The fraudster ate my homework

Madoff becomes the excuse du jour for overworked prosecutors in a ten-year-old art-restitution case.

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By William D. Cohan, contributor

'Portrait of Wally' now rests in a warehouse in Queens.

NEW YORK (Fortune) -- Add Bernie Madoff and Marc Dreier to the long list of excuses grownups now use to buy more time. Think of it as the "dog ate my homework" for federal prosecutors.

The Madoff Excuse entered the legal lexicon in a March 16 letter to U.S. federal judge Loretta A. Preska, who is presiding over the ten-year-old art-restitution case, United States v. Portrait of Wally. In the letter, Sharon Cohen Levin, an assistant U.S. attorney in the Southern District of New York and the chief of the asset forfeiture division, blamed both con artists for preventing her from filing an important brief in the Portrait of Wally case.

She then asked Judge Preska for a one-week extension to get the papers filed. "The Government is making this request because three Assistant United States Attorneys responsible for this case have been engaged in several large-scale securities cases, including United States v. Marc Dreier and United States v. Bernard Madoff and have had to deal with several unavoidable emergencies that have arisen during the last several days," Levin wrote Preska. "In addition, there has been a delay in the routine review by Washington of our case due to new personnel in the Administration."

What Levin did not make explicit in her letter to Preska is that the U.S. Attorney's office in the Southern District of New York has also had its share of turnover in the past year. Effective last December 1, Michael Garcia, the top federal prosecutor in the Southern District, resigned to join the law firm Kirkland & Ellis. Lev L. Dassin has been the acting U.S. attorney in the district since Garcia's departure. In 2008, both Garcia and Levin sought and received from Preska additional time extensions in the Wally case, blaming it then on additional evidence that came to light that the United States needed to review before making a motion in the case.

On March 17, Judge Preska agreed to give Levin the one-week extension in the case she requested. And on March 26, Levin did file the federal government's opposition papers to the defendant's motion for summary judgment in the Portrait of Wally case, so at least she was able to meet the new deadline she set for herself. A spokeswoman for the U.S. Attorney's office in the Southern District of New York declined to explain how the Madoff and Dreier cases had disrupted the lives of attorneys in the office.

The Portrait of Wally case has made international headlines in the art world for more than ten years, ever since Manhattan District Attorney Robert Morgenthau made the fateful decision to seize it and another Egon Schiele painting, "Dead City," from the walls of the Museum of Modern Art in New York, where a traveling show of some of the Leopold Museum's world-leading Schiele collection was on display.

The Leopold Museum is a Vienna, Austria art collection that was assembled over many decades by Dr. Rudolf Leopold, a Vienna ophthalmologist, and one of the world's foremost collectors of Schiele. In 1994, the Austrian government paid Leopold $240 million for his collection of more than 5,000 artworks and then spent another €29 million to build the Leopold Museum, which was completed in 2001. Dr. Leopold is the Museum's "director for life."

While the show was up at the MOMA, during the last few months of 1997, Morgenthau received information that led him to believe the Nazis had stolen the two paintings during World War II from their rightful heirs. Morgenthau seized the paintings in January 1998. A series of lawsuits ensued and eventually, in 1999, the New York Court of Appeals quashed Morgenthau's subpoenas and ruled the paintings returned to Vienna. But before "Wally" could be shipped out, the U.S. government seized it, again, and put it in a warehouse in Queens, where it remains. "Dead City" was returned to the Leopold Museum despite persistent questions about its provenance.

The United States and the Leopold Museum have been fighting about the 1912 "Portrait of Wally," which depicts Schiele's mistress, ever since. When Judge Preska took over the case in 2006 from former federal Judge Michael Mukasey (and the former attorney general of the United States), she was determined to move the case along more quickly.

But, thanks in part to Bernie Madoff and Marc Dreier, that does not seem to be happening, and catching a glimpse of Wally remains one of the art world's most elusive tickets. To top of page

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