Art Law Report

First Week of Corcoran Cy Prés Hearing Wraps Up, Focus is on Financial Condition and Other Alternatives to Proposed Merger

Posted by Nicholas O'Donnell on August 1, 2014 at 6:35 AM

Judge Robert Okun closed the first week of hearings yesterday on the proposed modifications to the Corcoran Gallery and the Corcoran Gallery of Art + Design in Washington, DC. The Corcoran’s trustees have petitioned the DC Superior Court for cy prés, to modify the trust that governs the two institutions to allow mergers with the National Gallery and George Washington University. All told, reports indicate that both sides have made strong presentations of the financial hardship on the one hand, and the possibility that the proposal may not be the only way out of this on the other.

The most significant aspect of the hearings was clearly the presence of the interveners who were allowed in last week. But for their participation, the proceedings would have been entirely non-adversarial, that is, the petition would have been presented with the support of the trustees and the District Attorney (who is responsible for charitable oversight). Merely be being there and opposing the case, however, the interveners (and their attorney) have changed all that.

Reports from the first day of hearings on Monday were about Corcoran COO Lauren Stack’s testimony, which apparently spotlighted an annual operating deficit of $10 million. She testified that an exodus of students (and their tuition fees) was imminent absent reform. The cross examination was reportedly tense and made a show of her annual compensation.

Thereafter the chairman of the Corcoran, Harry F. Hopper III, defended the proposed plan. Hopper’s position was that the museum’s condition had made it impossible to solicit the major donations necessary to succeed or even survive. “You can lead a philanthropist to water, but you can’t make him drink,” he said.

After only two days, the interveners moved the judge to rule adversely on the petition with no further evidence, arguing that the Corcoran had made “a showing of inconvenience,” but no more. That was denied, not surprisingly.

The interveners and opponents of the plan then got their turn, presenting philanthropist Wayne Reynolds as a key witness. The Washington Post reported that Reynolds

led a packed courtroom Wednesday on a rollicking and highly critical narrative account of his interactions with gallery leadership, at one point likening the Corcoran’s executive suite to ‘a goat rodeo,’ and asserting that he could do better, if given a chance. "You can’t close a $2 million to $5 million [budget] gap at an institution like this?" he said. “I could do it at a dinner party.”

Reynolds certainly sounds like an independent witness, but that kind of flippant testimony will do the opponents no favors with the judge, who is the sole arbiter here. Reynolds also campaigned last year to become the Corcoran’s chairman. That could cut both ways with the judge; he could be seen as a committed supported with ideas for the institution’s future—or, particularly given his testimonial flair, as a disappointed suitor hoping to embarrass the museum that spurned him.

On a more concrete note, Reynolds said that he would increase the board of directors to forty, and he produced a list of candidates whom he said he would recruit: Marcus Brauchli, former executive editor of the Washington Post and at present a consultant with Graham Holdings; Buffy Cafritz; Linda Daschle; Kenneth Duberstein; Susan Molinari; Frank Connor III; William “Billy” Martin; Catherine Merrill Williams, president and publisher of Washingtonian magazine; and former DC mayor Adrian M. Fenty. It is not clear from reports of the trial whether he indicated whether any of them had been approached or expressed interest. Other opposition witnesses took aim at Hopper, criticizing his tenure.

Yesterday, the opponents made their strongest move, offering the testimony of Wallace D. Loh, president of the University of Maryland. Remember: the Corcoran must prove not only its financial woes, but also that its proposal is “as near as possible” to the original trust. By definition, if an alternative exists that is more like the original trust, the plan will be in trouble. It was for this purpose that Loh was presented, though not speaking for himself. Notably, he had to be subpoenaed to appear, and he was not appearing to take one position or another. The Corcoran’s attorneys teased out why Maryland, which was initially considered for the merger now proposed with George Washington University, was turned away. Maryland had offered $46 million, but some of that was in the form of loans, and would have required a security interest in the iconic Corcoran building. Loh, apparently, pushed back a bit, pointing out that the money would actually have been required to be repaid only if the Corcoran had backed out of the partnership, and that he would be interested in reopening the discussion if the National Gallery/GWU plan falls through. The key contrast highlighted by the opponents is the direction of the money: according to them the proposed plan sends $43 million and the building to GWU, the Maryland plan would have resulted in cash to the trust.

The hearings are set to continue next week.

Topics: Linda Daschle, Deaccession, Kenneth Duberstein, George Washington University, William “Billy” Martin, University of Maryland, Adrian M. Fenty, Wayne Reynolds, Cy Pres, Corcoran College of Art + Design, Catherine Merrill Williams, Wallace D. Loh, Buffy Cafritz, Lauren Stack, Frank Connor III, Trusts, The Washington Post, Corcoran Gallery, Museums, Susan Molinari, Harry F. Hopper III, National Gallery, Graham Holdings, Richard Okun, Marcus Brauchli

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