Panel finds fraud by Thomas Kinkade company, awards $860,000 to gallery owners

LOS ANGELES – Arbitrators awarded $860,000 to two former Thomas Kinkade gallery owners who accused the artist and his company of hiding business risks and using Christian themes to win their trust.

Ruling 2-1, the arbitration panel Thursday found that Kinkade’s Media Arts Group and one of its executives, Richard F. Barnett, “failed to disclose material information” that would have dissuaded Karen Hazlewood and Jeffrey Spinello from investing $122,000 to open the first of their two Thomas Kinkade Signature Galleries in Virginia in 1999.

The panel did not single out Kinkade in finding fraud.

The American Arbitration Association ruling said Kinkade and other company officials frequently used terms such as “partner,” “trust,” “Christian” and “God” to convey a sense of “higher calling” to the couple.

The panel’s decision was the first major loss for Kinkade and Media Arts Group in litigation brought by former dealers. They had prevailed in at least three previous arbitration claims.

Dana Levitt, an attorney for Kinkade, Barnett and Media Arts Group, said the ruling had “numerous substantial errors” and they will seek to have it voided.

“The plaintiffs knew what they were getting into. It was a business investment that had certain risks and it didn’t work out for them. And now they want my clients to pay the price for mistakes they made,” Levitt said.

Spinello said Media Arts Group forced him and Hazlewood to buy two or three copies of each new edition of Kinkade’s canvas reproductions, but they proved to be slow sellers. Dealers were not allowed to discount the pieces, which sometimes cost thousands of dollars, and could return them only if they bought two or three new prints for each one sent back.

Spinello and Hazlewood closed their galleries in 2003. Media Arts Group went private for $32.7 million in 2004 and has been renamed Thomas Kinkade Co.

The panel’s interim award does not include interest, costs and attorneys fees and the amount could reach $3.5 million, said Norman Yatooma, the couple’s lawyer. Yatooma said his firm represents 23 Signature Gallery franchisees from seven states in pending arbitration.

Works by Kinkade, who labels himself the nation’s most collected living artist, generally depict tranquil scenes, heavy on country churches, lighthouses, trees and cottages with streams running nearby.

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