Hedge funder says gallery tricked him into bad deal over George Washington painting

A former hedge-funder says a Manhattan art gallery duped him out of millions of dollars when it tricked him into signing a bad deal where they secretly kept a commission on a $12 million historic painting of George Washington, new court papers show.
Billionaire philanthropist Michael Steinhardt bought the full-length portrait of the president titled “Munro-Lenox” from the New York Public Library in 2006 for $5 million to help the financially ailing institution, his Manhattan Supreme Court lawsuit from Wednesday says.
In 2017, Steinhardt decided to sell the work — which was the first of four identical pieces painted by Rhode Island artist Gilbert Stuart in 1800 — through Hirschl & Adler Galleries, which has expertise in 19th-century paintings.
But, Steinhardt claims the gallery falsely told him it would be a tough piece to sell, according to the suit.
And so the gallery took the painting on consignment on a $10 million “net to you” contract — not revealing that they undervalued the work and would keep anything above that amount regardless of how high, the court papers claim.

The next year, the painting sold to Leonard Stern, the founder of real-estate firm the Hartz Group, Inc. for $12 million. The painting is on display in the lobby at the Hartz Group office at 667 Madison Avenue, the court filing says.
The gallery paid Steinhardt $10 million, but didn’t tell him the selling price or reveal that it kept $2 million, the court documents allege.
Steinhardt would only discover the selling price after later running into Stern, the suit says.
“The Gallery retained a hidden and exorbitant 17% commission of $2 million,” the court papers charge. “It was never Mr. Steinhardt’s intent to sign a contract that would allow the Gallery to obtain a windfall and keep a large percentage of the purchase price.”
If the gallery had been truthful about the true worth of the piece and what they stood to make, Steinhardt, “would have found a gallery or dealer who would have sold the portrait on better terms,” the suit says.

Steinhardt is suing for unspecified damages.
The suit calls into question the use of “net to you” contracts which have “damaged scores of art sellers in the country.”
These types of contracts are even illegal in the United Kingdom. And under the Art Dealers Association of America’s code, when using these contracts galleries should make clear they will keep any amount above the net contract price — which the gallery didn’t do with Steinhardt, the court papers allege.
Steinhardt’s lawyer David Shapiro told The Post, “the gallery lied to Mr. Steinhardt about the value of the painting and how hard it would be to sell, so they could get a hidden and exorbitant commission.”

Judd Grossman, a lawyer for the gallery, told The Post, “Michael Steinhardt is a sophisticated collector, and Hirschl & Adler — one of the country’s most highly respected art galleries — sold his painting exactly as provided under the terms of the agreement he signed.

“His claims are frivolous and we expect that the Court will agree.”
Steinhardt — a leading Jewish philanthropist who is worth $1.1 billion, according to Forbes — co-founded Birthright Israel, an organization that provides a free trip to Israel to young Jewish people.
Last year, six women came forward to the New York Times and ProPublica with claims of sexual harassment against Steinhardt.
Steinhardt denied many of the claims against him, the outlet reported at the time.
He told the Times that he’s never touched anyone in appropriately while admitting that he had made comments in the professional setting in the past that were “boorish, disrespectful, and just plain dumb.”
He claimed those were always meant jokingly, the outlet reported.