Morgan Hill – Snowballing legal troubles for the Thomas Kinkade Company now include a pair of class action lawsuits and a rumored FBI investigation.
While the feds are keeping mum on their alleged sleuthing – neither confirming or denying a report in The Los Angeles Times this week – an attorney for 23 gallery owners and former executives who are plaintiffs in six civil lawsuits against the artist’s Morgan Hill-based company said he’s not at all surprised by the news. He himself has frequently spoken with FBI agents at their behest in the past several months.
“They were looking for information regarding Thomas Kinkade,” confirmed Michigan lawyer Norman Yatooma, adding some of his clients have also talked with agents.
Yatooma wouldn’t give details, saying it could affect pending civil litigation against the so-called “painter of light.”
Two class action lawsuits will be filed Sept. 11, he said, on behalf of shareholders and collectors who say Kinkade intentionally devalued stock in his public company, Media Arts Group, Inc., so he could buy it back cheaply.
The company went public in 1994.
In 2004, Kinkade and other investors paid about $4 per share to acquire the company. The stock had soared in the $30 to $40 range in the late 1990s.
While the company argues a national economic downturn after Sept. 11, 2001 caused sales at galleries to falter along with the price of the company’s stock, plaintiffs say Kinkade dumped a large inventory of original paintings to discount stores, a move that dramatically undercut the prices of the artwork in his galleries.
“They blamed the economy, 9-11, even the SARs epidemic” for poor gallery sales, Yatooma said. “No one’s buying into their crap.”
Dan Byrne, chief executive officer for the Kinkade company, said a one-day sale at a chain of discount stores indeed took place, but only affected a few markets where galleries operated.
“Only a handful of dealers were affected,” Byrne said.
In March, Kinkade suffered a blow when a judge in California ruled his company had defrauded two Virginia gallery owners. The plaintiffs, the first to be successful in an arbitration hearing with Kinkade, were initially awarded $860,000, but could get more than $2 million when the final sum is determined in September.
Annie Cull, director of a Kinkade gallery in Carmel, said dealers who have brought lawsuits against the company should only hold themselves accountable for their failed ventures.
“Without exception, it was disgruntled dealers whose businesses failed,” said Cull, who used to work for Media Arts Group before taking the helm at the Carmel gallery, the first exclusive Kinkade dealership in the world, opening 14 years ago.
Cull, who said she’s followed Kinkade’s art for 20 years, rejected the notion the artist exploited his Christianity to get people to invest tens of thousands of dollars in exclusive Kinkade galleries.
“We were honest about the risks involved,” Cull said, referring to seminars she helped organize in the past to educate prospective gallery operators. “The company was careful not to glamorize the business.”
For example, some people who were gung-ho about opening galleries were discouraged, Cull said, because they lacked financing. Others had great locations, she said, but didn’t have the “proper business sense.”
“People don’t want to point the finger back at themselves,” she said, “and say ‘maybe I wasn’t careful with my business practices.’ ”
Kinkade’s luminous paintings of country chapels and similar serene settings have made him a one of the most widely collected artists in the world. There are currently 500 dealers worldwide who sell his artwork, with shoppers spending thousands of dollars for “hand-touched” originals.
An estimated 10 million Americans have a Kinkade painting in their homes.
Reprints of his artwork, along with other trinkets carrying the Kinkade brand name, can be found in thousands of other retail outlets.
Kinkade earlier this year signed a deal with developers in northern Idaho to help design resort homes to look like the ones in his paintings. The houses start at $4 million.
Byrne said headaches over litigation won’t dispel what he sees as a bright future for the company.
“Mr. Kinkade continues with his rigorous painting schedule,” he said, “and anticipates several new and successful releases this year.”
Tony Burchyns covers Morgan Hill for the Dispatch. Reach him at (408) 779-4106 ext. 201 or tb*******@mo*************.com.
