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  Mad About Strads: Fiddling the Stradivarius Market

Mad About Strads Fiddling the Stradivarius Market

By Carsten Holm

Part 4: 'No Worse than the Carpet Trade'

But then she ran into a major snag: Although Machold had sold the 300-year-old violin to a Frenchman, he could only pay a small portion of the $2.6 million in proceeds to Koeckert. He was strapped for cash -- a quandary that had international ramifications. Koeckert couldn’t pay Bein & Fushi, and even the owner was left empty-handed. The calamity took its natural course: Bein & Fushi sued Koeckert, who then hired lawyers to pressure Machold.

It was a regular cliffhanger. Months later, Machold paid up and, via Bein & Fushi, the millions finally reached the original owner in Chicago. "I couldn't have left Bein & Fushi waiting much longer," says Koeckert, "but I didn’t have the money. I would have been broke. Permanently." Insiders estimate the commission for the Munich dealer and Bein & Fushi at $100,000 a piece. "Since then I’ve decided not to do business anymore with Machold," says Fushi. "I won’t take a risk like that with Machold again," says Koeckert.

Highs and Lows

"It was horrible for me, too,” says Machold. He swallows hard. "I had a lot of sleepless nights, and I felt terribly ashamed, especially with regard to Ms. Koeckert. I know that she almost went bankrupt because of me." Machold says he had "a cashflow problem" -- valuable violins, a castle, but nothing in the bank.

"Up until 2004, I was a millionaire,” says Machold. Then the cashflow problem reared its ugly head. He bought a Stradivarius in Rome, which was passed on through middleman deals and other dealer tricks via Brussels, London and Los Angeles to a buyer in Salt Lake City in the US. He says that this was the first time in the business that he wasn’t paid what he was owed. As a result, a chunk of cash, $3.6 million, was missing from the war chest.

It wasn’t until this spring that Machold got back on his feet. The sale of four Stradivariuses and a number of less valuable instruments brought in over €13 million. Two big deals are in the offing, each with a volume of $40 million. Now he just has to weather a rather bizarre court case: An Austrian actress is suing Machold for $21.3 million for allegedly stealing four old violins that belonged to her.

Machold’s reputation has suffered from the middleman deal with Koeckert. But this is not the first time that he has received bad press. Time and again, he has been criticized by colleagues because, in their opinion, he places inflated values on instruments. In 1998, US multi-millionaire Herbert Axelrod, 80, must have been overjoyed with Machold’s appraisal when he decided to donate two violins, a viola and a cello made by Stradivarius, to the Smithsonian Institution, a renowned research and education institute which also runs world-class museums.

Inflated Valuations?

The gift also benefited the donor. Since the value of the instruments was tax deductible, getting the highest possible estimate was worth plenty of cash. Axelrod was Machold’s "most important customer" at the time -- the German sold $20 million worth of instruments to the American between 1997 and 2003, and made millions in the process.

Machold estimated that the extremely rare quartet with inlaid work was worth a total of $50 million. This infuriated his colleagues around the world, and another expert said that he thought the collection was worth only $12 million. Machold is setting "astronomical prices," said Robert Bein, co-owner of Bein & Fushi in Chicago. Simon Morris, co-owner of Beare’s in London, is still outraged. He says Machold’s appraisal was "extremely high" and that this creates mistrust and is detrimental to "the entire business."

"I took the biggest beating of my life," says Machold. But the quartet is "unique", he insists. He adds that a similar assessment was made by the famous Art Appraisal Service of the US Internal Revenue Service.

The practice of making appraisals, as witnessed by the Smithsonian case, represents one of the main potential trouble spots in the sector. "It’s all marred by the fact that there are no independent appraisers," says David Schoenbaum, 71. The respected US historian from Iowa City, who is writing a 600-page compendium on the social history of the violin, does not have a high opinion of the violin trade. "The dealers are actually continuously at war with each other. They forge alliances again and again, short-term cartels to generate money."

Master violin maker Hargrave is applying varnish to a cello in his workshop in Lower Saxony. Long ago, he decided to focus on the artistic side of the industry, and leave the trading to others. Despite his extensive knowledge of the practices of the business, he focuses exclusively on making and repairing string instruments.

The violin trade, says Hargrave, has over the years "become an absolute jungle," he says. "It stinks from top to bottom." The only consolation, he adds, is that it's "no dirtier than the trade in carpets or antiques."

Translated from the German by Paul Cohen