They Called Him the Bernie Madoff of Violin Dealers

Tuesday, April 12, 2011

German violin dealer Dietmar Machold lived in an Austrian castle, owned a collection of sports cars and was always impeccably dressed. Over a period of several decades, Machold allegedly swindled banks, customers and dealers from millions of dollars, leaving behind a trail of bankruptcy, deep debts and unhappy customers.

On March 16, Machold, 61, was arrested on charges of aggravated fraud, misappropriation and fraudulent insolvency, said Thomas Vecsey, spokesman for the Vienna public prosecutor's office. Machold is officially charged with debts of $27 million Euros, or about 36 million dollars, but sources familiar with his business dealings suspect that sum is considerably higher, and the Austrian paper Der Standard has reported that there are over 100 million Euros in bankruptcy claims against him.

Machold’s arrest has been met with a sense of eventuality in the rare violin world, a business known to be rife with fraud, kickbacks, hidden commissions and lack of transparency. Locally, Machold is entangled with the embarrassing sale of $49 million worth of instruments to the New Jersey Symphony, and has done business with or knows personally most of the violin dealers in New York. Many of Machold’s colleagues, some of whom wouldn’t talk on the record because “it’s easy to get burned in this business,” compared Machold to Bernard Madoff: the big crook who comes to symbolize a business with plenty of smaller ones.

Acquaintances and colleagues described Machold as charming, flashy, ambitious, a smooth talker and a playboy. “He is elegant, well tailored and kind of a Gatsby,” said David Schoenbaum, an author writing a book on the social history of the violin who met Machold several times. At the height of his success, Machold had shops in New York, Zurich, Bremen, Vienna and agents in Tokyo and Seoul. His New York shop, open from 1995 to 2006, was known for paying salaries extravagant enough to bring in workers from competing firms, leaving a sour taste in competitors’ mouths. Machold also appraised the so-called "Golden Age" instrument collection that the New Jersey Symphony Orchestra purchased for $16 million, hugely exaggerating the values of the purchase.

Born in Bremen, Germany, to a violin dealer, Machold learned violin-dealing from his father. He has a law degree, and no formal violin-making training. “He bought his way into the field, and being a successful attorney, he had the capital to invest in instruments,” said Phillip Injeian, a violin maker and dealer in Pittsburgh who knew Machold professionally. No one seems to know if Machold actually played the violin. “I think he took a few lessons as a child,” said Schoenbaum, the author. “He’s coquettish about it.”

The arrest took place in Zermatt, Switzerland, on a warrant issued by the Vienna prosecutor’s office, and Machold will go through extradition proceedings, said Folco Galli, a spokesman for the Swiss justice ministry. Machold was charged with misappropriation because when selling customers’ instruments he pretended they were his own, said Vecsey, the Vienna prosecutor’s spokesman. The fraudulent insolvency charges are because he didn’t disclose assets when filing for bankruptcy and fraud charges are because he gave worthless instruments to banks to safeguard credit, Vecsey said. Some of these instruments, which Machold claimed were Strads, were later reported to be worth less than the cases that held them, said Schoenbaum, the author.

While some see Machold as a crook looking to deceive, others said his questionable business practices just spun out of control. “I feel that Machold was a little bit careless,” said Julie Reed-Yeboah, a New York City-based violin restorer who worked for Machold for twenty-one years. “He would put values on things based on what the owner wanted. I don’t think that he was so concerned that that would be considered fraud.”

He’s not a criminal but just did bad business at shaky financial times, said Dr. Wilhelm Häusler, the Austrian attorney who represented Machold in previous bankruptcy proceedings and has been corresponding with Machold in prison. “He suffered beneath the crisis,” he said. “He couldn’t make all his deals with Stradavaris and Amatis, because the persons who usually buy those instruments didn’t want to spend so much money for those things.”

Granted, putting a value on a violin is no simple task, especially in an unregulated market without guidelines like, say, like a bluebook for cars. A Strad violin can be worth anywhere from a half million to ten million dollars, said Injeian, the Pittsburgh maker. “To the dealer, the thing that is important is the authenticity of all parts of the instrument, then the condition, and then the playability.”

It’s a lot like the art market, said Stefan Bauni, a New York-based violinmaker who first met Machold in Europe, and later worked in the same building as the dealer. Names and origins – especially old Italians – are of paramount importance, and dealers and sellers work to create hype and stories around certain instruments, he said. “How many first violins of a great player can there be?”

Much of it is based on the individual sale, said Fritz Reuter, the Chicago-based violin maker and dealer. “Dealers analyze the customer and see what he is willing to pay.”

How common corruption is in the violin world is up for debate. “[Machold] is only one of a dozen individuals who do the same thing,” said Reuter, who lists dealers he calls the instrument world “mafia” on his Web site. “If any business is crooked, this one is.” In New York, there are probably a dozen people like Machold, said Emmanuel Gradoux-Matt, a violin restorer and dealer in New York who met Machold on several occasions. In the world of high-end instruments, it is common for a dealer not to disclose the source of an instrument and to give hidden commissions, such as to a teacher whose student buys an instrument from a recommended shop.

But some violin firms have gradually cleaned up their act, said Gradoux-Matt. “The good thing about people like Machold is that we’ve had to change some of the ways we’ve done business,” he said. About ten years ago, Gradoux-Matt said he increased transparency significantly, disclosing who bought an instrument, what they paid, and how much the dealer received in the commission.

Whether Machold’s arrest will cause major change in the business remains to be seen. “There have always been shysters and thieves of the like of Machold,” said Gradoux-Matt. “There were people like this in the 1800s, and there will be people like that 100 years from now. It’s the cost of dealing with beautiful artistic things at high price.”

Image credits:

1) Top: The location where Machold used to have his shop across from Lincoln Center. The building has since been torn down (Corinne Ramey).

2) Bottom: Emmanuel Gradoux-Matt, a violin dealer located on East 28th Street, says that dealers like Machold have led him to make significant changes in his business practices (Corinne Ramey).

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Comments [11]

CHARLES FISCHBEIN from FRONT ROYAL, VA.

i WANT THIS TO EXPAND ON A POST i PUT OUT EARLIER IN THIS THREAD. i RECENTLY HAD OCCASION TO GO O ONE OF THE TOP VIOLIN AND CLASSICAL STRING INSTRUMENT DEALERS ON THE EAST COAST OF THE u>s> THIS COMPANY WHOM i WILL NOT NAME, REPAIRS SOME OF THE BEST VIOLINS, VIOLAS, AND CELLO' IN THE WORLD. i HAD A PROBLEM WITH A SEPERATION AT THE LOWER END OF MY 150 YEAR OLD cELLO AND WANTED THE BEST PEOPLE TO REPAIR IT. wHILE i WAS SPEAKING WITH THE LUTHIER AT THE SHOP WE BEGAN TO TALK ABOUT HOW DIFFICULT IT IS BECOMING TO DETERMINE IF AN INSTRUMENT IS REAL OR COUNTERFEIT. OF COURSE AT THE TOP END WITH STRAD'S AND AMATI'S THEY HAVE SUCH A LONG HISTORY AND DOCUMENTATION IT WOULD-BE ALMOST IMPOSSIBLE TO PASS ONE OFF TO A WELL SCHOOLED APPRAISER. HOWEVER IN THE MID RAGE PRICE BRACKET SAY $75.000 TO $25,000 WHERE THE HISTORY OF AN INSTRUMENT MAY NOT BE AS WELL DOCUMENTED IS WHERE THE FRAUD TAKES PLACE. i HAVE SEE SHOPS IN CHINA THAT HAVE RADIO-GRAPHS OF MID LEVEL INSTRUMENTS AND EXACT COPIES OF THE LABELS.
WHAT THESE PEOPLE DO AND FREQUENTLY GET AWAY WITH IS TRULY ROBBING THE UNSUSPECTING PURCHASER OF THE INSTRUMENT THEY THINK THEY ARE BUYING AND INSTEAD PASSING OFF A COPY. i AM UNAWARE OF ONE INCIDENT FROM A SHOP WHERE THE LUTHIER TOOK IN A VIOLIN WORTH IN EXCESS OF $70,00 FOR REPAIR OF A CRACK, AND COPIED IT DOWN TO THE LITTLEST DETAIL ON THE VARNISH, WITH SCRATCHES ETC. EXACTLY AS THE ORIGINAL, AND THEN RETURNED TO COPY TO THE CUSTOMER AND KEPT THE REAL VALUABLE INSTRUMENT. THAT MAN EVENTUALLY WAS CAUGHT WHEN THE PERSON WHO GOT THE COPY WAS UNHAPPY WITH THE TONE OF THE VIOLIN AND TOOK IT TO A SHOP IN MANHATTAN, WHERE IT WAS FINALLY RECOGNIZED AS A FRAUD.
I POST THIS IN THE HOPE THAT BEFORE ANYONE PUTS OUT SUBSTANTIAL AMOUNTS OF MONEY FOR A CLASSICAL STRING INSTRUMENT THAT IT BE TAKING TO A NEUTRAL LUTHIER TO DETERMINE IF IT IS REAL OR COUNTERFEIT. i WISH THERE COULD BE A CLEARING HOUSE TO POST THE NAMES OF THOSE DEALERS WHO PLAY THESE GAMES BUT IN TODAY'S MARKET WITH WORLD WIDE TRANSACTIONS AND ONLINE AUCTIONS IT WOULD BE DIFFICULT TO TRACK EVERY IMPORTANT SALE, SO PLEASE BE CAREFUL AND DO NOT JUDGE AN INSTRUMENT BY THE LOOK OF THE SHOP YOU GO TO, ANY LEGITIMATE SELLER WOULD BE HAPPY TO HAVE A POTENTIAL BUYER TAKE THE INSTRUMENT THEY ARE INTERESTED IN TO A SKILLED LUTHIER/APPRAISE BEFORE THE CHECK IS WRITTEN. BE CAREFUL.

Feb. 18 2013 10:06 AM
Charles Fischbein from Northern Virginia

I just returned from a trip to Beijing to inspect a number of violins shops, actually factories. It is amazing how open violin and cello counter-fitting are in China. In several shops I saw complete x-ray radiographjs and one MRI scan of top level violins selling for over $150.000. Many many more were being copied to replicate mid level; instruments valued at the $15,000 to 20,000 range. With fraud rampant in the trade it is no wonder that this "dealer" got as far as he did. It only goes to show how careful a purchaser must be when buying a mid to upper level violin. I would suggest not just being satisfied with a certificate from the selling shop, but asking to have the violin sent to a well known national dealer who can in writing determine the authenticity of the instrument. I remember many years ago traveling thou the mountains of Greece watching small crafts shops turn out "antiques" that ended up being sold in Athens and shops on the Greek Islands. So be careful before you spend major dollars on a Violin, Viola, or Cello and do not be afraid to walk away if the deal sounds too good. Remember you are swimming with sharks.

Feb. 15 2013 07:52 PM
N. Fitzgerald

Does amnyone know the names of the other investors besides Senator Nunn in the acquisition of Robert McDuffie's Ladenburg Guarneri del Gesu?

Also any other national political figures who invested with Machold???

Jul. 30 2012 08:44 PM
Ileas from California

Machold owes me $4000 for a bow I left in consignment. Does anyone know whom I should talk to?

Sep. 26 2011 01:35 AM
Fritz Reuter from Chicago/Lincolnwood

The violin business is unique, it needs the buyer, the teacher and the parent to sell or buy a violin. The teacher is the one who claims to have the expertise. If one can profit up to 50% on a BLIND PURCHASE of a student's instrument, it is more profitable than teaching.

Jun. 03 2011 04:29 PM
Charles Fischbein from Washington D.C.

Fraud in the fine violin business is the worlds second oldest profession. As a musician and violin importer and dealer the best way to be sure a customer at whatever level is getting the right volin at the right price is to go to an established reputable dealer.
Avoid the one's you teacher suggests and look in the trade journals such as "Strings" magazine or other reputable publications. The brand name means little.
Too often instruments come with labels showing Italian sounding names and are finished to look like old instruments. It is only after they start to fall apart that the owner realizes they were made in China from green wood, and by unskilled labor. They sell wholesale in the U.S. to the dealer for under $50.00 They are perfect for the internet dealer with no reputation to be concerned about to mark up many times more than their value.
So if you are looking for a beginner violin for under $1000, or a fine instrument, do your homework, deal with an established violin dealer or luthier, and be careful about going to the firsty person your teacher suggets. I have personally received many calls from teachers over the years asking for commissions for them if they will send students to me. I don't even bother to answer their question befor I hang up the phone.
Regardless of your political attitudes remember what President Reagan once said, "Trust But Verify"

It is so true in the string instrument business.

Apr. 16 2011 01:12 PM
bob from NY

This poorly researched article certainly has the pot calling the kettle black. A dozen people like Machold in NY? Gimme a break. Machold a successful attorney? Ridiculous.

Apr. 15 2011 09:13 AM
Sage from Cremona

Ironic that Gradoux Matt is painted as a do-gooder in this article. Never mind he was behind the sale of the Gingold strad, whereby his firm sold the Strad without disclosing the final sales price, so Gradoux Matt to take a huge commission. The lawsuit settled out of court, so we don't know how much Gradoux Matt paid to have this go away. Did the reporter not do a google search prior to interviewing people? This was written up in several newspapers, including the Wall Street Journal and Chicago Tribune. http://www.cozio.com/Instrument.aspx?id=473

http://www.fritz-reuter.com/articles/wallstreetjournal/strings_attached.htm

Apr. 15 2011 04:03 AM
Kenneth Bennett Lane from BOONTON, NJ

Instrumentalists must depend to a great degree upon the quality of the instrument they master. Although an extremely talented instrumentalist may sway audiences with that performer's virtuosity on even a mediocre instrument, having the "right" instrument may make the difference between a stellar career and an ordinary survival existence. It is not surprising to learn how disreputable people can spin control the value of what they are selling.
In our world politicians do the same thing and they, too, get away with it for a long time. Being a singer and opera composer, I can only empathize with the victims, but it must be devastating to the victims of such misrepresentation.

Apr. 14 2011 03:35 PM
Lay Nge from Taiwan

@Yichihara from NJ,

My childhood's learning violin is the same as yours.
Later I knew that every teacher got the commission from the violin dealer everytime they sold it to their students. This kind of things are still going on up to now in every country because not every parents have the instrument's knowledge and have to rely on their kids' teachers.

Apr. 14 2011 03:39 AM
yichihara from NJ

For a former violin student, very interesting story! When I was in Japan during the time I was playing violin in my childhood to high teen, we used to buy violins from our violin teachers directly, but I had no idea what deals/ processes/ syndications, etc. were involved as to how they got violins from who, how they were priced, how they were evaluated, etc. BTW, I wonder if the ‘Red Violin’ is still haunting around.

Apr. 13 2011 03:25 PM

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