Fresh from his triumph over Peter Diamondopoulos of Adelphi last year, Dennis Vacco set out to rein in the Andy Warhol Foundation. “We need to protect not only the charitable dollars but also the national treasure of Andy Warhol’s artistic legacy,” he told this magazine.
In all likelihood, reining in the Warhol Foundation may be just about the last thing he does as the state’s attorney general. (Unless a state-court judge rules in Vacco’s favor this week, he will have lost his election.)
The foundation has long been accused of mismanaging the paintings and other assets left to it in Warhol’s will. At the center of the conflict has been Archibald Gillies, the foundation’s president, a tall, balding, preppy man whose résumé includes stints working for Jock Whitney and Nelson Rockefeller but virtually no art-related experience (his previous job was as head of the World Policy Institute, a left-leaning think tank).
After an eight-month struggle of near-byzantine complexity, Vacco’s office reached an agreement that leaves Gillies in his job but puts the foundation under the oversight of a new audit committee that will report quarterly to the attorney general’s office. And suddenly everyone is making nice. “The audit committee is an idea borrowed from the for-profit world, where audit committees are fairly common,” says Matt Sansverie, head of the attorney general’s charities bureau. “It’s a gesture of good faith.”
“It’s a fair and proper agreement,” says Gillies. “It will include some improvements with the way we present our financial information to ourselves and to the outside world.”
More openness is certainly needed. Whether openness itself is enough remains to be seen.
Vacco’s investigation began to heat up one afternoon in May when James McCauley, a man who for several years had been the controller for the Warhol Foundation, showed up to do something he really didn’t want to do: inform against his former boss, Gillies.
McCauley, however, had no choice. By reputation an honest and hardworking employee, he was nevertheless in the crosshairs of the investigation. He’d resigned weeks before because he felt that his use of a company credit card for personal expenses (later reimbursed) might be a source of legal trouble. Worse, as controller, he was one of the foundation officials who had signed off on documents such as financial statements, state tax forms, federal tax forms, and so on. This meant he could be held accountable for wrongdoing at the foundation whether or not he had been involved in creating it.
On this day in May, in the attorney general’s Manhattan office, McCauley was talking to Sansverie, confirming rumors and reported speculation that had been circulating about Gillies and the foundation for years. Yes, McCauley said, the foundation routinely underappraised its assets of Warhol art – by hundreds of millions of dollars – so foundation officials could get by with giving away less money. Yes, members of the foundation’s board of directors engaged in unusual behavior, such as in 1993 when Agnes Gund (now president of the Museum of Modern Art), who then sat on the Warhol board, bought something called “The Lips Book,” a book full of original Warhol drawings of lips, from the foundation’s stock for $55,000, although the book was worth vastly more than that. Yes, Gillies, who as president receives a salary of $250,000 annually, plus a generous retirement package, took sixteen weeks of paid vacation last year and regularly disappeared for four-hour lunches.
McCauley’s recollections only amplified what many in the art world had been saying for years: Gillies and many of his colleagues at the foundation were more interested in the perquisites of their jobs than in furthering the vision Warhol had charged them with. “There’s nothing about the foundation Andy would have been pleased with,” says Paige Powell, a close friend of Warhol’s. Brigid Berlin, another friend, agrees, adding, “All they’re doing at the foundation is spending Andy’s money.”
One previous attorney general, Oliver Koppell, launched an investigation that fizzled. “They found nothing wrong,” says Gillies. And in the mid-nineties, the foundation was embroiled in a much-publicized legal feud with its former lawyer, Edward Hayes, that played itself out in Surrogate’s Court before Judge Eve Preminger.
At issue in the Hayes case was the value of the foundation’s enormous cache of Warhol art. Federal law mandates that nonprofit foundations give away 5 percent of their assets. In 1994, Judge Preminger valued the collection at around $400 million, more than triple the figure the foundation was using. But most years, the foundation has valued the collection at much less than many art-world observers believe it to be worth; last year, the figure it used was $81 million. And in most years, it didn’t even give away 5 percent of its own, low valuation. In 1997, for instance, it donated a total of $1.2 million, against overhead costs of $4.3 million.
What caught the attention of the attorney general’s office was the foundation’s “unusually high expenses,” Sansverie says. Sometime in the spring, the attorney general’s office contacted McCauley. He resigned from the foundation shortly afterward and decided to cooperate with the attorney general. In the end, to avoid a potentially long and costly legal dispute, the attorney general – and, for that matter, the foundation – willingly entered into an agreement.
Under the terms of that agreement, the foundation will appoint a new chief financial officer, who will have a more central role within the foundation than the controller did. “In the future,” Sansverie says, “some of the day-to-day financial decisions being made by Mr. Gillies will be shifted to the chief financial officer.”
As for why Gillies, the object of much criticism in the past, still has his job, Sansverie will say only this: “If Gillies isn’t doing his job, then the directors will have to get together and fire him.”
Up to now, the board has supported Gillies in his various tribulations; he’s been instrumental in bringing in many of its members. Now, however, there will be at least two new independent members, drawn from the audit committee. “The committee will have three members,” Sansverie says, “none of whom is an officer of the foundation. Two of the three members will be on the board of directors. The attorney general will have some informal input about who will be the type of person to sit on this committee, which will perform an ongoing watchdog role on the expenses and expenditures of the foundation. The new CFO will report both to the president of the foundation and to the audit committee.”
The new agreement may curtail some of the foundation’s chronic overspending – each year, officials there routinely spend more than three dollars to give away one, the reverse of what a not-for-profit’s spending-giving ratio should be – but one important issue isn’t mentioned in the agreement: the foundation’s undervaluation of its art assets. “That’s an IRS issue, not a state-law issue,” Sansverie says. “There is no specific state statute that says a certain amount has to be given away each year.”
And what if the IRS, which is said to have looked at the foundation’s books only to have done nothing, decides not to step in? “I’m not saying if nothing were done we wouldn’t have anything to do about it,” says Sansverie. “But it would be in the most general sense. The state attorney general’s office isn’t in the business of enforcing a federal law.”
“We’ve been vindicated in this process,” says Gillies, “although we’ve never done anything but report these matters in the correct way.”
But in a war that’s lasted most of the nineties, one wonders if this is peace, or just a temporary truce.