AG's document requests show broad inquiry into Berkshire Museum's operations
PITTSFIELD — The state investigation into Berkshire Museum operations remains broad, ranging from the institution's right to sell artworks, to its true financial condition, to possible internal conflicts of interest at the highest levels.
The possible conflict flagged by the Attorney General's Office concerns payments to Hill-Engineers, Architects, Planners Inc., a Dalton company with which a board member, Jeffrey S. Noble, is affiliated as president.
Since 2011, Hill-Engineers has been paid at least $578,000 by the museum, according to the institution's Form 990 filings to the IRS.
In a letter last week to the museum's lawyers, the Attorney General's Office requested access to hundreds, if not thousands, of documents. The breadth of the request suggests that the office is seeking to bolster claims in earlier court briefs that the museum's leaders failed to properly care for their collection, as they acted to sell 40 of its most valuable pieces.
And at the same time, the office's nonprofit and public charities division is fighting at the Massachusetts Appeals Court level to protect its very investigation, which the museum's lawyers dismiss as unneeded and hope to cut short.
As the legal fight continues to escalate, it now includes calls by the museum that the state identify who has aided its investigation. That request came in a letter to the Attorney General's Office from Felicia H. Ellsworth; the letter reached the appeals court as an exhibit filed Friday.
Ellsworth asks that the office provide any documents or information it received from "third parties" during the course of its investigation into the museum's deaccession of art.
What's more, it asks for names — and a lot of them.
The museum's lawyers want to know with whom the state held 20 "informational" interviews in the course of its probe, as well as an estimated 400 other contacts it had with people who came forward with information about the museum's actions.
Narrowing the field
In an attempt to avoid procedural delays, the museum asked the court Thursday to clarify the order that Justice Joseph A. Trainor issued Nov. 10, when he differed with a lower court's decision and granted a 30-day injunction halting the start of art sales by the museum.
That act made headlines around the country regarding the controversial deaccession. The ruling forced the auction house Sotheby's to pull more than a dozen museum works from planned sales last week, including two paintings by Norman Rockwell.
As of Saturday, the appeals court had not responded to the museum's request that it clarify that proceedings can continue in Berkshire Superior Court.
"It is imperative that the Superior Court and the parties be able to continue to address the litigation on its merits," attorney William F. Lee of the Boston firm WilmerHale wrote in the emergency motion filed Thursday.
In correspondence with the Attorney General's Office that same day, a WilmerHale lawyer said it will treat the state's document requests not as part of an investigation, but as steps in a litigation discovery process — steering the focus back to the full trial the museum seeks to take place at the Pittsfield court.
It has reason to prefer that venue, both because Judge John A. Agostini of that court denied the first request for an injunction and because the lower court can generally move faster than the appeals court. The museum seeks to free up the artworks for sale as quickly as possible.
In a letter Wednesday to the museum's lawyers, the Attorney General's Office listed an array of documents it still seeks to obtain, nearly five months after it was notified June 22 that the museum planned to sell works from its collection to fund an expansion and to bulk up its endowment.
The list covers virtually all areas in dispute:
- The right to sell. The office wants access to documents related to museum founder Zenas Crane and correspondence with members of the Rockwell family. While the museum notified the Attorney General's Office that no works were restricted from sale, the state has questioned this.
In terms of the museum's collection, the state wants all documents related to past deaccessions, as well as papers generated by the museum's Collections Committee. That includes all minutes and materials, the government's letter to WilmerHale said, tied to collections decisions from 2006 to the present.
- The museum's finances. Materials on the state's list also suggest that the investigation is intent on verifying or refuting the museum's claim that it faces a financial emergency. The state wants to see reports from TDC, a consultant the museum hired, related to its financial condition from 2010 to the present.
The request also seeks documents related to any actual, planned or contemplated fundraising activities and to mergers or partnerships it considered with other nonprofit institutions, including Hancock Shaker Village.
The museum has said it faces a financial crisis so dire, including yearly deficits of about $1 million, that it could be forced to close in eight years. It seeks to use about $60 million in auction proceeds to change its focus to science and nature and to bank away $40 million as a financial cushion.
- Internal conflicts. In its letter to WilmerHale, the state specifically asks for "all documents related to the selection, engagement of and payments to Hill-Engineering, including but not limited to documents related to potential conflict of interest of board member Jeff Noble."
Further, the government wants copies of all museum policies from 2010 to now related to conflict of interest.
Noble, a longtime board member, is president of Hill-Engineers. His firm has been listed in the museum's IRS filings as a top outside contractor in multiple years.
Since 2011, it has received more than half a million dollars from the museum, according to the institution's IRS 990 filings.
The company was reported to have received about $22,000 for fiscal year 2011, $7,000 in 2012, $97,000 in 2013, $302,000 in 2014 and $150,000 in 2015, the most recent year for which tax forms are available.
The Form 990s for several years include a required Schedule L that lists business transactions involving "interested persons," such as a board member. Hill-Engineers is listed both for providing architectural and engineering services.
In his emergency motion, Lee, the museum's lead attorney, argues that the state failed to seek a "stay" of proceedings at the Superior Court level. In the government's successful Nov. 10 motion for an injunction from the appeals court, it asked only for that relief, Lee notes, and did not attempt to bar further proceedings in Pittsfield.
Lee asked the appeals court for a clarification "to avoid any confusion regarding the Superior Court's authority to continue to conduct proceedings in the case" during the 30-day period of the injunction.
Lee says the museum faces financial risks if it cannot get the artworks to market soon — and argues that it already has lost momentum from Sotheby's marketing efforts. The auction house said in an affidavit filed in the case that it invested half a million dollars in preparing to sell the works.
In a response filed Friday, the state claims that the museum is seeking to stop its investigation.
"The orders need no clarification," says a response signed by Andrew Batchelor, an assistant attorney general in the nonprofits and public charities division.
"The AGO should be permitted to complete her ongoing investigation before the litigation moves further in the Trial Court," the response says.
While the museum's attorneys have taken aim at what they characterize as a sluggish inquiry, the Attorney General's Office says it began looking into the deaccession after learning of it in June.
And the response filed Friday with the appeals court says the state has been clear in earlier briefs that its investigation was not complete.
That full probe is needed, the response says, and could "perhaps narrow the issues in dispute before the resumption of Superior Court proceedings."
Larry Parnass can be reached at firstname.lastname@example.org, at @larryparnass on Twitter and 413-496-6214.
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