By Jane Musgrave
Palm Beach Post Staff Writer
It began with a Revolver album.
While Boca Raton rock ’n’ roll memorabilia dealer Jerry Gladstone insisted the Fab Four penned the autographs on the still revered 1966 album, a self-proclaimed Beatles expert was equally insistent they were forged.
Unwilling to be branded a counterfeiter, Gladstone sued.
Three years later, while the defamation lawsuit languishes in the courts, Gladstone’s business is in ruins.
His five stores from Key West to Delray Beach to Sarasota are being run by a bankruptcy trustee who will eventually liquidate them. The FBI has seized a large part of his inventory. Disgruntled customers and industry competitors are using the Internet as a high-tech bathroom wall, writing screeds questioning his business practices and integrity and accusing him of fraud.
And his nemesis, Beatles autograph expert Frank Caiazzo, is now suing him.
“They’ve destroyed his business essentially,” said Joseph Ackerman, one of his attorneys.
“Mr. Gladstone has been injured by inaccurate and inflammatory statements,” agreed Jonathan Halpern, another Gladstone attorney, who is a partner in the Manhattan law firm of former New York Mayor Rudy Giuliani.
Industry targeted again
While his detractors are crowing about the FBI investigation, Halpern said neither Gladstone nor his company, American Royal Arts, is the target.
“The FBI investigation is about wrongful conduct in the industry,” Halpern said.
And, he said, Gladstone is cooperating fully.
FBI officials didn’t return a phone call for comment. But it isn’t the first time they have gone after the memorabilia industry. In a 1999 investigation dubbed Operation Bullpen, agents cracked a $100 million nationwide forgery ring dealing mainly with sports memorabilia. Agents arrested 20 people and seized $10 million in phony keepsakes, including, most famously, baseball cards signed by Mother Teresa.
But experts say the bust did little to stem the tide of fakes that permeate the $1 billion-a-year industry. Some estimate that counterfeits make up as much as 90 percent of the market.
Given the events of the last year, it isn’t surprising that FBI agents would contact Gladstone.
During a mundane hearing in his lawsuit against Caiazzo, Gladstone was forced to admit that guitars he was peddling hadn’t really been signed by recording giants Robert Plant, Bono, Don Henley or Miley Cyrus, as he had claimed.
Still, he insisted, he was a victim. To prove it, he sued a California-based company that he said sold him the guitars.
But, attorneys claimed, the damage had already been done.
Selling expensive and clearly discretionary keepsakes in the worst economy since the Great Depression is hard enough. Selling them when people are claiming your items are counterfeit is nearly impossible.
Some of those who have followed the saga said they don’t believe Gladstone’s tale of financial woe.
Some suspect Gladstone’s bankruptcy petition is a ruse to enable him to keep the business but avoid the growing liabilities and shine up its tarnished reputation.
“I know it stinks to high heaven,” said attorney Daniel Brams, who represents Caiazzo and successfully blocked a planned sale of Gladstone’s business last month.
Global Liquidators, the company that is offering to buy the business and continue running it, was formed less than a month before Gladstone in August filed a petition in Palm Beach County Circuit Court, turning over the company to a trustee. Further, the company submitted its bid to buy Royal Arts a day after the petition was filed.
Adding to the intrigue: The names of Global Liquidators’ officers aren’t listed on state corporate records.
Attorney Steven Newburgh, who represents Global, declined to name the principals. “It’s a confidential transaction,” he said, adding that to his knowledge Gladstone isn’t involved.
Further, he said he doesn’t understand the hubbub surrounding a simple offer to buy an insolvent business.
Brams said the reason is simple: Global is offering to pay $25,000 for the inventory.
While items seized by the FBI may be counterfeit, much of the merchandise is legitimate, he said. Gladstone has license agreements to sell photos, artwork and other items signed by such celebrities as Frank Sinatra, Muhammad Ali and Elvis Presley.
Gladstone: The dealer ‘has been injured by inaccurate and inflam-matory’ statements,’ his attorney claims.
Signed Led Zeppelin album. The expert says the autographs of all four band members appear to have been signed by the same hand.
Autographed photo of Paul McCartney. An expert concluded the signature on McCartney’s left cheek is consistent with forged autographs. The expert noted that it appears to have been signed right-handed. The former Beatle is left-handed.
The frames surrounding the artwork are probably worth more than $25,000, he said.
In a deposition this year, Agnes Palmer, a vice president of Royal Arts, said the FBI seized between 140 and 200 pieces from its Boca Raton headquarters. Further, agents asked that other items be set aside. In all, she said, about 90 percent of the dollar value of the inventory can’t be sold.
‘A shocking omission’
What most bothers Brams is that there is no public accounting of the inventory.
While there is a detailed list of every credenza, computer and coffee table at each of the stores and the Boca Raton headquarters in the company’s court filings, there is no list of the memorabilia that will end up in Global’s hands.
“Just tell me what the inventory is,” Brams said. “What’s the take-away here?”
Ackerman and bankruptcy attorney Ron Neiwirth described Global’s offer as a generous one. In addition to buying the inventory, it agreed to take over the leases that could cost creditors nearly $750,000.
It also is promising to set aside $177,000 to pay claims from customers who believe they have bought counterfeit merchandise.
The various concessions make the deal closer to $1 million, Neiwirth said. “They aren’t getting it for a song,” Ackerman agreed.
They said a detailed list of the memorabilia wasn’t needed. People with experience know what such items are worth, Neiwirth said. While Gladstone has some nice things for sale, he also has some items that have been gathering dust.
“When you buy the inventory, you buy the good stuff and buy the stuff you haven’t been able to sell for five years,” he said.
Peter Cane, a New York City attorney who sued Gladstone on behalf of Caiazzo on Long Island late last month, called the lack of a detailed inventory “a shocking omission.”
“I think there is an odor emanating from the proceedings,” Cane said. “The smell reaches all the way to New York.”
During Palmer’s deposition, he quizzed her about how much Royal Arts got from its insurer after a 2009 fire at its Key West store destroyed an estimated $1 million of inventory.
Palmer said she didn’t know the amount but that the money was used to rent another building and replace items that were lost.
The defamation lawsuit Cane filed on behalf of Caiazzo could give him the power to block the sale.
Claiming more than $500,000 in damages, Caiazzo can argue that he is a creditor and has a stake in the future of the business.
Buyers out of luck?
But time is running out, said attorney John Page, who represents trustee Philip Von Kahle of Michael Moecker & Associates, a Fort Lauderdale firm that specializes in court-ordered liquidations.
If the sale isn’t approved by Circuit Judge Timothy McCarthy soon, the trustee may not be able to continue to operate the stores. The inventory would have to be sold at auction, bringing in a fraction of what Global has said it is willing to pay. Creditors would get hurt.
However, those who claim they paid tens of thousands of dollars for items they now believe are counterfeit said they aren’t convinced they will ever get their money back.
David Baas, who lives in Toronto, said he hired experts who declared that signatures on a Paul McCartney picture, a Beatles album and a Led Zeppelin album are fake. For months, he said, he has tried to get his $23,000 back without success.
Gladstone’s attorneys said the experts Baas hired aren’t reputable.
Alan Fishbein, a forensic accountant who lives outside Philadelphia, said he has been unable to get back the $6,500 he paid for three guitars he was told were signed by Bob Dylan, Bruce Springsteen and four members of the Rolling Stones.
Scott Magie of Park City, Utah, also questions the authenticity of more than $100,000 worth of memorabilia he bought from Gladstone and said he has been unable to get his questions answered.
Halpern described such critics as people who are “piling on” now that Gladstone is in financial trouble.
Fishbein, like other customers, said he just wants his money back. But, he said, if that doesn’t happen, he may follow the path others, including Gladstone, have taken.
To Gladstone, he says: See you in court.