$80 Million Con

Anderson Cooper reports on the biggest, most lucrative art fraud scam in U.S. history, where a prestigious old New York art gallery sold fake works for 15 years

The following is a script from "80 Million Dollar Con" which aired on May 22, 2016. Anderson Cooper is the correspondent. Katherine Davis and Sam Hornblower, producers.

When one of the oldest and most respected art galleries in America, the Knoedler Gallery in New York, closed its doors abruptly in 2011, the art world was stunned. Not because the gallery closed, but by the discovery that over the course of 15 years, the gallery and its president, Ann Freedman, had sold millions of dollars in forgeries to wealthy collectors.

art-fraud-cooper-before-post.jpg

Jack Flam

CBS News

Nearly 40 paintings, supposedly created by some of the most important artists of the 20th century, were all fakes, painted by a struggling artist in his garage in Queens. The fraud might still be going on if it weren't for an art historian Jack Flam -- who was the first person to uncover the scheme and blow the whistle to the government, putting the brakes on an $80 million con -- the most audacious and lucrative art fraud in U.S. history.

At the center of the story are these seven paintings that sold for more than $3.5 million. They're known as "Spanish elegies" and were supposedly created by the artist Robert Motherwell.

Anderson Cooper: Do you think those are the series the artist is best known for?

Jack Flam: They definitely, the elegies are definitely the series that he's best known for. And I believe that they command the highest prices.

Jack Flam should know. He is one of the world's top experts in Robert Motherwell and was friends with the artist for years. Robert Motherwell was the youngest of a group of famous American painters that included Jackson Pollock, Mark Rothko and Willem de Kooning, who pioneered a new style of American art known as abstract expressionism. After Robert Motherwell's death, Jack Flam became president of the foundation dedicated to his work, and was assembling a catalogue of all of Motherwell's paintings - what's known as a catalogue raisonne.

Anderson Cooper: Essentially a dealer would want a Motherwell that they have, that they are selling, to be in the catalogue of Motherwell's work, so that-

Jack Flam: Absolutely.

Anderson Cooper: It gives it legitimacy?

Jack Flam: The catalogue raisonnee in a way is the Bible for the market.

For years, Jack Flam and his researchers had been gathering information about hundreds of purported Motherwell paintings, analyzing them to sort out the real ones from the fakes.

Anderson Cooper: Essentially you're doing detective work?

Jack Flam: It is very much detective work, yes.

Anderson Cooper: Into an artist's past-- an artist's history?

Jack Flam: Yes, I mean you end up knowing things about the artist that the artist himself or herself did not know

Anderson Cooper: In what way?

Jack Flam: Well, because the artist never sees his or her work all together like that// Whereas we were living with these things, you know, pretty much every day.

The first time he saw one of the forgeries was in 2006, when Ann Freedman, president of the Knoedler Gallery, showed him what she said was a newly discovered painting by Robert Motherwell, a Spanish elegy. She said it belonged to a collector who wanted to remain anonymous.

Anderson Cooper: When you saw this elegy, did you think it was genuine?

Jack Flam: I had no reason to believe it was not genuine.

Anderson Cooper: Because?

Jack Flam: Because it was in the Knoedler Gallery. It looked like an elegy.

Anderson Cooper: Tell me about the Knoedler Gallery. What was their reputation?

Jack Flam: They had a very good reputation. It's one of the oldest if not the oldest gallery in New York, and maybe in the United States so I mean they had a really sterling reputation.

But it wasn't until a year later that Flam and his team of researchers lined up that alleged Motherwell elegy with six others that had recently surfaced, and became suspicious.

Jack Flam: That day, when my team and I sat in front of the computer and looked at those images, we realized that something was gravely wrong.

Anderson Cooper: Something about the way they were painted--

Jack Flam: The way they were painted.

Anderson Cooper: - signature?

Jack Flam: Signature, the histories, the titles--

Anderson Cooper: Not just the histories, the lack of history?

Jack Flam: The lack of history, right.

Jack Flam says the signatures on the seven paintings were almost identical, as if copied from a template. And the words "Spanish elegy" were written on the backs although Motherwell never inscribed his works that way. He pressed Ann Freedman, president of Knoedler Gallery, for the name of the person who was actually bringing her the paintings.

Jack Flam: We asked her who the intermediary was.

Anderson Cooper; The person she bought the paintings from?

Jack Flam: The person she bought them from. That turned out to be Glafira Rosales.

Anderson Cooper: Had you heard the name Rosales at all?

Jack Flam: No, I'd never heard of her.

Jack Flam says he was assured that Glafira Rosales was an elite international art dealer, but when he hired private detectives to investigate her gallery, all they found was this modest house in Great Neck, Long Island.

Jack Flam: It was just a house in a neighborhood with newspapers lying in the yard.

Anderson Cooper: That was the gallery?

Jack Flam: That was the gallery.

Anderson Cooper: Not exactly the kind of gallery you expected?

Jack Flam: No, it wasn't what I expected.

Jack Flam's investigators also discovered Glafira Rosales' boyfriend, Carlos Bergantinos-Diaz, had been accused of selling forgeries in Spain.

Jack Flam: I was frankly very surprised that no one at Knoedler seems to have done the simplest background check.

Anderson Cooper: How long did it take investigators to find out this information?

Jack Flam: About a week.

Jack Flam suggested the paintings be sent for scientific testing to Jamie Martin, one of the world's top forensic art analysts. Martin showed us how he examined one of the fake Robert Motherwells using a stereomicroscope to study every millimeter of the painting's surface, and to select and then remove samples for identification. That's how he detected circular marks in the base layers, indicating an electric sander had been used to remove paint.

Anderson Cooper: So Robert Motherwell didn't use an orbital sander to sand down paintings?

Jamie Martin: No, no, forgers tend to use orbital sanders to remove paint from old paintings so that when that painting is handled, the back and edges look suitably old.

Jamie Martin also used what is called raman spectroscopy, which can help detect historically inaccurate paint pigments.

Jamie Martin: The smoking gun in this particular case was the red paint that is present on the edge of the work.

Anderson Cooper: Why was that the smoking gun?

Jamie Martin: Well the smoking gun is that the red paint contains a pigment called pigment red 170.

It turns out pigment red 170 wasn't available until more than 10 years after the paintings were supposedly created.

Anderson Cooper: When you saw the evidence that came out from the report, from the forensic testing, you had no doubt these are fakes.

Jack Flam: When I saw the report, I thought to myself "nobody could have a doubt now."

Jack Flam took his information to the FBI's Art Crimes unit, which launched an investigation. In 2013, Glafira Rosales confessed to playing a key role in the multimillion dollar fraud. She is now awaiting sentencing, and told the FBI the forgeries were the handiwork of this man: Pei-Shen Qian, an artist who lived in Queens and painted the works in his garage.

art-fraud-8.jpg

Art forger Pei-Shen Qian

Wenxin Fan

Anderson Cooper: When you found out that all these paintings were forged by one guy working in Queens, what did you think?

Jack Flam: I was amazed. I was truly amazed. The guy really knew what he was doing

These are all Pei-Shen Qian's forgeries. Incredibly, he was able to copy the style and technique of not just one major artist, but many of the giants of the 20th century: Jackson Pollock, Willem de Kooning, Richard Diebenkorn, Barnett Newman, Clyfford Still, Franz Kline, Lee Krasner, Mark Rothko and others. He forged 63 works that sold for more than $80 million to collectors.

Federal investigators don't know exactly how much Pei-Shen Qian made on the scheme, but it was at least $65,000. He fled to China and was later indicted. In an interview with Bloomberg News three years ago, the forger explained he began painting in Shanghai, and moved to the U.S. in the 1980s. He insisted he never intended to pass his paintings off as anything other than imitations and found it incredible that anyone had taken the paintings seriously.

Forensic analyst Jamie Martin points out there were obvious clues these paintings were fakes if you knew what to look for. This forged Jackson Pollock, for example, came with a misspelled signature. The "c" in Pollock is missing.

art-fraud-9.jpg

This fake Mark Rothko painting was sold by Knoedler Gallery for more than $8 million dollars. Jamie Martin found evidence it was a forgery within just a hour of looking at it.

Anderson Cooper: An hour? That's all it took?

Jamie Martin: Well, you and I can detect it probably within five minutes.

Anderson Cooper: How?

Jamie Martin: If we turned around the back, we can see that the white ground is apparent on the back of the canvas

The white ground between the canvas and the paint was crucial evidence because Mark Rothko did not use white ground layers until 10 years after this painting was supposedly created.

Jamie Martin: The white background here is a complete tip-off that this work is anomalous. It's historically inaccurate.

In some instances, the forged paintings had been given a false patina of age by subjecting them to heat or rain, or staining the canvases with tea.

So how did all these obvious clues escape notice by the Knoedler Gallery and its president, Ann Freedman? That's what buyers of the fakes want to know.

Domenico de Sole, the chairman of Sotheby's, is one of 10 wealthy art collectors who have sued Ann Freedman and Knoedler Gallery after buying one of these forgeries.

Anderson Cooper: Do you feel you did enough due diligence as a buyer?

Domenico de Sole: My due diligence was to go to the best, most prominent gallery in the United States dealing with a person with a stellar reputation, and pay a price that was reasonable, it was fair.

Domenico de Sole was the person who bought that $8 million fake Mark Rothko and told us he believes Knoedler Gallery and its President Ann Freedman either knew or should have known that this lucrative collection could not possibly be genuine. Greg Clarick is his attorney.

Greg Clarick: The red flags began with the notion that Glafira Rosales, who was an unknown person to Knoedler, who Knoedler never investigated, came in and she started delivering what turned out to be an endless stream of never-before-seen paintings was enough to raise a huge red flag.

Anderson Cooper: Strangers don't walk off the street into a gallery saying that they have access to a never-before-seen collection of some of the greatest masterpieces

Greg Clarick: That's right. Second, the works had no provenance.

Anderson Cooper: No chain, no history?

Greg Clarick: They had no history. They had no documents.

Anderson Cooper: So there was no evidence these paintings had ever been painted by the artists?

Greg Clarick: That's correct.

Not only that, there were no bills of sale, no insurance records, no shipping documents, and no museum exhibitions for any of the paintings. Greg Clarick told us the gallery had motivation to overlook the paintings' shortcomings.

Greg Clarick: Over the period of this fraud, Knoedler sold these paintings for about $67 million. Knoedler made over $40 million in profit from selling these paintings. And at the same time, Knoedler made essentially no money at all from selling other paintings.

Anderson Cooper: Their business wasn't doing well?

Greg Clarick: Their business didn't exist as a profitable venture from 1994 until 2009 except for selling fake paintings from Glafira Rosales.

We wanted to talk to Knoedler Gallery President Ann Freedman and though she initially agreed, just a few days before our scheduled interview, she backed out. Luke Nikas is her attorney.

Anderson Cooper: Did Ann Freedman know she was selling forgeries?

Luke Nikas: No, she didn't.

Anderson Cooper: Not at all?

Luke Nikas: Not at all.

Anderson Cooper: Never suspected over the course of 15 years?

Luke Nikas: She didn't. She believed in the pictures and she believed in the pictures because that's what the experts were telling her.

Luke Nikas says Ann Freedman showed the paintings to art experts and none of them told her the works were fake.

Luke Nikas: She disclosed there were no documents about these paintings. Never found a single one. She disclosed that. She disclosed this unusual backstory about the paintings. And from her perspective, the people who bought these pictures appreciated the risk.

Anderson Cooper: A lot of these buyers say, "Look, I never doubted these works because Ann Freedman vouched for them. The Knoedler gallery was selling them."

Luke Nikas: I think many people do say that. But if you are going to buy a painting that has no documents, has very little history, has this unusual backstory, and you're not comfortable with that, even with the Knoedler name on it, then you shouldn't buy the painting.

Of the 10 civil lawsuits brought against Ann Freedman and Knoedler Gallery, six have been settled out of court for undisclosed sums, including Domenico de Sole's case, over that fake Mark Rothko. As for Ann Freedman, she is back in the art business. She has opened another gallery and is once again selling paintings just a few doors down from her old gallery in New York City.

  • Anderson Cooper

    Anderson Cooper, anchor of CNN's "Anderson Cooper 360," has contributed to 60 Minutes since 2006. His exceptional reporting on big news events has earned Cooper a reputation as one of television's pre-eminent newsmen.