The glitteratti of the New York art world descended upon Sotheby's Wednesday night for the venerable auction house's first big show of the season. There was the usual anticipation in the air, as bidders prepared to plunk down millions for the 39 Impressionist and early modern works on the block by the likes of Pissaro, Van Gogh and Matisse. But there was also a palpable sense of unease, even discomfort among the assembled.

"It feels so awkward to be here, doesn't it, given the timing?" one elderly woman whispered to her escort as she scanned the airy auction room on Manhattan's Upper East Side.

The gray-haired art patron was likely referring to the trial starting Thursday morning of Sotheby's chairman and primary shareholder Albert Taubman. Taubman, a shopping mall magnate from Michigan who bought the auction house in 1983, is facing charges that he colluded with principal rival Christie's to fix commissions, divvy up business, and cheat customers.

The 77-year-old multimillionaire faces up to three years in prison and enormous fines if convicted in the anti-trust prosecution. More importantly to most in the art world, the scandal has thrown the future of 257-year-old Sotheby's, long equated with society's upper crust, in doubt.

A Tale of Two Houses

Sotheby's and Christie's have been genteel competitors for over two hundred years, evolving to dominate the high end of the auction business in a virtual duopoly. Many of the world's most valuable artworks have passed through one of their doors over the years — in some cases on multiple occasions.

Historically, both houses were able to make a healthy profit; their rivalry, though vigorous, was always gentlemanly; their individual business practices drawn as much from the parlor as from the boardroom.

Albert Taubman

"The dealer world has always operated on a gentleman's handshake style of agreement," says a private Manhattan dealer who has been in the art world for more than 30 years. "The auction business took a turn in a different direction when Al Taubman took over. He was a shopping mall magnate, without much experience with the art world or knowledge about art. The style of doing business became much more commercial."

The art market was hit hard in the recession of the early 90s, and both houses responded by hiring aggressive CEOs. Fierce bidding wars broke out for sellers, and scanning the obituary pages for estates to be liquidated became an acknowledged fact of the business.

"The business had gotten completely cutthroat because of an art market recession. They were competing for the same consignments, undercutting each other all the time," says Bruce Wolmer, editor of industry magazine Art and Auction.

The stakes were unbelievably high. Sotheby's auctioned off van Gogh's famous "Irises" for $53.9 million and a Renoir for $78.1 million. Christie's handled the entire art collection of multmillionaire Victor Ganz and turned it into $206.5 million, a record for a single estate.

Then, suddenly in 1995, the competition faded. Christie's announced a new sliding-scale for commissions. A few weeks later, Sotheby's matched its rival's policy to a T.

Officials at both houses waved off the similarites as coincidental. But prosecutors allege that the new policies were planned with precision — products of clandestine meetings at outer-borough restaurants between Christie's CEO Christopher Davidge and Sotheby's top operator Diana "Dede" Brooks, now the principal witness against her former boss Taubman.

The Anti-Trust Case

Though the Department of Justice first subpoened Sotheby's and Christie's in 1997, little headway was made in the anti-trust case until two years later, when shocking documents were brought to the attention of the latter's attorneys at powerful Manhattan law firm Skadden, Arps, Slate, Meagher, and Flom.

"At that time there was also a lot of speculation that dealers were colluding to avoid bidding against each other. When the anti-trust probe was announced, the dealers were all nervous. We never thought the auctioneers were colluding," says artnet.com editor Walter Robinson.

Taken from the files of Davidge, who had recently resigned and turned over his papers to the company, the incriminating documents included handwritten agendas the ex-CEO had prepared for a series of meetings with Brooks around the time of the commission changes.

The documents showed that the two houses were not only setting commissions together, but trading lists of clients, comparing salaries to avoid attrition, and even agreeing to contribute to different pet charities of the upper crust.

Christie's decided to cooperate with the Justice Department, promising they could show that the conspiracy was initiated by Taubman and former Christie's chairman Sir Anthony Tennant, in exchange for immunity from prosecution.

"It was samurai warfare," says Wolmer. "You whip the sword around and turn a disadvantage into an advantage. Christie's had a lemon with this anti-trust investigation, and now their biggest competition is in serious trouble."

A series of civil suits from sellers were quickly filed against both houses. And federal prosecutors handed down indictments against Sotheby's, Tennant, Taubman, and Brooks. In late September, each company agreed to pay $256 million in damages, for which the government agreed to drop charges against the houses but not against the principles involved.

Diana "Dede" Brooks

Tennant refuses to answer the charges and has stayed in England. Brooks pleaded guilty in October, 2000 after agreeing to take the stand against her boss. And Taubman has steadfastly maintained his innocence.

"Whatever Ms. Brooks chose to do, she did completely on her own, without my knowledge or approval," Taubman said in the only public statement he has given on the topic. "If the need arises, I will vigorously defend myself against any charges."

That's not what Brooks says. While in court for her plea, she noted that she had only acted "at the direction of a superior at Sotheby's." As CEO, she had only one boss: Taubman.

Him or Her?

A middle-class kid from Michigan who had made his fortune in a decidedly unglamorous field, Taubman used Sotheby's as a ticket to the society circles of New York, London, and Palm Beach. Now he faces the danger of jail time at an advanced age, massive fines, and the ruin of his reputation, or what's left of it.

Many observers feel that either the chairman or Brooks will go down; she does not have immunity, and officals can give her up to three years in jail depending on what facts emerge at trial.

While some documents recovered from Davidge indicate that Brooks told him their agreements were approved from the top, prosecutors may not be able to produce a smoking gun against the Sotheby's chairman.

The proceeding, variously estimated to take four or six weeks, will likely turn into a 'he said, she said' affair.

"I can't believe he knew nothing. But he may have tried to establish some kind of plausible deniability. Do what you have to do. Wink, wink. I don't need to know. That kind of thing," says art world insider Josh Baer, a private dealer who also produces an e-mail newsletter about the industry called The Baer Facts.

"At the end of the day, only Dede Brooks and Al Taubman really know what went on," says Wolmer.

The Fall of the House of Sotheby's?

Meanwhile, Sotheby's is in big trouble and will probably be sold, according to industry insiders. Settling the civil actions, as well as dealing with a disastrous and costly foray into the Internet auction market, has strained the old house's bottom line.

While nobody thinks that Sotheby's will go out of business, most observers agree that whoever purchases the company will be hard pressed to make it profitable with the fallout from the scandal and competition from Phillips, a relative newcomer that is threatening to make the auction market a three house affair.

Sotheby's stock price has also fallen dramatically, ensuring that Taubman will take a large hit to his wallet even before any punitive fines are imposed.

Some observers see this as poetic justice for the embattled chairman, who introducing some less than savory practices into the art world. "The art market was a mostly fun, enjoyable place to do business. It's now become a rather more grimy ground to play on," notes one dealer.

Others are less troubled by the whole affair.

"Gipping an art dealer or a rich art collector out of few bucks. This is not something that really bothers me," jokes Robinson.