A House Divided

Thomas Krens’ controversial mandate at the Guggenheim.

Thomas KrensNo one denies that Thomas Krens, the Guggenheim’s controversial director, has put the museum on the map-literally, guratively, and, some say, dangerously. His global expansion began in Bilbao, included branches in Berlin, Lower Manhattan, and Las Vegas, and continues with talk of a mammoth building in Singapore. But he’s clashed with two powerful donors, Ronald Perelman, who resigned as board president in 1999, and Peter Lewis, who gave the museum an estimated record $77 million, then quit as board chairman this past winter. Is Krens’s empire on precarious nancial ground? VICKY WARD gets the full picture.

On January 19, 2005, Peter Lewis, the 71-year-old, tall, brown-eyed, white-haired car-insurance tycoon from Cleveland, started his day at 7:30, as usual. Sitting in his light-filled duplex apartment overlooking Manhattan’s Central Park, he checked his e-mail and was surprised to see a message from a complete stranger that wasn’t spam. A woman claimed to have found in a taxi a binder belonging to him. She assumed it was his because it had his e-mail address in it. She asked if he would like it back.

Lewis, said to be worth $1.7 billion, was confused. He hadn’t lost a binder. Furthermore, he had not been in a New York taxicab in six years because he had his own car and driver. He called a friend and asked, “Can you find out what this thing is?”

The friend agreed to do so. The e-mailer turned out to be a Citibank employee, who worked in Queens. Receiving no reward, she sent the binder over to Lewis’s associate, and Lewis got it around 11 a.m. He and the friend looked through it together.

The binder, it emerged, did not belong to Lewis. Instead, it was the handiwork of Thomas Krens, 58, the controversial motorcycle aficionado, whose day job is director of the Solomon R. Guggenheim Foundation, in New York City. For many years he and Lewis were friends. Lewis had joined the Guggenheim board in 1993 and had become its chairman in 1998. During his tenure on the board he had given the museum an estimated $77 million, an amount nearly four times greater than that given by any other trustee-ever.

The contents of the binder, however, reflected that the friendship was over. It contained a photocopy of a three-and-a-half-page memorandum that Lewis had e-mailed to Krens two days previously, and to the members of the Guggenheim’s board the day after. This was followed by an attempt to refute, point by point, the allegations that Lewis had put forth in the memorandum, which stated that the museum had severe financial problems.

Lewis had stipulated in his memo that if certain changes were not made at the board meeting, to be held later that day in the Guggenheim’s landmark Frank Lloyd Wright building on Fifth Avenue at 88th Street, it would become the trustees’ responsibility to “finance our annual financial deficits and to contribute the $100+ million required additional endowment.” In other words, Lewis would not be giving the museum any more money. Chiefly, he had called for Krens to leave, arguing that if the museum was to survive, it needed to head in a new direction, one of retrenchment and fiscal discipline rather than of continued global expansion.

In fact, the museum’s endowment had fallen to $38.9 million at the end of 2001 (from $55.6 million in 1998) and, according to one report, would actually have been $28.9 million had not the profits from the sale of certain paintings several years earlier been allocated to an “art endowment,” which the museum counted as part of the overall endowment.

Then came 2002, a terrible year for all museums because of 9/11; there was a loss of $2.8 million in the value of securities in the Guggenheim’s portfolio. According to news reports, almost half the staff was fired (the Guggenheim’s deputy director for communications, Anthony Calnek, explains that 23 percent of the New York staff was laid off in 2001 and 2002, and no one elsewhere) and projects were folded. Krens promised Lewis he’d retrench after Lewis had to cough up $12 million to pay off debts and bills, and settle a bond issue.

In 2003, financial statements show, the Guggenheim did better, suffering a loss of only $100,458 in its securities portfolio. In 2004, Krens promised the board that the museum would break even. But by December of that year, according to one insider, it was $2 million in the red, and it had no cash on hand to pay the bills. (Calnek claims the museum then had a $3.1 million operating surplus and ample cash on hand.)

Laid out in the memo was an allegation by Lewis that Krens had gone against a decision by the board not to proceed with plans to build a partly submerged Guggenheim branch in Rio de Janeiro, at an estimated cost of $130 million, to be designed by French architect Jean Nouvel. (Calnek says that no negotiations with Rio have taken place since the fall of 2004 and the project appears to be scuttled.) In recent months Krens has also held an architectural competition for a branch in Guadalajara, Mexico, and in 2003 he commissioned Zaha Hadid to develop a conceptual design for a building for Taichung, Taiwan. (The project has since been abandoned.)

By January, according to colleagues, Lewis had had enough of what he called a “disconnect between Krens’s (promises)”-such as “(the deal with) Brazil has closed, and we’re going to have $8 million in the bank tomorrow”-and reality. Lewis was livid at the incomprehensible way in which the museum’s figures were presented to board members. Furthermore, he complained, a fall 2004 show curated privately by Krens for the Salzburg gallery of Austrian art dealer Thaddaeus Ropac was, to his mind, an ill-chosen use of Guggenheim resources “with imperceptible benefits.” Others felt the show laid the museum open to criticism, since even if no money changed hands it did not seem ethical for a public museum to be doing business with a commercial gallery. (Calnek says that the Guggenheim frequently works with commercial galleries for scholarly purposes.)

The Guggenheim had lent Ropac Jackson Pollock’s painting Number 18, which is said to be fragile. “Art is not supposed to travel back and forth like any old commodity,” says an art-world insider, who now calls the Guggenheim “the Guggenshlime.” (Calnek says the painting was examined closely and determined to be stable.)

Other issues bothered Lewis. According to an associate, he has claimed that when Krens traveled he often took “a bag carrier or two with him,” which Lewis found unacceptable, given the financial problems. He also found questionable the fact that Krens had accepted a free motorcycle from BMW following the Guggenheim’s 1998 motorcycle show. (Calnek says Krens, after several years, returned the motorcycle to avoid the appearance of a conflict of interest.) In the memo, Lewis objected to the Guggenheim Motorcycle Club, a group that included Lauren Hutton, Jeremy Irons, Dennis Hopper, Laurence Fishburne, and Bob Geldof, some of whom have ridden their bikes to publicize Guggenheim shows and openings.

In October 2000, Hutton had an accident during a ride in the Nevada desert to promote the 2001 Las Vegas Guggenheim opening. This incident did not sit well with Lewis. The motorcycle club, he said in his memo, “appears as a BMW promotion, (and) exposes (the foundation) to liability.” (Krens’s counterattack in the binder allegedly consisted of photographs of Lewis at a cookout with members of the club.)

Having looked over the binder and Krens’s counter-arguments, Lewis went into the board meeting, scanned the room, and was pleased to find that, for once, almost everyone on the board either had shown up in person or was on speakerphone. (Missing, however, was Denise Saul. One of the few board members considered to be a bona fide art connoisseur, she was in Washington, D.C., for the Bush inauguration.) According to one source, it was the best-attended board meeting in recent years. Usually only a handful of people showed. (Calnek counters that board meetings are always well attended and lively.)

Lewis chaired the meeting and kicked off by reading his memo aloud. Then Krens, unruffled, gave his arguments as to why he should stay. As part of his defense, according to a source, Krens waved a check for several million dollars from the Las Vegas Sands Corporation’s Sheldon Adelson, the owner of Las Vegas’s Venetian Resort Hotel Casino, in which the Guggenheim still maintains a small gallery shared with the Russian museum the Hermitage. (The Guggenheim’s larger exhibition hall, designed by the Dutch architect Rem Koolhaas, was closed in 2003 because of insufficient funding.) Adelson was then bidding to build a hotel in Singapore-for which, at least one person has speculated, a Guggenheim branch nearby would lend the cultural patina necessary to win local approvals-and, sure enough, in April, Krens expressed interest in a Singapore Guggenheim, bigger and grander than the one designed by Frank Gehry in Bilbao.

Krens was excused from the room after his speech, and then the two dozen board members present, all except Lewis, indicated their support of Krens’s staying on. They could, they promised, rein in the director. One even suggested taking away his ability to buy anything, but essentially they agreed with Krens’s philosophy of international expansion.

“The consensus was-and it was virtually unanimous-that Tom was being overly pressured … there were all these things that were going to materialize, might materialize, or that Tom’s excesses could be (managed) with tighter controls and management, and that expansion was wonderful,” says someone who was in the room.

Lewis listened and said, “Given that, I have something else to read to you.” He produced a second document, his letter of resignation. When he finished reading the letter, he handed it to the board secretary, Edward Rover, and said, “I never did this before, but I think I’ve got to get out of here.”

That the moneyman should be the one to fall on his sword was greeted with incredulity in the art world. “Shocked” was the term most commonly used by observers who spoke to this reporter.

This is not how it usually works. Generally, if you donate the most money, you get to call the shots. At American Ballet Theatre, where financier Lewis Ranieri is chairman of the board, he recently extended the fall season by a week (which he underwrote financially); at Manhattan’s Whitney Museum of American Art, it is said, board chairman Leonard Lauder is consulted on curatorial decisions. (A Whitney spokesperson says Lauder is not involved in such decisions.)

But at the Guggenheim, things are different and have been since its inception, in the 1930s. It was founded by the late copper baron Solomon R. Guggenheim, largely at the suggestion of his much younger German mistress, the Baroness Hilla Rebay, an amateur painter who felt that no mogul should be without a collection of modern art, “the greatest step forward from the materialistic to the spiritual.” In 1976, Peggy Guggenheim, Solomon’s bohemian niece, who spent most of her life in Venice, donated her own dazzling European collection to the museum with the proviso that it not be moved from her palazzo, which was converted into a museum.

The Guggenheim has been plagued by problems from its inception, starting with the Manhattan building that Frank Lloyd Wright was urged to design as “a temple of spirit.” It wasn’t completed until 1959, 10 years after Solomon Guggenheim died, and was met with heated debate. A number of artists, including Willem de Kooning, whose work was displayed at the opening, wrote to then director James Johnson Sweeney that the walls of the interior spiraling ramp were not well suited for showing paintings-the walls slant because they parallel the ramp as it ascends. Sweeney solved the problem by using rods that projected from the walls, so the paintings would hang level. Even so, there was enough wall space to show only a few of the masterpieces in the collection at any one time.

There were other problems. The Guggenheim, which has the smallest endowment of New York’s three major modern-art museums, had no room for expansion, since the building was hemmed in by Central Park on one side and town houses on the other. Furthermore, it emerged, the building, though a tourist attraction, would soon need renovating, because Solomon Guggenheim had left a truncated budget for its construction, and the builder had been forced to take shortcuts with materials.

In 1988, Thomas Messer, a Czech-born art professional, handed over the directorship to Krens, a college art professor who’d played a bit of semi-pro basketball in Europe. Krens had also dabbled at being a painter, but, more relevant, he had an M.B.A. from Yale.

Krens was hired from Williams College in northwestern Massachusetts, where he’d helped develop the Williams College Museum of Art into one of the country’s leading academic art museums. At the same time, he had seen the potential for a museum in an abandoned factory complex, comprising 780,000 square feet in 27 mill buildings in North Adams, Massachusetts, not far from the Williams campus. He enlisted sufficient financial support from the state government and private donors to create Mass MoCA, the Massachusetts Museum of Contemporary Art, a $50 million center that has become one of the leading showcases of international art in the country. Still, the project hit a difficult financial patch in the early 1990s, and at one point critics nicknamed it the MegaloMoCA.

It wasn’t long before a series of missteps at the Guggenheim laid Krens open to similar criticism. To this day, people are divided as to whether he’s a visionary or a power-crazed egomaniac. To fund restoration and build a tower addition at the Fifth Avenue building, Krens borrowed $54.9 million in the form of bonds issued by the Trust for Cultural Resources of the City of New York, with Swiss Bank Corporation as the creditor. The language on the reimbursement agreement, however, was confusing. It did not appear to rule out that the art collection could be used as collateral should the Guggenheim not be able to make its payments, according to a 2003 report in Art in America.

Records show that in 2004 the Guggenheim replaced its letter of credit, switching creditors to Bank of America. The new agreement does not seem to prohibit using art as collateral, either; however, according to someone familiar with the documents, the new wording is the same as that in bond issues used by the Metropolitan Museum of Art, MoMA, and other art institutions in New York. (Calnek says that none of the assets or income of the foundation or its affiliates serves as collateral for the bonds, nor can the assets be seized by the bank.)

In public at least, Krens was blase about the situation. He was quoted as saying, “It is almost free money.” In 1990, Krens de-accessioned three major works-L’Anniversaire, by Chagall, Boy in a Blue Jacket, by Modigliani, and Fugue, by Kandinsky-from the Guggenheim’s permanent collection in order to raise $30 million to pay for the Minimalist art collection of Count Giuseppe Panza di Biumo. The deal was seen as unnecessary by some people, not the least of whom was 47-year-old art publisher Sandro Rumney, who also happens to be Peggy Guggenheim’s grandson. “Why get rid of three masterpieces?” Rumney asks. “I do know that de-accessioning has been going on for years, but only Tom Krens would do it blatantly at (a Sotheby’s) auction,” says Rumney. “Other museums are far more discreet.”

But Krens did not care about discretion. He had a radical agenda: global expansion. “Museums often have to change in order to survive,” he told the Financial Times in 1992. “Either their mandate or their collection or their audience must change.” His longtime friend Mark C. Taylor, who had been a colleague at Williams, says Krens came up with this theory long before he was hit with the Guggenheim’s particular difficulties. (Williams College has produced more or less an art-world mafia that includes Earl A. “Rusty” Powell III, director of the National Gallery of Art in D.C., and Glenn Lowry, director of MoMA.) “Tom saw sooner than anybody else I know what the shape of the early 21st century was going to be… He understood globalization… The primary metaphor people have used to describe what he’s done is a franchise, which is wrong. The metaphor is the network. What he has tried to do has been to create a global network of museums that will allow for cultural exchange and interchange.”

In the early 1990s, Krens considered moving some of Peggy Guggenheim’s collection from her Venice palazzo, but Rumney and two of her other grandsons, Nicolas and David Helion, filed suit. The claim languished in the courts for years, but in 1996 the heirs reached a settlement that honored the terms of Peggy Guggenheim’s will: nothing can be permanently moved from their grandmother’s palazzo. Prior to the suit, the Guggenheim-family members, according to a source, were increasingly sidelined by Krens, who was already flying around the world to implement his international vision. In 1991, Krens negotiated a deal with the Basque government, in Spain, to build a Guggenheim branch designed by Frank Gehry in the ugly industrial town of Bilbao. The terms, basically, were that the Guggenheim would lend its name and administrative expertise-for $20 million-and send over selected artworks and shows from New York, but that eventually the museum would build its own collection, thus turning Bilbao, a place few people had ever heard of, into a tourist attraction.

Critics claimed the endeavor was the McDonaldization of the Guggenheim-or, more simply, the McGuggenheim. “The risk was the Peggy Guggenheim collection could lose its idiosyncrasy,” says Rumney. “It could look like any other museum in the world.” But when Bilbao opened, in 1997, it was a howling success-culturally as well as fiscally. The distinctive, soaring structure attracts an average of 985,000 visitors a year, and over time the Basque government has succeeded in building a credible collection. Even Rumney admits, “You have to hand it to him: Bilbao worked.”

Buoyed by that success, Krens pursued other new venues-branches opened in Berlin and Las Vegas-but none were as successful as Bilbao. Meanwhile, the Guggenheim’s own collection did not substantially expand, and with a few exceptions, such as James Rosenquist and Robert Rauschenberg, major shows were few and far between. “It’s become the grow or die corporate motto of the late 80s,” says a former art-museum director. “There’s no real reason the Guggenheim is expanding. The point is, (the museum) doesn’t collect (major art), it doesn’t do art exhibitions except episodically, it doesn’t have a curator to publish research, and there is no educational program of any consequence.” (Calnek says that the museum has top-notch curators, leads the world in fine-art exhibitions, serves more than 175,000 people through its education department, and, under Krens’s directorship, has increased its collection by some 3,000 works.)

“I think Krens has not been able to find the time to lay out in an articulate way … the logic behind (his vision),” says Taylor in his friend’s defense. In fact, Krens’s aloofness has often been perceived as arrogance, something which his friends say is unfair. “He’s actually shy,” says Calnek. Others disagree.

“He’s perfectly articulate if he thinks you’ve got something to offer him; otherwise you may as well not exist,” says a person who claims he was shunned by Krens midway through a conversation when Krens suddenly spied wealthy financier Stephen Schwarzman across the room.

Another anecdote, according to The New York Times Magazine, has Krens telling the venerated 82-year-old American painter Ellsworth Kelly, “You know, Roy (Lichtenstein) has given us two works.” So Kelly, too, gave a painting willingly and has given the museum gifts of art on several occasions. In the same June 2002 New York Times Magazine article, deputy director and chief curator Lisa Dennison freely admitted that the museum does ask for art from living artists when the Guggenheim gives them a solo exhibition. Some critics think this can seem like taking bribes to give shows.

But, more than anything, it is the confusion underlying the institution’s fiscal management that is Krens’s Achilles’ heel; it has even been referred to in print as a Ponzi scheme. Many people seem unsure of how certain ideas were paid for. “I wondered a lot about what was going on,” says a former curator, “but if the board was in the dark, the staff was certainly in the dark.”

Gail Harrity, now the chief operating officer at the Philadelphia Museum of Art, resigned as the Guggenheim’s C.F.O. in the 1990s to become the project director for Bilbao, because, according to someone close to her, “she was more conservative financially (than Krens).” In the fall of 1998, Ronald O. Perelman, the chairman of Revlon, who’d been appointed president of the Guggenheim’s board of trustees in 1995, and donated $20 million to the museum, grew frustrated when Krens delayed closing the SoHo gallery, even though it was already clear that the attendance numbers were not enough to sustain an annual operational cost of somewhere between $6 and $7 million.

Managing Krens, Perelman discovered, was a full-time job, and it got trickier still. In 1998, Perelman was caught completely off guard, says one person, when the Guggenheim’s plans to construct a building designed by Frank Gehry on the Hudson River in Lower Manhattan appeared in the press. “It was very difficult for Ronald because it got into the press, and he was close to Giuliani and to Pataki, and both of them read in the paper that the Guggenheim was about to launch the building of a museum with public funding on public space, and each thought that the other knew about it. And nobody knew about it, because it was just a glimmer in Tom Krens’s eye… All the community groups got all riled up and jumped in. It was a terrible fiasco,” says someone familiar with the situation.

Perelman was livid with Krens and told him never to do anything like that again. But by that time Krens had found a replacement for Perelman and his millions in Peter Lewis, who loved the idea of global expansion and the so-called Manhattan Project, the proposed branch on the Hudson River which had morphed into one on the East River. Lewis even offered to put up $250 million for it, if the other funds needed could be raised. That fall Perelman met Krens in his office and asked to be brought up to date. Krens, it emerged, had been steaming ahead, and was focusing on the East River museum project. Perelman felt he had been deceived. “We sort of proved in SoHo that the city didn’t want a downtown museum. Why were we going to talk about building a $1 billion one?” asks someone involved with the museum at the time.

In May 1999, Perelman ended his term as president, and in August 1999 he resigned from the board altogether. Lewis took Peter Lawson-Johnston’s place as chairman in September 1998. (Lawson-Johnston became the honorary chairman.) “It’s a marriage made in heaven,” Frank Gehry said of the relationship between Lewis and Krens. Someone else, a former executive at the museum, sees it differently. “It was really more of a threesome: Tom, Peter, and Frank.”

Lewis had been introduced to Krens by Gehry. The architect and Lewis had become friends after Lewis commissioned Gehry to design a house in Lyndhurst, Ohio, though it was never built, perhaps because, over the project’s eight-year planning period, cost estimates escalated to more than $80 million. Many of the details, however, were subsequently incorporated into the Bilbao museum. When Lewis first saw the completed structure, he turned to the architect in amazement and said jokingly about one room, “This would have been my bathroom.”

“Peter and Tom each like the big, bold vision,” says Michael Horvitz, a lawyer who is chairman of the board of the Cleveland Museum of Art. “They were both mavericks,” says a former Guggenheim board member, “visionaries to some degree, searching for a place in the world. Both like to have fun.”

Lewis is a difficult man to figure out. He looks and plays the part of a billionaire playboy. He has decent, if not exceptional, art in his New York home, including works by Eric Fischl and William Baziotes. Also, he has a strong interest in modern architecture and design.

He has a yacht, named Lone Ranger, a converted tug, which he bought for $16.5 million in 1997 and which he sails around the world with a crew of 18. He likes to dress casually, in T-shirts and dark pants; he wears a Stetson hat when it’s cold. He works out obsessively, despite having had the lower half of his left leg amputated six years ago because of a congenital problem.

He is an avid advocate of decriminalizing marijuana and has reportedly given at least $5 million to an A.C.L.U. project that challenges medical-marijuana restrictions and school drug-testing. He refers to harsh drug laws as “racism at its zenith.” In the winter of 2000 he was arrested at the Auckland International Airport, in New Zealand, en route to the America’s Cup boat race, because he had some pot in his suitcase and briefcase. He spent a night in a jail cell and donated to a local charity after he was released. He later told the Cleveland Plain Dealer, “I learned something about myself, learned that I have the capacity to be stupid and arrogant.”

He is also astonishingly generous: he has given $115 million to Princeton University, where he is on the board of trustees, and was a major contributor to Democratic organizations in the last election. He was married for 25 years to Toby Devan Lewis, the daughter of a leather-goods businessman, with whom he had three children. The couple were divorced in 1981, due in part, presumably, to his extramarital sex life. He told Forbes in 1995 that he does not disapprove of intra-office relations and that he once had an affair after lunch with a colleague, when he “felt overwhelmed by the need to have an extramarital experience.”

He discovered, according to a 2002 article in The Plain Dealer, that he could not live “the big lie.” He told his wife, “I can’t sneak around. I’ve discovered I cannot do this. It’s killing me.” He has never remarried, but he and his wife have remained friends.

Telling the truth, bluntly, is not just another of Lewis’s trademarks but one of the main reasons, he believes, for his success. His father, Joseph Lewis, who died when Peter was studying at Princeton, was the co-founder of the Progressive Corporation, a car-insurance company that employed just 40 people when Peter started working there full-time after graduation. Today the company has more than 27,000 employees in 500 offices nationwide, with 30,000 agencies representing Progressive worldwide. It is the third-biggest auto insurer in America. Lewis told The Plain Dealer that as a young executive he tried “chiseling”-in other words, when customers canceled their policies, he didn’t refund their premiums until they asked. Soon, however, he stopped the practice; people, he realized, were looking for directness and straightforwardness in an insurer. In 2001, Progressive reportedly became the first corporation to report results monthly, as opposed to quarterly.

This same honesty has led him to make provocative statements-he has criticized his hometown of Cleveland, which, he felt, was slipping in cultural and economic terms because of an excess of lawyers with civic leadership roles. “Those aren’t the people who drive creativity,” he told The Plain Dealer. “Their whole job is to keep people from doing things.”

He also told the paper he felt marginalized in Cleveland because he is Jewish. “I have this theory that Jews are put on this earth as a societal irritant,” he said, “which is why everybody tries to squash us all over the place. Which connects with my wanting to do things differently.”

In 2002, the Guggenheim trustees got an inkling of just how different Lewis could be when he announced he would stop giving money to every single Cleveland philanthropic institution because he was fed up with the way the cost of a project he’d started there-a Gehry-designed business-school building at Case Western Reserve University-had spiraled overbudget. Lewis, in typical bulldog fashion, apparently felt the only way to make the university get its act together was to remove his support-from the entire area. Some believe his gambit worked, while others felt it overwrought. The building opened in October 2002.

Lewis backed Krens’s expansion plans for several years before he began to have questions. He even backed Krens publicly in controversies that occurred-the 1998 motorcycle show, which drew a mixed critical response, and a Giorgio Armani retrospective, which ran about the same time that the designer gave the museum $15 million, a move that caused a public outcry. “I was embarrassed by it. Because, you know, it was just about the money,” one of the Guggenheim’s own curators told a reporter.

More controversial than any of these, however, was the de-accessioning of artworks in 1999 and 2000-the Guggenheim has, in the past, declined to say which-to raise $14.5 million. Maxwell Anderson, then the president of the Association of Art Museum Directors (and also the then director of the Whitney), wrote to Krens, asking for proof that the Guggenheim was abiding by the Association of Art Museum Directors (A.A.M.D.) code, which stipulates that art can be sold only to buy other art.

“There were rumors and press coverage, and we decided we have a responsibility to this association and to our other members to make sure it was legal,” says Mimi Gaudieri, the executive director of the A.A.M.D. Krens did not produce the necessary documentation; rather, he got an associate to contact the A.A.M.D. saying the museum had done nothing wrong. “We went back to them,” says Gaudieri. Finally, several months after the initial request, the A.A.M.D. got the documents, which showed that although most of the money had not yet been spent on new art, it was sitting in a fund that could be used for that purpose in the future.

“(The confusion) was all about the bond issue… It was a very difficult puzzle,” says Gaudieri. Why didn’t Krens simply produce records instead of delaying and fueling controversy? “I don’t know,” says Gaudieri. “We wondered the same thing.”
Publicly, Lewis continued to play the loyalist to Krens. He said he could see nothing wrong with the de-accessioning, but in private he was becoming increasingly concerned. According to a colleague, he liked neither the opaqueness of the financial statements he was being shown nor the secretive manner in which, it seemed to him, Krens was operating. He said he had not been informed even that there was a rule that said you could sell art only to buy art.

The situation began to deteriorate more seriously in 2001, the year the museum opened the Rem Koolhaas-designed Las Vegas branches, where attendance in 2002 was less than half of what had been expected. That year a $20 million Internet venture, Guggenheim.com, was developed, but it quickly disappeared. In December 2001 the SoHo gallery closed; in 2003 one of the Vegas spaces was shut; in 2002 shows featuring the work of Matthew Barney and Kazimir Malevich were postponed in part because the museum needed to conserve its funding. Krens dismissed the Barney delay: “At first Matthew was not happy about it, but, as it turns out, I think he adjusted and profited from the idea, because he had more time to plan the New York installation,” he told Art in America in 2003.

In the winter of 2002, after Lewis had coughed up the $12 million to save the day, he decided to make public his ultimatum to Krens. He told The New York Times that he had ordered Krens to rein in his expenditures or he’d fire him. “Either you go back and come back with a real plan, or we will have to talk about your leaving,” he said he told Krens after seeing the proposed budget for 2003. “I stopped cajoling and started seriously threatening.”

In private Krens reportedly told Lewis that he was absolutely right to have threatened his job. But he started to cast around for new board members. It has not always been easy for the Guggenheim to find trustees, according to a former board member. MoMA is far richer-David Rockefeller just gave it an extra $100 million-and is widely considered the gold standard in terms of ethics and taste, thanks in part both to its board of trustees’ chair, Ronald Lauder, and to its president emerita, the philanthropist Agnes Gund. Still, Krens managed to persuade Russian oligarch Vladimir Potanin to join his board, as well as two of the real-estate developers behind the Time Warner Center, William Mack and Stephen Ross. He also got Mark Walter, C.E.O. of Guggenheim Capital, a financial-services company, onto the board.

In July of last year Lewis attended a retreat for the board in New York City. There he spoke passionately and vociferously about his concerns and said that he strongly doubted Krens could make the changes Lewis felt were necessary, and if he could not, the director might have to leave. He was aware that many of those present didn’t like his style or presentation, which he later described to a friend as “bull in a china shop.”
“The board members love expansion. That’s why they’re there. I think if the expansion were to stop, many of them would have fallen away,” says someone close to Lewis. There was also resistance because no one likes to be controlled by one man in the room. “Being a board chief is very difficult for someone with Peter’s personality,” says Michael Horvitz. “I don’t think he is as effective or as comfortable in a situation where he needs to build consensus… He’s much better suited to be a C.E.O.”

At the retreat both John Wadsworth, the former chairman of Morgan Stanley Asia, and William Mack asked Lewis to give Krens more time to see what he could pull off. January 19, 2005, was, however, crunch time for Lewis. The poor figures for 2004, he felt, meant that there could be no more procrastination. He had wanted to fire Krens before Christmas, according to a source, but was prevailed upon not to. It was part of his transparent nature to send Krens and the board the memorandum that turned up in the binder, and until that meeting, Lewis thought he had a good chance of ousting Krens. He had, after all, won almost every battle in his life until that point.

When Lewis looks back at the meeting, a colleague says, he’s both appalled at the poor governance it highlighted and proud that for the first time the board had come together to think seriously about the museum’s problems. Nonetheless, he was disappointed in the outcome. “Here was a bunch of relatively uninvolved and significantly ungenerous people making a decision against the recommendation of the only guy who was informed, involved, and generous,” says a source close to him.

One person whom Lewis holds in high regard, Wadsworth, later told him that he was staying on the board only out of loyalty to the institution and to Krens, according to a source. Nonetheless, Wadsworth resigned as chairman of the Executive & Finance Committee, and has told people he will not be giving much more money. (Wadsworth did not return calls for comment; he is currently chairman of the Guggenheim’s Audit Committee.)

The Guggenheim is spinning the meeting as a triumph for boardroom governance and as a ringing endorsement for Krens. “We feel that it’s far better to get money from a more diversified group,” said someone connected with the museum.

Some former trustees and executives, however, are less upbeat about the new situation. “Mack isn’t strong enough to control Krens,” says one source bluntly. “As for securing the next Peter Lewis on the board, that’s really hard to find. Peter was very, very generous financially, and very, very generous operationally.” This person, a former trustee, believes that the main reason the board voted to stay with Krens was that it would be too hard to find a new director. “It’s a very time-consuming thing to manage one of these. And if you are going to get rid of the director, and hunt for a new one, and deal with the day-to-day operations until you find a new director, that could be a full-time job for Bill Mack for a year or two.”

Since January, Lewis and Krens have not communicated, other than through Frank Gehry. Meanwhile, as this piece was being written, Krens was jetting around the world. He was in Mexico and Asia, where in late April he announced his interest in a mammoth Singapore Guggenheim. The board seems enamored of his high-flying management style, and someone closely connected to the board wrote to V.F., “As far as I am concerned, he has saved the museum from mediocrity and has forced institutions around the world to rethink a lazy and elitist attitude that relies 100% on arts funding through the local government or the same philanthropists to pay for a collection that is rarely seen by the public and for shows that generally only show once. Tom has brought motorcycle enthusiasts, fashion junkies, Las Vegas gamblers, Spanish blue (collar) workers in a war torn region, and countless others into the most famous international arts museum in the world.”

Some nights Peter Lewis has a fantasy, one he’s shared with Guggenheim board members. It goes like this: He pays a visit to New York State attorney general Eliot Spitzer and says, “Mr. Spitzer, you and I have a problem. We have this museum which is insolvent-here is a plan for fixing it. The plan includes selling a half a dozen pictures and raising x billions of dollars. But we can’t do that without your blessing.”

Spitzer says, “Well, I’m not going to give my blessing to that.”

Lewis responds, “Mr. Chairman, here’s the key to the museum; now New York State has a new museum to finance.”V

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