Following the Money
Guggenheim Bilbao currency deals become a political issue
By Roger Atwood
Juan Ignacio Vidarte, director of the Guggenheim Museum Bilbao, may have exceeded his authority by engaging in risky foreign-currency transactions to acquire artworks for the popular museum, a Madrid law firm said in a report commissioned by the Basque government.
The critical report, by the firm RamÃ³n y Cajal, details how the museum’s management began dabbling in foreign-currency markets with public money in 2002 and gradually increased its positions despite posting losses that eventually reached $10.5 million. The museum then tried to paper over the losses, the report said, by calculating artwork in the museum’s collection at a higher value. Though administered by the Guggenheim Museum in New York, the Bilbao institution is financed entirely by local and regional Basque governments.
The 39-page report recounts how the museum became a significant player in foreign-exchange markets under Vidarte’s direction. Yet the director “may have lacked sufficient authority” under museum statutes to act as he did, it says.
At Vidarte’s initiative, the museum repeatedly signed options contracts for foreign-exchange deals that “could not be justified in accordance with reasonable and prudent management standards,” according to the report. It further charges him with an appearance of conflict of interest, as he initiated the foreign-exchange deals on behalf of the New York-based Guggenheim Foundation but then billed the losses to the Bilbao’s museum’s local ownership.
Vidarte “acted simultaneously in the name of the Foundation and the [museum’s local] ownership group … without eliminating the risk of a conflict of interest, as our jurisprudence demands,” the report continues. Vidarte, who became director of the Guggenheim Bilbao in 1996, has aggressively acquired art for the museum and is cited even by critics for making it a world-class institution. In a written statement to ARTnews , the museum says that the foreign-exchange deals were meant to pay for major works, including Richard Serra’s The Matter of Time, an installation of seven monumental sculptures, and Jeff Koons’s sculpture Tulips. According to the lawyers’ report, which cites a 2009 audit of the museum’s finances, the $20.3 million which the museum spent on art while it was engaged in currency trading also went to works by Jasper Johns, Francis Bacon and Ellsworth Kelly.
The museum describes the foreign exchange trading program as a well-intentioned deal that went bad. The institution “receives its budget contributions in euros but must pay for artworks in dollars, the usual currency in the international art market,” it says. In 2002, the museum’s financial advisers believed the dollar would continue to rise against the euro, so the museum locked in an advantageous exchange rate for the purchase of the Serra and other works.
“Reports by banks and international economic organizations at the time suggested that the dollar would continue rising. Against the prognoses, the dollar depreciated,” the report [from the museum] said. “This was a deal aimed at optimizing the resources available for the purchase of artworks, although the results were not what we expected.” Offsetting the losses by calculating a higher value of artwork and other assets was an accepted practice among Spanish accountants, said the museum, adding that the value of the museum’s total collection is now double the price paid for it.
Vidarte has also been the Guggenheim Foundation’s chief officer for global strategies since 2008 and spearheads the Guggenheim Museum’s Abu Dhabi branch, due to open in 2013. He currently divides his time between New York and Bilbao, according to the museum statement.
Richard Armstrong, director of the Guggenheim Museum in New York and the Guggenheim Foundation, issued a statement to ARTnews saying that he “fully supports Mr. Vidarte” and is “confident that he always has acted with the highest integrity.”
Basque officials criticized Vidarte over the financial deals and the museum’s plans to build an extension into an ecologically sensitive zone. “It is evident that there have been irregularities. Mr. Vidarte had no authority to carry out these operations,” said Blanca Urgell, the Basque government’s culture secretary, in a speech in April to the regional assembly. Urgell said that her office had commissioned the lawyers’ report “out of our duty to protect the public’s money” after the losses turned up in audits of the museum’s finances.
A spokesman for the Basque government, Carlos Lasaja, said the lawyers’ report would be remitted to the museum’s external auditors, who have been examining its finances annually since 2007. He said there was no sign of criminal wrongdoing in connection with the foreign-exchange dealing.
Other politicians defended Vidarte and accused his critics of waging a political vendetta. A member of the Basque assembly, Leyre Corrales, from the Basque National Party, or EAJ-PNV, accused Urgell of “harassing” the museum and “neglecting the fact that [Vidarte] he has placed the museum in the highest cultural spheres with his brilliant work.”
Roger Atwood has been writing for ARTnews since 1999. Some of his articles can be read at www.rogeratwood.com