Duel of the Mega-Dealers

Every June they fly in like an air force of contemporary art: the world’s top dealers and collectors landing in Basel, Switzerland, for the year’s most significant fair. Of that glittering throng, four figures stand apart. The mega-dealers occupy booths no different from the rest. They just sell a lot more art: not a million dollars here at Art Basel, but tens of millions. Not tens of millions over the course of a year, but hundreds of millions. Or, in the case of Larry Gagosian, $1 billion. If, that is, you believe those numbers: the mega-dealers may boast of a particular sale, but all are private, and they stay mum on profits in what is, notoriously, the world’s largest unregulated market of legal goods.

At 48, Swiss-born Iwan Wirth, of Hauser & Wirth, is the youngest of the four. Oldest, at 80, is Arne Glimcher, who opened New York City’s Pace Gallery in 1963. Glimcher has notched many of the top sales of the last half-century, and remains a force. But he is openly weary of the global bazaar that contemporary art has become. “This market has nothing to do with art,” he says. “It’s all about how fast one can make money.” Glimcher has made his son, Marc, 55, his successor, and it is Marc who comes to Basel now, while his father keeps to his small, lamp-lit office on Manhattan’s 57th Street—the street where contemporary art began.

The other two Megas—Gagosian, 73, and David Zwirner, 54—are the ones most carefully watched at Art Basel. Gagosian, while powerful, is less given to the rages that once defined him. The German-born Zwirner is calmer, more genial. But the two are still so competitive that for all the events they have attended together—the art fairs and gallery openings and ceaseless art-world parties—they have never “broken bread” with each other, says Zwirner. Not one face-to-face meal or drink, not one cheery chat. Theirs is an art-world cold war that has helped shape the entire marketplace. It is no exaggeration to say that the deals made by this pair of adversaries can alter the fates and fortunes of their numerous allies and challengers.

All dealers, of course, vie with one another, and tensions rise and fall. But Gagosian and Zwirner have had an especially bitter history, epitomized by their fight over a now deceased, hard-drinking Viennese artist once relatively unknown—whose estate is now worth more than $50 million. The story of Franz West is the story of how Gagosian and Zwirner became arch-rivals and then, through proxies, became entangled in a seven-year court battle that is only now awaiting a final verdict.

Some dealers, like Gagosian, start with nothing. Most start with family money and connections. David Zwirner is one of those. His father, Rudolf, was a well-known German dealer and intellectual. David grew up above his father’s gallery in Cologne, hanging out with houseguests like Jasper Johns, Andy Warhol, Roy Lichtenstein, and Cy Twombly.

David was 10 when his parents divorced; four years later he moved with his father to SoHo. Briefly he nursed dreams of becoming a jazz drummer. He was 28 in 1993 when he opened a gallery of his own, on SoHo’s Greene Street. His timing was propitious: the art-market recession of 1990 was ebbing. Zwirner had no fixed ideas about what he wanted to show. “I didn’t care what medium: painters, sculptors, video—no parameters,” he recalls. “Authenticity was what I was after.”

Zwirner knew he would have to build his business in the secondary market: works already sold at least once by artists established or on their way. But discovering new artists—the primary market—was what made his heart race. To find new talent, he went to then small European fairs such as Documenta. He came back with, among others, a video artist named Stan Douglas, who made short, noir-ish movies; a figurative painter named Luc Tuymans; and a young, carousing dynamo named Franz West.

West was a multi-media artist much admired in Europe for his collages, made of papier-mâché, plaster, and aluminum. Some of his works resembled small boulders; others were masks of varying sizes; later sculptures suggested sausages—or phalluses. As a teenager, West had hung out at bars with an older set of artists known as the Viennese Actionists. A debauched bunch, they made performance art meant to shock and revolt the authorities: from public masturbation to rubbing themselves with the blood of slaughtered animals. “He was a young guy sitting with them and drinking all the time,” recalls Eva Presenhuber, his Swiss dealer. “It was a rock ’n’ roll story: They did a lot of drugs, went to Afghanistan. You got opium and got high because you wanted to ‘grow.’ ”

Zwirner dedicated his first show to West—a bold stroke. West’s work wasn’t easy to love, but love it Zwirner did. Already he was showing he had an eye as keen as anyone’s in contemporary art.

“It was a rock ’n’ roll story: They went to Afghanistan. You got opium and got high because you wanted to ‘grow.’ ”

West seemed pleased, too. But as Presenhuber noted, the artist was acutely aware of his own talent, which in time would lead to tensions. “Zwirner was a young gallerist, maybe a little too ambitious—he told Franz what to do all the time,” Presenhuber explains. “Franz started to hate that.” Through the 1990s, though, he held his tongue and enjoyed the stretch limos Zwirner provided on opening nights.

Zwirner had no doubt he could make West a major name in the United States. It was just a matter of keeping him on track as an artist and not letting his demons get the better of him. Zwirner acknowledges that he sometimes tried to monitor West’s behavior and keep him from engaging in excesses. That was a challenge, for West already had alcohol-related liver damage and at some point contracted hepatitis C.

When Zwirner opened his gallery, the most propulsive force in the contemporary-art market was Larry Gagosian. Everyone knew his story: his Armenian roots; his modest upbringing as an accountant’s son working his way through U.C.L.A.; his starting job in the William Morris mail room, from which he was fired after a year; the period of low-level gigs—record store, bookstore, supermarket—until, as a parking-lot manager, he noticed a man selling posters out of the trunk of his car and thought he could do that, too.

A poster-framing shop in L.A. led to a gallery, and then a fancier one, along with another in New York. He charmed dealer Leo Castelli, the prince of Pop art, while hustling sales with a brute force never before seen in the market. By 1991 he had a gallery on West 23rd Street—the Chelsea frontier—another in SoHo, and a block-size flagship on Madison Avenue.

For all his success in the roller-coaster 1980s—recognizing the genius of a young Jean-Michel Basquiat before almost anyone else, selling modern masterpieces in excess of $10 million to publisher S. I. Newhouse (who resurrected VANITY FAIR in 1983), then reselling some of the paintings for even more to entertainment mogul David Geffen—Gagosian had a secret longing. He wanted his own primary artists. Basquiat, for all the still-wet canvases Gagosian bought and sold, was represented by Swiss dealer Bruno Bischofberger and later by Mary Boone; the rest of Gagosian’s triumphs were secondary sales.

One of his early breakthroughs was Cy Twombly, the artist whose elegant abstract paintings of hand-drawn scribbles and flower-like shapes weren’t yet astronomically valued, in part because Twombly had left the New York art scene years before to reside in Italy. At first, as Gagosian made his pitch to represent him, Twombly seemed standoffish, and the dealer feared his effort had been in vain. In desperation, he blurted out, “Why don’t you give the Armenian a chance?” Twombly found that hilarious and signed on.

Gagosian went from peak to peak in the 90s, taking on Damien Hirst and Jeff Koons, among other enormously lucrative artists. Poaching Franz West from David Zwirner in 2001 was, for Gagosian, a modest move, almost an afterthought. One of his senior directors in London, Stefan Ratibor, had suggested West would be a good—and profitable—fit. “He was the architect of that,” Gagosian says.

West’s motives were mixed. He liked the prospect of joining the gallery that had Cy Twombly. Also, in addition to Ratibor, West knew and liked a Gagosian director named Ealan Wingate. But for West, as for Gagosian, this marriage was mostly about power, prestige, and money. Gagosian was well on his way to global dominance, with a foothold in London to complement his three New York galleries. He had his detractors, rough as he could sometimes be in his business dealings. But none could deny the beauty of his shows, from his clean, Castelli-like exhibition spaces to the gorgeous frames and museum-quality catalogues. There was, perhaps, one more reason for West to bolt. Gagosian was no schoolmarm; he wasn’t going to tell West how to live. For Zwirner, West’s departure was a devastating and baffling blow. “I loved him as a person as well as an artist,” Zwirner recalls, “and we had worked so hard for him.” What more could the dealer have done? Slowly it sank in: nothing. Gagosian simply had more money and clout.

West’s departure changed everything for Zwirner. “It made clear to me that I had to grow,” he explains. Zwirner needed a space big enough to excite artists with its exhibition potential and to draw talent from other galleries. He leased one, in 2002, in the heart of Chelsea.

Zwirner’s record by now was remarkable, one hot primary artist after another: Diana Thater, who made site-specific video installations depicting the contrasts between nature and modern culture, and Jason Rhoades, whose anti-social installations were tinged with wry humor—the first, CHERRY Makita, depicted the artist as mechanic in a body shop, working on a car engine that actually turned on, its toxic fumes piped out of the gallery to keep from killing the curious. For secondary sales, where the most profits lay, Zwirner teamed up with dealers Iwan and Manuela Wirth, smoothing their way to New York from Switzerland while they helped him reach European collectors: not until 2009 would the two parties split.

Yet for all his success, Zwirner nursed a grudge against Gagosian, who, in turn, had his own grievances. He bridled at Zwirner’s public pique, expressed after Gagosian wooed away portraitist John Currin from dealer Andrea Rosen with a brusqueness that startled the art world. “Our generation doesn’t have that aggressive behavior,” Zwirner declared. Gagosian was furious. “If the tables were turned, he’d do the same thing,” Gagosian now says. “Zwirner had a lot of nerve trying to burnish his ethics on my hide.”

Oddly enough, the two dealers were alike in many ways. Both were tall—over six feet—tightly coiled, and fit. Perhaps Zwirner was in better shape, given his passion for surfing off Montauk, but Gagosian, nearly two decades older, was no slouch. Both had close-cropped silvery hair and wore a uniform of casual shirts and jeans. Both had a keen eye for art, both were tough bargainers, and both thrilled to the art of the deal. Both, as it happened, were jazz aficionados.

The contrasts were just as striking. Zwirner was a family man, devoted to his wife and three young children. His circle of friends came mainly from the art community. Gagosian’s personal life involved a succession of girlfriends, lavish parties, and luxurious stays on the yachts of friends who were also business partners.

Unlike Zwirner, Gagosian had been a pioneer of “historical” shows of works not for sale: museum-like exhibitions of artists such as Edward Hopper, Yves Klein, and Andy Warhol, curated by world-class experts like the late Picasso biographer and VANITY FAIR contributor John Richardson. Also unlike Zwirner, Gagosian had generally stayed away from new artists. No emerging talents just out of art school. No brilliant discoveries in their 20s. “I like it when there’s some momentum—the artist has some traction,” he says. “The economics of it [are] more attractive.” Also, as he notes, “when they’re up the food chain, and their prices are up, they tend to be better artists.” But, he adds with a laugh, “sometimes you see a young artist who’s really a genius and you have to resist the temptation to do anything!”

As they signed on with the older dealer, the artists experienced a new phenomenon: the Gagosian effect. His wealthy collectors stood ready to buy what Gagosian suggested they buy. Newly signed artists, as a result, tended to see their work spike in price over the course of a year or two. (Gagosian would be accused in one high-profile lawsuit of misrepresenting the worth of an artwork to cosmetics billionaire Ron Perelman, only to have the suit dismissed. Gagosian is currently named in two suits regarding the supposed non-delivery of Jeff Koons sculptures. Gagosian has said the works will be handed over when they’re ready.)

Collectors, more than artists, seemed to make Gagosian’s world go round. The dealer gave elegant dinners, either at one of his homes or his favorite restaurant, Mr. Chow, on East 57th Street. Art-market lawyer Aaron Richard Golub, who had started as a social acquaintance of Gagosian’s and ended up fighting him in court, attended a number of those parties and appreciated the dynamic involved. The guests, he noted, were nearly all male and, of course, quite wealthy.

For collectors who might be a bit insecure, being invited to Gagosian’s soirées conferred a heady validation. They could drop Gagosian’s name in art circles—just “Larry” to them—and tell friends that this or that painting had been bought from him. The Gagosian brand name was now nearly as important as the artists’.

These gatherings were often sprinkled with a few of Gagosian’s artists. “The artists just stand in one place; they’re stationary,” Golub explains. “You can talk to them and shake their hands.” But not just anyone could stroll up to them. “Those who get that privilege have either bought Gagosian art or are about to do so. The handshake is very helpful.”

The guests had one thing in common: they’d bought art from Larry. And so, to make conversation, they talked about what artworks they had. They visited one another’s vast homes to see each others’ collections, and often saw works by the same artists. The “Larry collection,” as Golub puts it, would typically feature a Damien Hirst. Also a Mark Grotjahn, a Richard Prince, an Ed Ruscha, a Cy Twombly, and a Rudolf Stingel. And, if the collector had outdoor space, a Richard Serra and, of course, a Koons sculpture.

As a Gagosian artist, Franz West saw his star rise, both in Europe and in the U.S. Along with his rough-hewn sculpture, he designed lines of playful furniture; Gagosian sold those, too. West had no quarrel with his dealer, or his principal go-between, Ealan Wingate—not yet, at least. His personal life was where the complications lay.

Shortly after signing on with Gagosian, West hired a pixie-ish studio assistant 24 years his junior, and the two fell in love. Tbilisi-born Tamuna Sirbiladze was an artist herself—a good one—and loved West enough to become his wife. But when a young writer named Benedikt Ledebur began working with West on the books that arose from his art, Sirbiladze was drawn to him as well. Ledebur was likewise smitten, despite the fact that he, too, was married, and had two children.

An open relationship ensued. From this unconventional arrangement came a son, Lazaré Otto, born in 2008, and a daughter, Emily Anouk, born in 2009. The identity of the biological father was an issue but not one that any of the three cared to pursue. “I did have a relationship with Tamuna at the same time,” Ledebur says. “When she had children, Franz said he wanted them as his own.” As West’s Swiss dealer, Eva Presenhuber, puts it, it was a very Viennese tale. “Franz liked complicated situations,” she contends. “He provoked things like this.”

Presenhuber observes that family life failed to bring West the happiness he sought. “I always said to Franz, ‘It’s interesting you have these children,’ ” she recalls. “He said, ‘I’m more like the grandfather to them.’ ” Presenhuber says West often spoke of seeking a divorce. Ledebur admits the troika had “difficult phases” but says West always fell back in love with his family—and kept working with Ledebur.

With an eye toward his legacy, West began talking to Gagosian’s Wingate about how to safeguard his art. West had formed a nonprofit archive some years before, but he had come to regret the power he’d ceded to its director. What he needed, he felt, was a repository for his art, from which it could be shown and sold, and into which he could put the archive. “I know that Franz wanted to have this foundation,” Presenhuber says. “He had been in touch with lawyers two years before.”

With Sirbiladze’s help, West had stopped drinking. But he had lived too hard in his youth to escape the consequences. By early 2012 he was losing his fight against hepatitis C and cirrhosis. Hoping the Italian sun would help, West moved to Naples to live and work while Sirbiladze tended to the children in Vienna. Soon, however, he fell into a coma and was checked into a private clinic.

West had stabilized by the time Ealan Wingate dispatched a private plane to Naples. The urgent message, says Ledebur, was that West return with doctors to Vienna. Only there could they sign all the documents needed to ratify the foundation West had planned on. Ledebur says West protested: he wanted to stay in Naples and had managed to line up a potential liver transplant in Nice.

Wingate, according to Ledebur, insisted on bringing West home to Vienna: the jet was already booked. Erich Gibel, who would become one of the foundation’s lawyers, disputes that version: “West was flown to Vienna at his own request. So it is not true that Ealan Wingate [pushed] to bring West home.” West’s friends saw the tussle as a sign of the Gagosian camp asserting itself, possibly against its artist’s personal wishes. Others saw yet another chapter in the West-family drama. Some even wondered if Zwirner, in some way, might enter the fray; he remained close to the archive’s director and made a point of staying in touch.

Soon after checking into a Viennese hospital, West was visited by Wingate. With him were the putative members of the new Franz West foundation. Wingate had brought along a notary public and documents for West to sign. Christoph Kerres, who would serve as lawyer for Benedikt Ledebur and West’s estate until 2017, suggests that West was no longer in his right mind when he signed the documents. “When the notary was present in the hospital, Franz West was about to be taken into intensive care,” he says. “It remains questionable if Franz West understood the consequences of the notarial deed.”

Why otherwise would West assign all of his art and assets to a foundation, Kerres notes, leaving nothing of his work to his widow and children? For into the foundation would go all of West’s royalties, copyrights, art, and assets, including all the holdings in the nonprofit archive. Foundation lawyer Erich Gibel takes issue with this interpretation of West’s intentions. He maintains that West—not Gagosian and not Wingate—“had the clear desire to establish the foundation and wanted to bring in his whole oeuvre.” It was, says Gibel, West’s “dying wish: the artist’s way of protecting his assets.”

Less than a week later—on July 25, 2012—West was dead. His widow was shown the foundation documents: a fait accompli. “The night after Franz died,” Ledebur recalls, “Ealan was standing in [the artist’s] flat, telling Tamuna that all this art now belongs to the foundation”—not to West’s two children, his direct heirs. Wingate, in Ledebur’s telling, conveyed it as good news, supposedly saying, “You don’t have to live in a museum. We can get you furniture you like.” Wingate, according to Ledebur, added that he would send someone from the foundation over to make a list of the works before the foundation took possession of them. Ledebur recalls Sirbiladze being stunned.

According to West foundation lawyer David Stockhammer, “Ealan Wingate did not go to the apartment of Franz West. Nor would he indicate anything regarding ownership or possession of any of Franz’s works. Language like ‘you don’t have to live in a museum, we can get you furniture you like’ is not anything that Ealan Wingate would say. On the contrary, Ealan Wingate had been with Tamuna for the previous days and was providing her lots of support.”

So began the years-long court battle. Sirbiladze sued the foundation, claiming it had sucked up all of her late husband’s work without her permission. The Gagosian gallery was not named in the suit, but Sirbiladze had concerns that the man chosen to oversee the foundation was a Gagosian director, Ealan Wingate. His title was “protector” of the foundation—a lifetime appointment. According to the documents, he had the power to name all board members under him and to sell or consign West’s work to galleries. One indicator was the foundation’s selection of consignee for the late artist’s playful lines of furniture. For its U.S. distributor, the foundation chose the Gagosian gallery.Gibel, the foundation lawyer, says that despite Wingate’s title and authority, the Gagosian gallery had nothing to do with the court case “and also … nothing to do with the foundation.” That wasn’t how some in the art market saw it. “Zwirner and Gagosian fight,” suggested collector and dealer Adam Lindemann, and West’s reputation “always suffers.”

Through West’s last years, Zwirner had had little contact with the artist. “We bumped into each other a couple of times, but there was no love lost on either side after he left,” Zwirner admits. Yet he appeared to be playing the long game. Quietly, he kept buying West’s work whenever he could and, at the same time, kept ingratiating himself with the nonprofit archive, always eager to be of assistance.Two years after West’s death, Zwirner, who had effectively been frozen out, staged a major show of his work in New York—much of it with art Zwirner owned—and invited West’s widow, Sirbiladze, along with Ledebur and the two West children. “It was during this trip that the family ended up staying in the gallery’s artist/guest apartment, and I got to know Benedikt and Tamuna well,” Zwirner recalls. “Tamuna was gregarious, an engaged mother, a very interesting artist in her own right, and full of fond memories of her life with Franz. She was devastated and appalled by the goings-on.”

Christoph Kerres says he found one clause of the new foundation’s documents mind-boggling—and motivating. The legal papers West had signed called for all of his artworks to be put in the foundation. That violated a fundamental legal tenet in Austria, where children are entitled to 50 percent of a parent’s inheritance, period.“The foundation has so far never denied or contested that the children of Franz West are entitled to 50 percent,” says Gibel. As far as the foundation was concerned, West’s wife and children had come out well. They were inheriting, as Gibel put it, a luxurious villa, five apartments in Vienna, five cars, cash, and West’s private collection of other artists’ work. All this, Gibel says, added up to $17 million. Kerres begs to differ. The children got two apartments, he declares, and the villa, which was more like “a cottage.” The cars were a modest substitute for paintings and sculptures. As for West’s collection of other artists’ work, it was, Kerres acknowledges, of meaningful worth—so much so that the foundation reclaimed it, according to Kerres, after having it appraised at $10 million.

A settlement seemed close in early 2016, one in which the children might get a substantial chunk of their father’s estate and the foundation the rest. Then came a tragic twist: Tamuna Sirbiladze’s death from cancer at age 45. One of her last legal efforts was to question the fees that some foundation board members were paid. That June, the Austrian Supreme Court found that the foundation’s three-person secondary board had paid themselves “suspicious” sums: salaries totaling more than $560,000 over a five-month period in 2012, followed in 2013 by payments of some $900,000. The secondary board members were expelled by the court. No such sums were associated with Wingate, who remained in charge. But now one court decision after another went against the West foundation.“I think Ealan was a bit too nosy, too clever,” suggests Presenhuber. “He should have drawn Tamuna in and told her 50 percent would go to the kids.” Instead, the foundation hung tough. Even after the Austrian Appellate Court quashed its appeal in June 2017, the foundation asked for an appeal to the Supreme Court. The foundation also threw the estate a curve: Franz West had had a sister. The foundation lawyer became her lawyer, too, asserting on her behalf that she—though not named in any of West’s wills, according to two sources—was the rightful heir, not West’s children.

The Supreme Court’s ruling, when it came in, this January, was a mortal blow to the foundation. The court ruled that it had had no right to take West’s art. It was ordered to give all its assets back to West’s estate, and back they have been coming, piecemeal.

Two months ago, however, another Austrian court found in favor of West’s sister, declaring her to be the rightful heir. While some insiders expect the court’s decision to be overturned, if the sister does prevail, she will inherit all of the art that has gone from the foundation back to the estate. Because of the 50 percent inheritance rule, she would have to give the children their half of the estate in cash. But she could still end up with tens of millions herself.

Over the years in this battle royal, all four mega-dealers have come to dominate the contemporary-art market. Hauser & Wirth is building a colossal space on West 22nd Street. Arne Glimcher, of Pace, is erecting an eight-story extravaganza on West 25th Street. Gagosian now has 16 outposts around the world; he was the first to build a supersize gallery in Chelsea. And Zwirner is putting up a $50 million space on West 21st Street. In it, he will be able to showcase one of his newest artists, if the court so rules: none other than Franz West.For some years now, the West estate and Benedikt Ledebur had hoped to switch representation of West’s works from Gagosian back to Zwirner. “Zwirner,” says Presenhuber, “always knew he would show West again.” And now it has come to pass: the late artist is technically back with the dealer whose admiration, if unreciprocated, has been constant all these years.

Last fall, in Paris, the Centre Georges Pompidou staged a major West retrospective, which then moved to London’s Tate Modern, where it remains until June 2; at the same time Zwirner proudly opened a separate West show at his London gallery, with works from his private collection. Two floors are dedicated to the artist and a third to his ill-starred wife, Tamuna Sirbiladze, a show curated by her lover Benedikt Ledebur. “Is it a triumph?” Ledebur reflects. “Yes, but a tragedy, too. Franz dead, Tamuna dead—the cost is too high.”

With the disposition of West’s work still uncertain, Zwirner will have to wait to learn how much of it he can take on, even as West’s legacy continues to flower.Gagosian is hopeful, too. For there, in the dealer’s unparalleled online roster of global greats—roughly 100 artists in all—is Franz West. Gagosian has access to his own cache of West works, acquired by the gallery over the years. Win, lose, or draw, he’s still selling the master’s bounty.

Adapted from Boom: Mad Money, Mega Dealers, and the Rise of Contemporary Art, by Michael Shnayerson, to be published on May 21, 2019, by PublicAffairs. Copyright © 2019 by Michael Shnayerson.

Inside the Private Museums of Billionaire Art Collectors

Tucked down a leafy road in Potomac, Maryland, the private museum Glenstone has barely a sign in the area to guide visitors, but it does have a beefy security guard at an imposing booth, from which the names of each hour's reservations are relayed, one by one.

Up, with each confirmation, goes the gate at this 200-acre estate owned by Mitchell Rales, age 60, billionaire co-founder of a conglomerate called Danaher. Along with his wife Emily Rei Rales, 39, he has amassed some 800 works by the greatest names in modern and contemporary art: Willem de Kooning, Jackson Pollock, Mark Rothko, Alexander Calder, Henri Matisse, Brice Marden, Jasper Johns, Robert Rauschenberg, and more.

A curving drive leads past Split-Rocker, a huge sculpture by Jeff Koons of a head bedecked with 50,000 live flowering plants and an undulating work by Richard Serra. So private is Glenstone that it has no parking lot; we members of the 1 p.m. group leave our cars on the grass beside the French limestone–clad museum, which was designed by the late Charles Gwathmey. Across a lawn and a duck pond stands the Raleses' capacious, Gwathmey-designed home, sleek and rather severe.

Eagerly we head into the gallery, to find empty walls. None of those modern masters, no paintings or sculptures at all. Only taut lengths of yarn from ceiling to floor, delineating trapezoids and rectangles.

This, in fact, is the work of the late minimalist Fred Sandback. It has filled the gallery's seven rooms and 9,000 square feet of exhibition space for 15 months, while most of the Raleses' $1 billion collection remains in storage. Before that the museum was closed for nine months.

Private museums get whopping tax breaks, which gives a taxpayer the right to ask: Is this a fair exchange? The U.S. Senate Finance Committee, under chairman Orrin Hatch, wondered the same thing. Last summer it concluded an investigation of 11 private museums, including Glenstone. The senator's staffers seem more perplexed than when they started.

Private museums get whopping tax breaks, which gives a taxpayer the right to ask: Is this a fair exchange?

There's a lot of good to be said about most of the new American private museums, they acknowledge. A lot to be said for Glenstone, too. Whether Glenstone merits those tax breaks—worth hundreds of millions of dollars—is yet to be resolved. Hatch has relayed his concerns to the IRS, whose commissioner has the last word on whether to tighten the rules.

Whatever the IRS decides, it's safe to assume that Mitchell and Emily Rales will not let taxes deter them. The couple have enough money and ambition to carry through with their plans even if the IRS were to disqualify some of the museum's tax benefits. Just beyond Split Rocker is proof: a vast construction site where New York–based architect Thomas Phifer is overseeing a 170,000-square-foot addition set into the hillside. When it opens in 2018 it will make Glenstone the largest private museum in America.

For the world's 1,810 billionaires, so many of them freshly minted, private museums are the new ne plus ultra: rooms of utterly impractical beauty that only the wealthiest can afford. Of the 236 private contemporary art museums totted up globally last year in the BMW Art Guide by Independent Collectors, more than 80 percent have arisen since 2000. The United States has 43 of them, second only to South Korea.

Private museums come in two basic sizes, big and small, which has a lot to do with how they're different in other ways, too. In Paris nearly 1 million visitors a year now tramp through the Fondation Louis Vuitton, the Frank Gehry–designed dazzler in the Bois de Bologne that opened in 2014—financed by one of France's richest men, LVMH chairman Bernard Arnault. America's latest entry is the Broad in downtown L.A., a private museum founded by real estate magnate Eli Broad and his wife Edythe that has drawn 800,000 visitors a year since its 2015 opening.

Crowds cheer; the cognoscenti mutter that obvious art choices fill too many walls of those big private museums. The small ones are quirkier, the fingerprints of their founders more evident. The small ones also stir more debate, both about how involved their founders should be with their operation and how public a private museum needs to be to justify those tax breaks. "At first you don't know how much public you want," says Mera Rubell, who with her husband Donald 23 years ago opened Miami's Rubell Family Collection, which is now one of the best—and biggest—of the private contemporary art museums. "But you can't be half pregnant. You're either welcoming the public or you're not."

You can't be half pregnant. You're either welcoming the public or you're not. —Mera Rubell

Jeffrey Deitch, longtime dealer, curator, consultant, and former director of L.A.'s Museum of Contemporary Art, puts the new museum founders in a continuum of art culture that goes back to wealthy patrons like Henry Frick, J.P. Morgan, Duncan Phillips, and Albert C. Barnes. All built museums for their private collections and later let in the public; those institutions live to this day. The difference, if there is one, is in the relationship between the new founders and the artists they collect.

"These collectors are engaged in a dialogue with the best artists of today," Deitch says. "They want to get involved." The epic scale of so much contemporary art, he adds, makes that dialogue essential. (Split-Rocker, for example, is 37 feet tall.) "If the best artists today were making easel paintings, there would be much less of a need to build private museums."

Tax breaks, says Jason Kleinman, tax and estate adviser to high-net-worth clients for the Herrick, Feinstein law firm, are never the point, or at least not the main point, of building a private museum. If a collector is in the art game for profit, he won't start a museum. "He'll sell the art and go to Vegas," Kleinman says, "because he gets more from Sotheby's than from the charitable donation."

A wealthy collector who decides to donate art rather than keep it on the wall or sell it has already made a financial sacrifice. The question is whether to give it to a public museum or start one of his own. And that, in turn, is a decision that often comes down to power. "If he gives a painting to the Museum of Modern Art," Kleinman says, "he'll never have control over it again. He'll never be able to say what type of lightbulb to shine on it. Or when it should it be pulled up from the basement and displayed. Also, let's say he wants to give 100 pieces. Very hard to find a museum that says, 'I'll take all 100.' Museums have limited space, so they'll be picky."

By definition a public museum is funded mostly by the public—which is to say government at one level or another—and is steered by its trustees to do what's best for the public, not what's best for a wealthy donor. Or so it goes in theory.

The money a founder spends to start his own museum is rarely offset in full by tax breaks. But those breaks do help. They come in exchange for contributions the founder makes, usually of cash, stock, land, or art. All are tax-deductible gifts (applicable up to 50 percent of the founder's adjusted gross income).

Often the weightiest of these are shares of stock and artworks, since a founder pays no capital gains on their appreciation when he donates them. The foundation gets the gift at its appreciated value and can spend it in ways that further its mission: building a museum, for example, or buying art—even traveling from one art fair to another, within reason, to shop for more art. Art purchased by the foundation is fully deductible. Any further appreciation of purchased art? No capital gains tax.

Strictly speaking, all these tax breaks benefit the foundation, not the founder, since the founder no longer owns it. But the founder—or members of his family—may sit on the board and help decide what a foundation should do or buy. Which means that billionaires who like spending money on art and the spaces in which it resides can spend a lot more of it if they have a private museum than they can as collectors on their own.

Marta Gnyp, an art adviser and author of The Shift: Art and the Rise to Power of Contemporary Collectors, says another appeal of private museums is the greater role the founders get to play in the art world. "Collectors certainly like to share their passion, show what they have, bring other people into contact with art, or even create their own artistic canon," she says. "There is also a market element in this passion. In today's art world there are so many new collectors. How do you get access to the hottest artists' work? Having a private museum helps. It gives you prestige and visibility; the galleries treat you differently. It may even get you the art at lower prices."

"How do you get the hottest artists' work? A private museum helps. Galleries treat you differently. It may even get you lower prices."

Overall, of course, the price of contemporary art has skyrocketed, in part because billionaires with private museums can outbid all comers, and that has pinched public museums. "We probably spend an average of $40 million to $50 million a year on acquisitions in total," says Thomas Campbell, director of New York's Metropolitan Museum of Art. "That could be spent on a single work of contemporary art." Campbell has to hope that private museum founders will work with him—buying pieces together, co-curating shows, serving on his board, and one day seeing the wisdom of giving their collections to the Met.

"The challenge of the private museums is twofold," Campbell says. "You have to have a really big endowment to assure their long-term stability. And the mandate to maintain the vision of the founder can be a straitjacket. If the mission is held too tightly, it can strangle the museum as things change." Case in point: Philadelphia's Barnes Collection, where a practical need to move and expand put the museum at odds with its late founder's will and led to a protracted lawsuit.

Another frustration private museums create for the rest of the art world is what longtime New York dealer Frances Beatty calls the "urge to control the narrative." Founders like to promote the artists they have collected. But that can distort the reputations accorded those artists by major museum curators. "They have the megaphone, because they have the money," Beatty says of the founders. "They understandably want their art seen. But a lot of what we see in these private contemporary art museums might not survive 30 years from now."

Robert Storr, former dean of the Yale art school and one of the country's most trenchant critics, goes further. "Most collectors have a limited grasp of curatorial practices…and tend to be impatient, even impulsive, where museum professionals would take more time thinking around corners. It's hard to name a great collector ho became a great museum director, even of their own museums."

Mitchell Rales likes to say that de Kooning and Pollock are kindred spirits of his: rebels in the art world, as he and his brother Steven were in leveraged buyouts. Throughout the bull market '80s, the Rales brothers piled up debt to buy boring companies that made unglamorous things (fuel pumps, dental appliances), squeezed out waste, and made a killing: $4 billion each. Mitchell bought art to fill his walls, but not with any grand intent.

Then came a fishing trip in Russia in 1998 that changed his life. His helicopter had touched down in a village to refuel, and as Rales and his friends walked away from it, a plane on the tarmac exploded. "We were 10 feet away," Rales told theNew York Times. "Flames shot more than two stories high. I was lucky to have escaped. I left Russia barefoot, with only a torn T-shirt and gym shorts. From then on it was no longer about making money."

Rales divorced his wife the next year. In 2008 he married art curator Emily Rei, of Manhattan's Gladstone Gallery. Working closely with New York dealer Matthew Marks, Mitchell and Emily set out to build a world class collection spanning the whole postwar era.

"This is not just buying what they like," says Jeffrey Deitch. "This is a very systematic program to encompass the history of great art from the New York School period on up. It's an amazing thing they're doing."

Glenstone opened as a private museum in 2006, though with barely a peep. Long press-shy, Rales gave no interviews and did little if anything to promote the museum. He kept the museum's hours to a minimum, required all guests to make reservations well in advance, and, instead of extending broad invitations to art critics to see shows, often actively discouraged journalists from visiting.

Between 2006 and 2013, just 10,000 visitors came to Glenstone. Yet the Raleses drew enormous tax benefits from the museum and its foundation. Even more extraordinary was the stock play. Between 2012 and '14, Rales donated more than $450 million in Danaher stock to Glenstone, according to the foundation's 990 federal tax forms.

Rales paid no capital gains on the stock, while the Glenstone foundation got it all tax-free, to spend in full, presumably to buy more art.

Was this legit? In late 2015, Senator Hatch sent a letter of detailed queries to 11 private museums in the U.S. The institutions ranged from L.A.'s Broad and Miami's Rubell (two of the largest, collections that clearly provide great public benefit by welcoming tens or even hundreds of thousands of visitors a year) to small ones, among them Glenstone, where the benefits were harder to judge.

Education was a key point: How much of it did Glenstone provide? Enough to justify those tax breaks? "They do make a lot of effort to bring in kids from the outside," one of Hatch's investigators concedes about Glenstone. "But I don't know what a bunch of eighth-graders will take away from that Fred Sandback show."

The investigators also wanted to see for themselves how close each museum was to its founder's home. On the same property? A stone's throw away? Might the founder be tempted to host a private dinner in his museum, or haul art across the lawn to hang for guests in his home—art no longer his—and so try to have it both ways? The proximity of Glenstone to the Rales residence did appear questionable to members of Hatch's team. "It seems like what you don't want," one investigator says. "It's on the property, right by the house."

Ralph Lerner, co-author of the classic textbook Art Law, says the Raleses need not worry. As a private operating foundation, Lerner says, Glenstone isn't obligated to open its doors to visitors at all, much less worry about measuring the distance from museum to house. "It's in black letters, clear-as-day regulation," Lerner says. "If you lend art on a rotating basis to other institutions as one of your purposes, you don't have to open your private museum to the public." The Senate Finance Committee is just misguided, he says, and he should know: He's the one who set up Glenstone as a foundation in the first place.

As for Hatch, he has passed along his findings to the IRS commissioner, clearly less than reassured. "Tax-exempt private museums have a duty to provide a benefit for not just their benefactors and the well connected but the public as a whole," he tells Town & Country. Without naming which ones, he adds that some of the 11 museums he investigated "appear to have the ability to exploit gray areas of the tax code to overly benefit their founders."

Deitch takes strong exception to Hatch's assertion. "I personally know all the people who are on that list," he says, "and they are all very public-spirited people. They're completely committed to sharing their passion with the public, and ultimately it costs them much more to have this public side rather than stay private."

One prominent collector has taken a more modest approach to showcasing his artwork. J. Tomilson Hill, 68, is vice chairman of the Blackstone Group, a billionaire in his own right, one of New York's most dapper dressers, and an avid buyer of both Renaissance bronzes (he has 34) and modern and contemporary artworks (at least four each by Roy Lichtenstein, Francis Bacon, Andy Warhol, Agnes Martin, and Christopher Wool).

Art fills his Peter Marino–designed homes in New York, East Hampton, Telluride, and Paris, but Hill puts on no airs about it. "Our collection is totally personal," he says of his and wife Janine's acquisitions. "A museum implies knowledge not just of the history of art but trying to be scholarly in a way that I don't have to be." So instead of erecting a monument to the work they have amassed, he's moving it into a 6,400 squarefoot gallery space in Manhattan.

This fall the Hill Art Foundation will open on two floors of a new condo building on West 24th Street, in the heart of Chelsea. Like Glenstone it is a private operating foundation that will allow Hill to receive a tax deduction for anything he donates to it (up to 50 percent of his adjusted gross income), but the goal is not to create a permanent repository. Education, he says, will be its primary mission. "I'm on the board of Our Lady Queen of Angels school in East Harlem," Hill says. "When we had our show of bronzes at the Frick, we had our eighth-graders come down to see it. These were students who had never thought they could enter the Frick. It looked like a private home to them. They spent two and a half hours talking about mythology and antiquities."

The beauty of the gallery setup, Hill says, is its impermanence. Whenever he chooses he can easily close the temporary exhibition space and find other ways to execute the foundation's mission. For example, if he likes he can give the art to a public museum—one like the Metropolitan Museum of Art, on whose board he sits. Like other collectors, he winces at the thought of a museum cherry-picking his paintings after his death and putting the rest in storage.

But unlike people who have built museums to prevent that in perpetuity, Hill can still negotiate. "Look at what Donald and Dora Fisher of the Gap did with the new wing of the San Francisco Museum of Modern Art," he says. The museum got to house the Fishers' collection by pledging to devote the space exclusively to the works for one year out of every decade over a 100-year period. "I could see negotiating something like that."

The Raleses, who declined to be interviewed for this article, are taking a different approach, building an addition that, according to Glenstone estimates, 100,000 people will visit every year. That level of attendance should eliminate any talk of unfair tax breaks, but the new, more accessible structure will reportedly cost at least $125 million—a big commitment, even in capital-gains-tax-free dollars. Discrete pavilions, one for each of the Raleses' favorite artists (among them Brice Marden, Charles Ray, Michael Heizer, and Cy Twombly), will be a key feature of the new addition. "Each time visitors to the pavilions exit an exhibition space," the couple announced in a statement, "they will come across a water garden or the landscape before going back inside, allowing for a serene and contemplative art viewing experience."

And that is, to be sure—after the temple building and tax deducting—what it's supposed to be all about: the art itself.

This article originally appeared in the February 2017 issue of Town & Country.

Artsy's Wendi Murdoch Just Wants to Sell You a Painting

As tech startups go, Artsy.net has just the right blend of grunge and glamour. On four floors in Tribeca, rows of twentysomethings tap out news articles, steer art buyers to galleries, and set up auctions, all in silent servitude. But the floors are high up, and the river views are sweeping. Two of Artsy’s founders look appropriately scruffy in a small conference room. The third, in much-torn jeans, looks the part too, but she is fooling no one.

Wendi Murdoch, 49, the ex-wife of press lord Rupert Murdoch, is well enough set to have backed a bevy of tech companies, from Uber and Snapchat to Oscar and Warby Parker. Artsy, though, is her passion, and if there’s any truth to the company’s few public statements, she has picked a winner.

Founded as a partner for galleries selling art online, Artsy says its monthly sales have doubled in the past year. In just that time the company has also become a serious player in live auctions, working with all the major houses. In 2017 it held 190 of them—not fancy evening sales, but definitely day sales for Sotheby’s and Christie’s. Between the galleries and the auction houses, Artsy says it is now facilitating sales worth more than $20 million a month, all told. Meanwhile, its rivals are laying off staff.

The legend is that Carter Cleveland, tall and somewhat Uriah Heepish, invented Artsy in his Princeton dorm room when he was a computer science major. The son of an art historian, he missed seeing paintings on his walls, and he started imagining an art version of Amazon: a single website where every work of art in the world could be displayed—and bought and sold.

Sebastian Cwilich, formerly of Christie’s and the short-lived London gallery Haunch of Venison, brought art business savvy. Murdoch supplied seed money and strong opinions. She won’t say how much she invested, but when Artsy opened for business in 2012, it had $50 million in venture capital. Last summer, amid soaring numbers, it raised another $50 million. Artsy has other investors, but it’s Murdoch who sits with her two young partners, slow to make eye contact with a visitor but forceful when she does speak in her still strong Chinese accent.

Which of the three hatched the idea for Artsy is a bit murky. Cleveland has his Prince­ton story; Murdoch has her own version. “Dasha and I had an idea to do this,” she says with a bright smile, referring to Dasha Zhukova, the former wife of Russian oligarch Roman Abramovich. “Together we raised money… I talked to leading galleries, brought them in as our supporters. Dasha did creative design. Carter and Sebastian built the Artsy platform. We all worked as a team.” Cleveland is quick to admit that there would be no Artsy without Murdoch. She is quick to return the compliment.

One of Murdoch’s first calls was to Larry Gagosian—“He tried to sell me art!” The world’s most powerful dealer needed little convincing that the art market’s future lay online. Other gallerists—Marc Glimcher of Pace, the William Acquavella family, assorted Rockefellers—soon fell in. “It was clear there would be some platform that would allow people to have access to all art,” says Cwilich. “But this is the art world: It was all about ‘Who will I associate with? Who are the others on the platform?’”

For that, Murdoch was the perfect third leg of the stool: a world class connector, in business as well as romance. In 2010, Murdoch brought in Joshua Kushner of Thrive Capital, who wrote a check for $1.25 million. Kushner went on to lead Artsy’s $18.5 million series B round of funding.

If we talk about that, it will be the one line everyone reads.

Two years earlier Murdoch had reignited the courtship of Josh’s brother Jared with Ivanka Trump—history in the making. Asked about that match today, Murdoch demurs. “If we talk about that, it will be the one line everyone reads.”

(Those readers apparently include U.S. counterintelligence officials, who worry that Murdoch may have lobbied Jared and Ivanka for real estate projects on behalf of the Chinese government, in particular a $100 million Chinese garden at the National Arboretum, which called for a 70-foot tower that could conceivably have been used for surveillance of the White House and U.S. Capitol. A spokesman for Murdoch told the Wall Street Journal that she “has no knowledge of any garden projects funded by the Chinese government” and observes that she has not been accused of anything.)

Artsy has plenty of competition, but other startups have approached galleries in disruption mode: Work with us or else. Artsy let the galleries stay in charge—and so they remain. When an Artsy browser sees a painting he likes, Artsy passes him along to the gallery that has the work. The gallery, not Artsy, sets the price.

Five years after that strategic start, it has images of 800,000 artworks, 500,000 of which are for sale from more than 2,000 galleries around the world, which pay a monthly subscription fee. In a market where brick-and-­mortar galleries are burdened by rising rents and pricey art fairs, sales wafting in from Artsy seem like so many check-laden Christmas cards.

At first glance Artsy’s auction side seems a much harder sell. Why not go to Sotheby’s, where you can see the art up close? “They said the same thing about dating,” Cleveland snorts. “‘How will it work when you can see the person only online?’ ” Case closed there. The appeal of Artsy to auction houses is clear: larger crowds, not just Old World catalog holders. For users, bidding is all but frictionless. “Once you register, we have your credit card information. You can bid at the next auction—don’t have to register all the info again,” Murdoch notes.

Not everyone goes to the site to buy. Many of the twentysomethings in the office are journalists turning out Artsy’s articles for a general audience—a great way to get the word out and stay atop Google. Museums are represented on Artsy too; it’s a research tool for curators and collectors alike. “If I want a Hockney,” Cleveland says, “I might want to see the Hockneys in major museums.”

There’s even a posse of professors—somewhere—working up an art genome for Artsy, rating traits by artist and artwork. One Picasso painting might be 100 percent on the Cubism scale; another might be 20 percent (his blue period, perhaps?). A classic Bonnard might be rated for redness, a figurative Philip Guston for pinkness. Almost any Warhol will rate 100 percent on the Pop Art scale, while a lesser Pop Artist—Tom Wesselmann, say—might rate 60 percent.

Now Artsy has gone further, spending a chunk of its capital on ArtAdvisor, a data science startup that uses artificial intelligence as a tool to value art. But the ultimate goal is to assess not just the art but the Artsy user. Amazon records our likes and dislikes; why not do the same for our artistic tastes? Every time a user clicks on an artist, a new bit of her genome is filled in. If you like de Kooning, you might be steered to a young artist in Bushwick who paints with similarly strong brushstrokes. “When Artsy sends me an alert about some cool art,” Murdoch says, “quite often I discover something I like.”

If this sounds a lot like Instagram, it should. Users on both sites browse art pages, and one page leads to another. Indeed, Cleveland says Instagram fits right into his master plan. “Our goal is for art to be as popular as music,” is something he’s fond of saying. Artsy has 600,000 followers on Instagram—a lot of cross-pollination—but Cleveland doesn’t think he’s losing many sales to Instagram artists who post their work and serve as their own dealers. A buyer has to give his credit card information every time he wants to buy a work on Instagram.

“Completing a seamless experience is not what Instagram is based on,”

-Murdoch says.

Whether Artsy is profitable at this point—and whether Murdoch and other investors stand to make a killing or not—is another question.

Whether Artsy is profitable at this point—and whether Murdoch and other investors stand to make a killing or not—is another question. Though they have little but a black box to ponder, some analysts have set Artsy’s market cap as high as $275 million—a future windfall if the company keeps growing. Marion Maneker of the Art Market Monitor website, who talked to midlevel Artsy executives at the Basel Miami art fair in 2016, is more skeptical. They told him Artsy was “close to profitability,” which meant it had lost money in its first four years.

As with any tech startup, so much is perception, according to Artnet’s “Gray Market” columnist Tim Schneider, who cites Tesla as an example. The carmaker hasn’t made a profit either, yet its market cap is higher than GM’s. “Someday Artsy could be profitable, even wildly so,” Schneider says.

Asked what $100 in Artsy seed money would be worth today, Murdoch and Cleveland exchange knowing looks. “We can’t say,” Cleveland replies, “but you would have done very, very well.”

Murdoch is, not surprisingly, a serious collector. Like a lot of Chinese buyers, she started with Asian artists: Cai Guo-Qiang, Lee Ufan, Wang Guangle, Jia Aili, and Wang Yan Cheng. But in her Fifth Avenue living room, overlooking Central Park, there is an Agnes Martin above the mantel, and on another wall a Mark Grotjahn. Every day, she says, her art makes her happy—and so does Artsy. “You feel you help the art market to a broader universe.”

Cleveland, who gives talks on “art as an asset,” has his own take on why the art market is growing as fast as it is, and why Artsy is doing so well. “We are in an era when more and more of humanity is collectively ascending Maslow’s Hierarchy of Needs.” I don’t quite catch this, so I ask him to repeat it. Somehow, when he does, Maslow’s Hierarchy of Needs comes out as Mass of Higher Beads. Could he just clarify that one more time?

That’s when Murdoch turns to Cleveland and exclaims, in her Chinese accent, “Speak English!” And for a split second a really funny Wendi Murdoch appears before slipping back into her Artsy investor guise.