Artful Dodger

Here’s a story that has all the plot elements of a Hollywood spy thriller. International intrigue! Soviet agents! Stolen art! A fabulously wealthy politician caught red-handed! Money, money, money! And – I’m not kidding – philanthropy.  Here’s my rendition, based on historian Olivier Zunz’s excellent new book Philanthropy in America.

The story is about Andrew W. Mellon. Mellon was by most accounts one of the three richest men in the United States, having built a huge fortune in the steel, chemical, and aluminum industries. When he served as Secretary of Treasury under Presidents Harding, Coolidge, and Hoover from 1921 to 1932, he didn’t stop managing his many enterprises, allegedly intervening now and then with policymakers in ways that benefited his companies. And through these years, thanks to his high-handed manner, he acquired more than his share of political enemies.

One thing to know about Mellon, besides that he was richer than Croesus, was that he played a long-term role in cleaning up the Washington Mall. Apparently the Mall – that vast, green, museum-lined public space leading up to the Capitol – was, at the turn of the twentieth century, something of an eyesore, filled with train tracks and dilapidated buildings, what in the twenty-first century we might call a brownfield. And Mellon’s pet project was to clean up the Mall and make it into, well, what it is today.

The second thing to know about Mellon is that he was a great art collector, and he acquired masterworks with an addictive obsession. Being the third-richest man in America, he could afford to feed the addiction. Buying a Rembrandt or two was not going to cause him to miss his monthly mortgage payment.

So it turns out that Josef Stalin (yes, that Josef Stalin – Communist dictator, mass murderer, avowed enemy of capitalism) needed some cash in 1930 to fund his massive industrialization efforts, so he let it be known through a shady art dealer in London that he was willing to sell twenty of the masterworks housed in the Hermitage Museum in Leningrad in exchange for hard currency. And the eventual buyer of that artwork? None other than Andrew Mellon. Yes, one of the world’s greatest capitalists, who was serving as the Treasury Secretary of a nation that did not then even recognize the Soviet Union, sent money to Josef Stalin to help him build his communist utopia.

Once Mellon received this ill-gotten collection of Botticellis and Van Dycks, what was he going to do with them? He couldn’t display the artwork – it was a secret that he even had the paintings, and their provenance was more than a little suspicious. So Mellon stored most of the paintings in an apartment to which only he and a few trusted friends had keys.

Now it also turns out that Mellon really hated paying income taxes. In fact, he worked earnestly through his years as Treasury Secretary to reduce income taxes on the richest Americans. (This fellow seemed to have trouble recognizing conflicts of interest, didn’t he?) So Mellon undertook a very clever – though not very smart – tax dodge. He established the Andrew W. Mellon Charitable and Educational Trust “to promote the well-doing or well-being of mankind.” Then each year Mellon donated several of his once-Soviet-owned masterworks from his personal collection to his foundation. And, of course, he took a tax deduction commensurate with their value. Note that the paintings never moved – they were still stockpiled in that same apartment. But their ownership had technically changed to that of a charitable institution, justifying his charitable deduction.

At this point, you might be saying, “Well, isn’t the IRS going to catch him?” Remember that Mellon at this time was the Secretary of the Treasury. He oversaw the IRS, which I imagine significantly diminished the enthusiasm of the tax auditors to sniff out his little deception.

As the saying goes, time wounds all heels. In 1933 Franklin D. Roosevelt became president. FDR and Mellon lived to hate one another — each simply despised the other. Roosevelt was thrilled, therefore, when his Treasury Secretary, Henry Morganthau, caught wind of Mellon’s tax-avoidance chicanery.

Now, remember how Mellon was working on cleaning up the Mall in Washington? Roosevelt and Morganthau certainly did. And so they confronted Mellon (now close to eighty). Still impossibly wealthy, but at this point politically powerless, Mellon received a choice:

He could be brought to trial for tax evasion; or he could decide to donate his ill-gotten artwork to the new art museum he had been mulling over for the Mall. And for good measure, Roosevelt let it be known that he would consider it to be an excellent gesture if Mellon threw in $10 million for the museum’s construction.

By 1936 Mellon, under growing pressure, chose the philanthropic route. The paintings became the property of the U.S. Government. Construction began on the museum. Mellon died the next year.

At the inauguration of the museum in 1941, Roosevelt recognized Mellon’s remarkable (if coerced) gift and, no doubt with great inward delight, honored him as “a giver who has stipulated that the gallery shall be known not by his name but by the nation’s.” Hence: The National Gallery.

So there you have it. Twists and turns galore. A happy ending – if you overlook the millions of dollars that ended up fueling Stalin’s ghastly activities. And in an upcoming post, I’ll talk about how some latter-day Mellons are still taking advantage of the tax laws governing donations of art. (When it comes to the marriage of hubris and shady tax avoidance, the bond appears to be eternal.)

Copyright Alan Cantor 2012. All rights reserved.

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