The Straw That Broke...

Mysterious art deals and a $14.5 million bankruptcy

A year ago, Steven Straw was a boy wonder of the art dealers' world. At 26, he owned a highly successful gallery in Newburyport, Mass., full of Oriental rugs, antiques and such masters as Degas, de Kooning and O'Keeffe. He flew around the country in his private Cessna 414 putting together six-figure art deals.

To match potential buyers with his latest acquisitions, he installed a sophisticated computer system in the 172-year-old building that housed his gallery. He hired his own broker, trained by Merrill Lynch, to handle his sideline interest in commodities and foreign-currency trading. Said one of his admiring associates: "When I looked into his eyes, I saw a gentleman and a sensitive soul."

Today the sensitive soul's empire is in ruins. After a New York dealer launched a suit against him, Straw suddenly filed for both personal and corporate bankruptcy. Against $1.7 million in assets, he listed a staggering $16.2 million in debts. He left at least 97 stunned creditors. Among them: the Petersen Galleries of Beverly Hills, whose claim of a $7 million loss was the single largest; art dealers in places as far-flung as San Francisco, Cincinnati and Signal Mountain, Tenn.; the Internal Revenue Service and Western Union Telegraph Co. Straw allegedly sold paintings that he did not own --and some that did not even exist. He staved off creditors with partial payments and bouncing checks. The case, now being investigated by the FBI, is one of the most sensational scandals ever to hit the secretive world of big-time art collecting.

Says Ralph Colin, administrative vice president of the Art Dealers Association of America: "I'm as astonished as the rest of the world that anyone could run up $16 million in credit."

The son of a successful and reputable New Hampshire art auctioneer, Straw bought his first painting for $75 when he was 14, and at 22 opened his first gallery, in Newburyport. He was already well connected with regional dealers and collectors, and his business prospered. A slim, impeccably dressed young man, he went to church every Sunday and always paid his bills on time. His obvious expertise inspired confidence. So did his gallery's handsomely printed brochures. Says one of Straw's creditors: "The art business is filled with horse-trading. Steve had the ability to horse-trade and maneuver, but he never overstepped the line of integrity. We enjoyed a lot of good years together with never a hint of trouble."

Straw's troubles emerged last June, when A. Richard Benedek, a private New York dealer, filed a complaint against Straw in the Superior Court of Essex County, Mass. The two had been doing business together since 1975, and everything had apparently gone smoothly. According to the affidavit filed by Benedek, he had invested heavily in three separate partnership deals arranged by Straw. One was to purchase a collection of antique furniture. The second was to buy eleven paintings that included a Mary Cassatt and a Winslow Homer. The third involved a spectacular $15 million group of 31 old masters and French impressionists, including a Rembrandt, a Titian, two Renoirs and three rare Seurats. Benedek said he put up $1.5 million for a half share in the first two deals and more than $1.8 million for a smaller share in the third, both paid partly in cash and partly in credits.

Straw, Benedek claims, subsequently told him that 17 of the 22 pieces of furniture had been sold, but Benedek was never paid his half share of the proceeds. And although Straw had told Benedek that he had a buyer lined up to pay $19 million for the $15 million group of old masters, no payment appeared from that deal either. Benedek became suspicious and, he claims, asked Straw for proof of purchase and sale. Straw did not furnish it. He wrote Benedek two checks totaling $655,000; both bounced. Then he wrote three promissory notes to cover his debts and, according to Benedek, defaulted on all but a fraction of them. Most of the furniture collection, Benedek discovered later from a newspaper article in the Maine Antique Digest, corresponded to one auctioned off by Sotheby Parke Bernet in New York; Straw had never owned it. None of the old masters is listed in the gallery's inventory.

No one yet knows the extent of Straw's maneuvers, largely because other dealers, perhaps fearful of disclosing their losses, have not filed court actions. But what has emerged so far seems to point to a confidence game played in a market where thousands ride on a handshake and a reliable reputation. Says Robert Petersen of the Petersen Galleries: "I was told that Straw's father was famous and that Steven Straw knew all the important people. We looked on him as a key source."

What happened to the missing millions? Straw will not comment on the case, but there is speculation that he lost money in commodities futures and foreign-currency trading, and that his penchant for the grand gesture drove him into debt.

Once, according to one disgruntled creditor, Straw rented a jet to deliver a check: it bounced. Authorities say Straw may face charges of mail fraud, wire fraud and bankruptcy fraud. But in the meantime, his bankruptcy has left the art world's faith in itself considerably shaken.

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