		Listen to clips.
John Schaefer	Money, Power and corruption, and I’m not even talking about rock and roll. I’m John Schaefer and today on sound check , we take a look at the ugly business behind the beautiful world of high-end violins.	Clip01
	We’ll speak with Drew McMannus who covers Symphony Orchestras for the Blog ARTSJOURNAL.com and from Chicago, Fritz Reuter, a leading violin dealer and maker. I’m John Schaefer, this is sound check at WNYC 93.9 and WNYC.org.
	Well, back in 2003 you may remember, the NJ Symphony Orchestra scored what it thought was a major coup. 30 rare string instruments, bought at a substantial discount,	Clip02
	now 2 years later, the millionaire philanthropist (Herbert Axelrod) who sold them the instruments is in jail, and the instruments have been found to be grossly overvalued. Today, we peer under the rock and take a look at the seamy underbelly of the genteel world of high-end string instruments.
	Joining me here in our studio in New York is Drew McMannus who writes the BLOG know as Adaptistration at Arts Journal .COM, covers the Orchestra Business –Drew, It’s good to have you back on Sound Check today,	Clip03

John Schaefer	Drew, let me begin with you –last December the New Jersey Symphony Orchestra’s own 3-member panel found that these instruments, the much bally-houed collection that they bought -should be valued at around the purchase price of 17 million dollars, not the 49 million dollars that they were originally valued at. What happened? How did we get to this point?
Drew McManus	By the end of that commissions report, that 17-18 million dollar values what you said they actually paid for it –the 48 to 49 million dollars is what Axelrod said they were actually worth –and that was also based on the appraisal from his dealer –Dietmar Machold.

John Schaefer	OK. Whose appraisal was this? This was... ?
Drew McManus	Dietmar Machold's appraisal of Herbert Axelrod’s instruments.
John Schaefer	So, Axelrod was the philanthropist who made his money in books caring for tropical fish, and he hired the guy to do this appraisal.

Drew McManus

That’s’ what you would probably think. In my investigation of the matter when I talked with symphony officials, one of the reasons that they had quoted in the report that they said that they did not get a full appraisal of every instrument in the collection,

because they said that it was simply too expensive because the common practice of most appraisers is to take a percentage of what the actual value of what the instrument is as their fee. And they said it would cost a million or more to have the appraisal done.

At the time, they didn’t have the money to pay for that appraisal, so they only had some of the instruments examined for a brief period of time, from some experts that the orchestra hired at the time—their names were kept quiet.

John Schaefer	So they, had some people look at a few of the instrument and then made their purchase based on that.
Drew McManus	In addition too, they had some of the orchestra musicians come and play them to give their opinions as well, and of course they had all of the opinions from Dietmar Machold who had examined all of the instruments on behalf of Herbert Axelrod—
John Schaefer	right, ...who said $49-50 million dollars, something like that, for which he got, valued at $20 million dollars, his fee would have been substantially less. Is that right?

Drew McManus

Well, I don’t know what type of deal Herbert Axelrod had with Dietmar Machold, Machold has dealt with Axelrod for years in helping him buying and selling instruments over the years, acquiring and unloading, and loaning them out to soloist to use, and so on and so forth. I don’t know the nature of their business relationship, but I’m sure of course that the higher value they can place on those instruments, the better it’s going to be for Mr. Machold.

John Schaefer

Fritz, Fritz Reuter in Chicago, How would a normal sale, a normal deal like this work, where an orchestra or even an individual wants to buy a instrument or a group of instruments can you just talk us through the way this should go?

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Fritz Reuter

Yes, in a round about way, an instrument is being purchased and then generally also the dealer provides with it an appraisal [See: How to Buy a Violin] for the instrument. And also at times when high priced instruments are involved there are certifications needed, by reputable dealers, to substantiate that the purchase was in harmony with what was stated in the invoice.

Fritz Reuter

Yes, the certification as indicated, and then also an appraisal. But, the appraisal can come in various forms. You have appraisals for insurance purposes, fair market value, wholesale value.

They are not standard evaluations giving a specific price at the end. So, if you have a fair market appraisal, it's primarily between dealers for themselves, so that they know what the price is, they would pay cash. Most of the instruments are requiring insurance appraisals. I don’t know what the appraisal was with the NJ Symphony, as to what purpose it was given.

John Schaefer

Fritz, what about what Drew was alluding to before, the fact that it's in the appraiser’s interest to appraise things at a higher value, in other words, if I could say with some justification that this violin is worth 1-2 million dollars, it would be worth my while to say 2 million rather than one, right?

Fritz Reuter

If that is the basis by which he gets his fees, probably that would be the case. But generally, if you are an appraiser, member of the Appraisers Association of America, or the International Society of Appraisers, you required to stipulate basically the time you use for appraising the instruments and the time you use for appraising the instruments and based on that you collect your fee. For certifications, that is generally a different story. You get generally 10% of the value or up to 10% of the value of what you appraise. So that’s a different story, that is a different type of appraisal.

Drew McManus

It can definitely artificially inflate the price. As a matter of insurance purposes actually, that’s a good point. I did interview interview Dan Schoenfeld, (link to article) who’s the president of a largest insurance firm dedicated to the needs of musicians worldwide, that’s Clarion Associates Incorporated, and I asked him several questions about how they accept appraisal value. According to him, they have a list of appraisers they accept as being bona fide and they will usually just take what they say. But he said they have challenged values in the past if they thought an instrument was artificially inflated in value. But of course he couldn’t go into details about where that’s happened.

John Schaefer

Well now, Fritz, there is another sort of side of the sale of high end violins that also involves a kind of hidden commission, and I know you've talked about this at least in print before—and that is the fact that some violin teachers get a commission from the sale of violins to their students. It that still a pretty common practice?

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Fritz Reuter

That is very common, as a matter of fact that is one of the basis by which you sell items which are blind purchases. Most people have no knowledge as to what they purchase when they buy a violin and they have to rely upon somebody, and so generally they go to the teacher, and the teacher knows the financial situation of the purchaser -the parents and the like when they are youngsters -and the teacher has a relationship with a particular dealer and they negotiate as to how much out of the sale they receive by OK'ing the sale. And you know, ultimately the student goes to the teacher and asks for his "OK". Then, for the "OK", the teacher gets a commission which, at times, is up to 50% of the purchase price.

Fritz Reuter

There is a financial interest, and if you follow the money you see that even these large collections. Like for instance, there was a violin sold to Ely Lilly Foundation for 1.6 million dollars. The owner was the son of the owner who had died, and he was supposed to be getting 1 million dollars and nevertheless, it was sold for 1.6 million dollars.

So, the dealer was supposed to get $250, 000 out of the sale -there was $210,000 left which he also pocketed and there was a suit initiated. But the owner -and I don’t know what the stipulations were -but generally, the dealer has to be able to pay off numerous individuals to be able to land a sale like that. Especially with a foundation that has no knowledge of anything, they rely upon rainmakers -those dealers -to make a sale.

John Schaefer

I supposed the question of knowledge is the key one though here Fritz, because if I’m a student and I want to buy a violin and my teacher is getting say, a 25% commission on the violin that I buy, that's going substantially increase the money I have to pay for my instrument.

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John Schaefer	It’s sort of like the real estate business, if you were buying a house and the real estate agent did not disclose to you that he or she worked for the sellers -that it was in their interest to get a higher price.
Fritz Reuter	Yes, but the real estate, by law, they are to give the amount of commission that they get.

John Schaefer	All right, we’re speaking with Fritz Reuter-a Chicago based dealer and maker, and with Drew McMannus who writes a Blog on the orchestra business at ArtsJournal.com. If you have questions or comments about this issue, it certainly is one that most of us never gave a 2nd thought to until the much ballyhoo’d purchase of the NJSO sort of turned into a big Magilla. You can call us at (212)264-7483.	Clip09
	Well take a break in just a moment, but before we do, Drew, is there—we’ve seen the government get involved in so many different things: steroids, baseball, and the case in Florida-- should the government be involved, should it be looking into how we buy and sell violins?

Drew McManus

In a way it actually has already. Senator Grassly, a Republican in Nebraska whose is chair of the finance committee, actually investigated the Axelrod issue because Axelrod had a tremendous potential for a write off, if he valued the instrument at 50 million and sold them for around 17-18. Since he fled the country due to his other problems, he never actually filed taxes for that year.

Drew McManus

They were tax fraud related, but not with the violin issue, but violin issue because that was a very large potential write-off for him. The New Jersey Star Ledger wrote and publish an article that actually brought the authenticity of some of the instruments into question and that’s were it all really started. So now it wasn’t well he selling it, and he’s getting this big write-off, but now some of the instruments are not even supposed to be legitimate as well, too. So that’s when the government really became involved, the straw that broke the camels back. There were a lot of tax fraud going on with charitable donations at that time.

John Schaefer	Ok, so willy-nilly, the government has at least made some tentative step into this arena.
Drew McManus	...and that's not all!
John Schaefer	And then I supposed the industry itself is going to have to –at some point- take some kind of steps. Fritz, you were a founding members of the American Federation of Violin and Bow Makers, do they have a code of ethics? Does the industry governmen itself somehow?	Clip10

Fritz Reuter

Absolutely! They do various things which should be reported, but nobody does that, because you would be stepping on toes, and I’ve stepped on toes and therefore they threw me out. As a matter of fact, I was a member of the International Society too and they threw me out and because I opened my mouth.

But, I would like to relate an interesting point here that the Internal Revenue Service –an appraiser for them –he at one time appraised a viola by Stradivari for 12 million dollars, even though a dealer had appraised it for 8 million dollars. So he upped the ante from 8 million to 12 million. And he was an appraiser for the Internal Revenue Service. Here the question is, for what purpose was it appraised. What was the ultimate desire of the appraisal.

John Schaefer

As with so many different collectable, there is always a book value, and no one expects have to buy anything at book value, so I mean there’s lots more to talk about and we will continue our discussion with both Fritz Reuter of Fritz Reuter and Sons in Chicago, and Drew McManus from Adaptistration at ARTSJOURNAL.COM , and with some of you who are already on the phone. Our number (212)264-7483. You're listening to Soundcheck

	Big money changes hands when high-end violins are bought and sold—and big money changes hands just when the get appraised apparently, we are finding out from both Drew McMannus -who Blogs at ARTSJOURNAL.com, his blog is known as Adaptistration which covers the orchestra business -and from Chicago, fritz Reuter, a leading violin dealer and maker. Drew, how would you define the high-end string market, what’s our cutoff numerically?
Drew McManus	It keeps going up every year. I interviewed one dealer, I interviewed many dealers and violin makers researching all of this, and one dealer in particular who used to be very active said that after Strads and some Amati’s started to get up over the $300-$400,000 range, that’s’ when he got out of the market, it just wasn’t affordable. An now, getting a Strad or Amati for that price is unheard of.
John Schaefer	So we're talking about instruments, whether, Strads or Guarneri, or Amati’s and other older instruments, were talking about instruments that basically cost more than the average house.
Drew McManus	Much more in most cases.

Drew McManus

That’s a good question. Some people would wonder why do you need to spend that much. There are some soloist now as well who are even kind of renouncing the old Golden Age instruments in favor of instruments that have been constructed in the last 10, 20, 50 years.

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Greg -Caller in NY

Thank you. Just so you know, I happen to be also a violin dealer. First of all, I want to thank you and applaud you for the topic -the subjects very important for everybody. 2nd of all, you mentioned the prices of violins being 2 million, not to justify it, but obviously at the cost of a painting might be 20 million , so obvious something made from the 18th century piece of wood, that makes a wonderful sound that can be used, a performer could justify it certainly at 2-3 million dollars

Greg -Caller in NY

or an investment for an investor. I want to interject about this paying off of teachers. I’ve had several teachers insist on certain commissions from the sale from their student. And when I didn’t agree to it, they killed the deal. And I said what about the student, your student loves this violin. Cant’ we find a way to at least put this violin in their hands, can’t we compromise here. And they said no. they didn’t care about the student at all and totally shut the whole deal down.

Greg -Caller in NY

And later, I eventually shooed the teacher eventually out of my shop. And all I can tell you that it’s very refreshing to hear this, because it’s such a shame, these families are very vulnerable. They can only rely on the dealer and for the dealer to only have money on their mind, it’s like the politicians who rise to the top, who supposed to care about this country and only care about themselves. These violin teachers and certain dealers have only their own bank account in mind and it’s really a shame to see this.

Greg -Caller in NY

It’s absolutely standard for many teachers to send their students only to certain dealers, which is also an indication, a clue the student should realize there is something that is going on there. As a teacher and a violin dealer, I tell all my clients and violin students -go anywhere you want, show my instrument, and look for instrument all over the world, there is never any reason for anyone ever to tell you not to go and seek opinions. Just like when you buy a car, you want someone to look under the hood of the car. You don’t buy anything without having it checked out. For anyone to tell anyone to go only here or only go there, it’s obviously a sign of some kind of problem.

Fritz Reuter

Yes, he is correct. He said actually the same as I’m saying. Also, the violin business is based on false premise because most people say older instruments are better and they always talk about sound—absolutely not true—nothing in the universe improves with age.

So what you’re dealing with is the rarity of the object for which you pay, not for the sound at all. So here, also regarding the lost secret of Stradivari, there is no lost secret… we know how to make violins. They are not as high priced, because they don’t have any collectors value yet as to extent that Stradivari’s have.

But, it is something where when you follow the money, you will see that the dealers profit from it, the teachers profit from it, and therefore they drive up the prices because many of times they possess instruments of high value and they like to have the market going that way.

John Schaefer

Fritz, let me just play devils advocate for a while. If I’m the teacher, and maybe I’m not making a huge amount of money, but I’m spending a lot of time looking at violins, really trying to figure what would be best suited to my students’ needs—shouldn’t I be able to be compensated for that?

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Fritz Reuter

There is an assumption that the student doesn’t know what he is playing and he has no personal judgment on matters, the teacher judges as to what his taste is if he’s honest. And therefore, he imposes his taste upon his student.

Here. There is Jaime Laredo of Curtis Institute who said, “a great player can make a cigar box sound great”. So what do you say to that, the player is the one who makes the instrument sound, it is not the instrument per say.

Fritz Reuter

They wouldn’t let the student know because otherwise the student would question the teacher as to what his interest is in getting a commission for it. Because ultimately the student finds out when he wants to sell the instrument that the instrument may not be worth anywhere near to what he had paid. This takes place maybe years, many years after he had contact with the teacher.

John Schaefer

Drew, just to follow-up on something else Fritz just said and you mentioned it too, that idea that the old instruments are universally better sounding than the new ones. Seems like there is a 2nd school of thought at work here.

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Drew McManus

Oh sure, I think in the end, with anyone who plays an instrument, it’s going to be what they think that sound is and how it affects them personally as an individual player. I don’t think there is any single thing for a player that is going to be more important than that. And whether the instrument is from the Golden Age and 300 years old, or whether it’s 50 years old made by Parisot -who is a fairly recent violin maker -what they sound good on is what they sound good on.

Robert -Caller in NY

Hi, thanks for taking my call. My daughter is going to be buying a violin soon and I would like specific advice from Fritz Reuter on how to proceed with this, because I think it’s absolutely correct that not all teachers can be trusted, and certainly not all violin dealers can be trusted.

Fritz Reuter

Alright, when you buy an instrument like this as we do, we give a written warranty to the fact that we buy the instrument back for 75% if you return the instrument to us, or we give 100% trade-in value. Most dealers don’t do that -because of they pay off. If you were to pay off 25% or 30% you wouldn’t make any profit. But we don’t pay, period.

John Schaefer	So you’re suggesting that Robert look for a dealer who is willing to come up with that sort of paperwork. Robert, thanks for the call.
John Schaefer	Let’s return to Drew here in the studio. The idea that old versus new… We are talking about pieces of wood, glue, varnish, string –over the course of hundreds of years those substances will deteriorate, so where does the idea come from that the older instruments somehow get better with age.	Clip16

Drew McManus

Well, personally, I do think that instruments get better with age---to a point. They just need to get played a little bit and they start to open up their sound and they generally improve. But that reaches a point to where it now starts to go on a down cycle, because of exactly the reasons you mentioned—because it’s made out of wood. And especially the instruments from the Golden age period, which early golden age period instruments were made to take the stress from the strings --was much less than it is now. So over the years they’ve had to have significant modification made to them and there may be less parts on the instrument that are original.

John Schaefer

I don’t want to make this sound like both you and Fritz are painting in black and white strokes because in fact, we had some of those NJ instruments in the studio after the purchase was made, and their principle cellist Jonathon Spitz played both his old cello -in other words the one he had previously -and the new Stradivarius cello that was among the Axelrod instrument they had bought and I thought that there was in fact an audible difference, that this Stradivarius instrument was just a magnificent instrument. Of course, I don’t know what the other one was, but there certainly was in that case, something you could hear –Oh, that’s what their spending all the money for.

Drew McManus

Sure, and just for the number of instruments that Stradivari and the other makers produced, just over the course of time, some of those have just been played so much more that others. If an instrument had been locked away in a castle for 150 years, this can have a significantly less amount of wear and tear than an instrument that has been played on consistently during that time. So yeah, it’s not to say that old instruments are bad either, the universal statement is not good in that case,

	but the simple assumption that all golden age instruments period instruments are valuable because they are golden age valuable instruments is a dangerous assumption to make.	Clip17
John Schaefer	although, they could be valuable as one of the callers was saying, just as an object, as an “object d'art”.
Drew McManus	Oh sure, I absolutely adore them because one of my hobbies is woodworking. I just love it for the instrument and the art, and the craftsmanship of the art itself. But that’s a completely different reason, If you want to sit on stage and play an instrument that lost it’s tone…
John Schaefer	Fritz, from Fritz Reuter and Sons from Chicago, any final words of advice for anyone listening who either has an old violin and wants to get an honest appraisal of it, or is in the process of buying or selling a violin, a high-end instrument?	Clip18

Fritz Reuter

It’s so hard to say what one ought to be doing… maybe reading my web site http://www.fritz-reuter.com which has ample information as to how to go about buying a violin ,among other things and articles about the violin world. Drew McManus dealt with it and I have some of his article there too, so it gives them an oversight as to what is involved and what is the business function and the money trail really, of the business.

John Schaefer	It’s a sort of an unexpected website to find the so called “seamy and dishonorable side of the violin business”, but there it is at www.fritz-reuter.com. We have been speaking with both Fritz Reuter and Drew McMannus. Gentlemen, thank you both for joining us this afternoon, this has really been an audio version of an eye opening experience for all of us.
Drew McManus	Thank you for having me.
Fritz Reuter	Thank you, appreciate it.
John Schaefer	You’re listening to Soundcheck at 93.9 WNYC.

John Schaefer

Violinist Christian Tesla, he no longer plays his old Stradivarius, but rather a new 3 year old German violin, so apparently he agrees with Drew McManus and Fritz Reuter. What do you think about this topic? You can email us at soundcheck@wnyc.or

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Drew McManus	Thank you for having me John.
John Schaefer	And from Chicago, Fritz Reuter, one of this countries leading dealers and makers of violins and stringed instruments. Fritz, thank you for joining us today.

John Schaefer	Did you say 50, FIVE ZERO???
Fritz Reuter	Yes, up to 50 -though generally it’s up near 20%-30%.
John Schaefer	WOW!

John Schaefer	Right. Is there any such law in the world of selling high end violins?
Fritz Reuter	No, it would kill the business.