Give Creditor Where Creditor is Due

Detroit appears to be the “no mo’tor” city, digging in to find that fresh start just as creditors line up, circling the assets that might just have substantial values. Parks, buildings and little hidden values.

Enter the Detroit Institute of Arts, not the richest and most incredible art museum in the world, but there are works by famous artists like Rodin (above), Breughel, van Gogh, Caravaggio and Rembrandt. It is, however, a municipal asset, and creditors are looking with drooling mouths at what might be a new and sizeable source of paintings and sculptures that can enhance the private collections of some pretty wealthy folks. Perhaps some of the potential buyers might even be museums in other cities. After all, assuming the Chapter 9 bankruptcy proceeds, the trustee must examine all alternatives to settle as many of the city’s debts that he or she can find.

The Institute has faced financial misfortune before, but the state’s leadership has been trying to build an insulating layer between the art and the creditor’s claims: “Few large American art museums have found themselves in the financial cross hairs quite as often as the Detroit Institute of Arts. Not long after it was founded in 1885, it became enmeshed in a lawsuit that led to a loss of city appropriations, putting it in budgetary straits. In 1955, during a city financial crisis, the museum’s acquisitions mostly ceased. And in 1973, during another economic downturn, it had to close temporarily.

“[In June], after the first rumblings that creditors were pressing the issue of the collection as an asset, Bill Schuette, Michigan’s attorney general, issued a forcefully worded opinion saying that the artworks — under the state’s trust law and other laws — were ‘held in trust for the public’ and could be sold only for the purpose of acquiring additional art, not for satisfying municipal debts. He added that in decades of financial turmoil in Detroit, ‘at no time have the people demanded their most precious cultural resources be sold in order to satisfy financial obligations.’” New York Times, July 19^th.

DIA’s artwork might have the easiest and clearest valuation in the global marketplace, but once that art is sold, the Institute would never be the same. So you can bet that both Michigan and the city fathers and mothers will fight tooth and nail to prevent such a run on these public treasures. “Liquidating DIA art to pay down debt likely would be a monstrously complicated, controversial and contentious process never before tested on such a large scale and with no certain outcome. The DIA is unusual among major civic museums in that the city retains ownership of the building and collection while daily operations, including fund-raising, are overseen by a nonprofit institution.

“DIA Executive Vice President Annmarie Erickson said the museum has hired New York bankruptcy attorney Richard Levin of Cravath, Swaine & Moore to advise ways to protect the collection from possible losses. Levin is one of the nation’s leading bankruptcy attorneys and was active in the General Motors bankruptcy and other high-profile cases.

“‘We are standing by our contention and belief that we hold the collection in trust for the public,’ Erickson said this evening. ‘And although to some it may seem to be an asset, we do not.’” Detroit Free Press, May 24^th. But is this separation of building ownership and operation through a non-profit sufficient to save the art? And do we really want such treasures, available to anyone in the public who wants to view them to disappear forever into private collections where only the gaze of the rich will ever view them?

I’m Peter Dekom, and sometimes money really has to take second place.