiries related to the possibility of selling the five artworks, that does not show that any of the five artworks was offered for sale,” Perelman’s lawyers said in a May 2 filing.
The insurers, whose own expert found no evidence the artworks were damaged in the fire, say Griffin’s testimony is “highly relevant.”
It speaks to whether Perelman treated the paintings as damaged or offered them for sale as normal and then “opportunistically presented for an insurance payment based on purely financial consideration,” they said in court documents.
The dispute is the latest headache for Perelman, who was once considered America’s richest person. He has seen his wealth collapse from $19 billion to $2 billion after the pandemic roiled his leveraged investment empire.
The most notable casualty was Revlon, for which he paid $1.74 billion in 1985. It filed for bankruptcy last year.
Filings show he used his shares in the makeup company as collateral to back the debt of his investment firm, MacAndrews & Forbes. His holding company also received an unusual loan from a family foundation.
All told, at least nine banks had claims against Perelman’s assets, including his art collection, house in the Hamptons and various aircraft, Bloomberg reported in 2020. That year, he sold more than $100 million of art — including a Twombly — as well as a private jet and company stakes.
A spokesperson said at the time they weren’t forced sales; a Perelman biographer viewed them as a sign “he needs cash.”
The current money battle stems from a September 2018 fire that broke out in the attic of The Creeks, which damaged the residence and destroyed art and furniture. Insurers paid out $169 million in the aftermath.
The five contested works, enclosed in plexiglass frames and evacuated by firefighters and staff with no initial signs of damage, weren’t included in 2018 claim, though staff told insurers they were being monitored, according to court filings. They were re-hung at The Creeks the following summer.
But a month after Griffin’s 2020 visit, Perelman sued his insurers for payment on claims on four of the five artworks. He engaged an expert who found the fire had caused abrasions, paint flaking, and “accelerated aging and molecular changes” altering their chemical structure, according to court filings. The painting Griffin had come to view, Untitled (1971), was later added to the lawsuit.
The following year, Perelman testified he never attempted to sell any of the paintings involved in the case.
“The pictures were never made available for sale,” he said. “Those pictures meant a lot to me and my family.” He also said he didn’t want to sell the pictures because he “could have some potential liability” if they had hidden damage.
Perelman testified that the art he’d sold in the years since the fire hadn’t been at The Creeks, so damage wasn’t a factor.
But the two paintings Griffin purchased, Brice Marden’s Letter About Rocks and River 4, were hanging at Perelman’s home near the other five artworks when the fire occurred.
Griffin only found out about the fire after the purchase and later had the works inspected by experts, according to court documents. Ahmed, his spokesperson, declined to comment to Bloomberg on what they found.
Griffin “is not a party to the litigation between Mr. Perelman and his insurance companies,” Ahmed said in a statement. “He has never owned any of the art involved in their dispute. Both parties have access to witnesses with far more substantive knowledge of any pertinent facts than Ken, and he is rightfully annoyed at the petty and harassing behavior of the insurers and their lawyers.”
The paintings were insured for many times more than their market value so that they could be replaced by art of similar quality regardless of whether a collector was planning to sell, according to testimony from a Perelman executive.
Unlike many insurance policies that typically involve repairing or reimbursing for the value impact of any damage, Perelman’s policies allow him to request insurers pay an item’s full schedule value.
Warhol’s Campbell’s Soup Can was insured for $100 million despite being appraised at $12.5 million in 2018, according to a court filing.
“The inconvenience of being deposed” may not matter in this case, Wallace said. “This is a big firm, big stakes litigation with hundreds of millions of dollars at stake.”
(Updates with details of insurance policies in 29th paragraph.)
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