Somerhill Gallery's president, Joe Rowand, allegedly unlawfully diverted funds from his Durham-based business, essentially using it as a personal bank account to support a high-flying lifestyle.
These allegations—plus accusations of misconduct, mismanagement, breach of financial duty and corporate waste—were recently unveiled in court documents as attorney Sara Conti is seeking damages on behalf of artists owed, in total, hundreds of thousands of dollars.
In court documents, Rowand's attorney, John Northern, denied the accusations and asked that the complaint be dismissed. Northern is also asking the court to require Conti to pay for court costs related to the complaint.
The case is being heard in bankruptcy court and no criminal charges have been filed.
Somerhill declared Chapter 7 bankruptcy last year, owing at least $277,000 to artists—many of whom said they were not paid on sales of their work for as long as a decade. And in some cases, the artists said, they were told by the gallery that their pieces had not sold when in fact, they had.
Conti alleges that part of Rowand's generous salary came from sales of artwork and that he "knowingly and intentionally convert[ed] artwork which belonged to artists represented by Somerhill to Mr. Rowand's own personal use and benefit, by selling the artwork and paying himself and not the artists."
Somerhill racked up this debt while Rowand, according to court records, paid himself a $202,000 yearly salary, plus $3,300 in monthly health insurance benefits. Using the gallery as his personal ATM helped him maintain an extravagant lifestyle, Conti claims, which includes his 4,500-square-foot mansion with a saltwater swimming pool on 22.5 acres.
Even while Somerhill's finances were melting down last summer, court documents allege that Rowand approached Tim Toben, developer of Greenbridge in Chapel Hill, about opening a new gallery there.
At the time, Toben confirmed to the Indy that he and Rowand were discussing a possible deal, saying he "would be happy to have Somerhill." (Greenbridge itself has encountered financial difficulties lately. Bank of America has refused to pay a final $1.6 million in invoices on the Chapel Hill development because the project exceeded the guaranteed maximum price.)
Rowand, the complaint contends, showed willful disregard of the gallery's deteriorating financial condition. His "excessive spending" and "failure to control expenses" ultimately prevented him from paying his creditors.
In addition to the money owed the artists, Somerhill was indebted $200,000 to its landlord, Scientific Properties, plus hundreds of thousands more to banks, the N.C. Department of Revenue, individuals and financial lenders.
Even while earning these exorbitant sums, however, Rowand filed for personal bankruptcy last summer. His Orange County home is for sale for $1.95 million, down from the original asking price of $3 million.
Strategically, business owners often incorporate to shield their personal assets from corporate liability. Since Somerhill has only one asset—a seven-carat tourmaline ring in a diamond-encrusted setting, which Conti has yet to find a buyer for its $15,000 asking price—any money awarded to the artists would presumably have to come from the sales of assets from Rowand's personal bankruptcy case.
It is unclear if a judge would allow that, but court documents set out to establish that Rowand and Somerhill were essentially the same entity, and that the gallery was "operated as the alter ego of Mr. Rowand."
Rowand, who was president, dominant shareholder and executive director of the gallery, "exercised complete control and domination of the finances, policy and business practices [of Somerhill] that [Somerhill] had no separate mind, will or existence of its own," the documents read.
That seven-carat tourmaline-and-diamond ring was the final unsold item from Somerhill Galley's bankruptcy auctions held last fall. Conti received permission from the court this week to sell it for consignment at Grimball Jewelers in Chapel Hill; the retail price could be between $6,000 and $8,000, with half of the proceeds being used to help pay off creditors. The other 50 percent would go to the jeweler.