[intro]Another Story that Raises More Questions than it Answers[/intro]

Annie Leibovitz needs a better PR strategy. Let’s hope she does a better job picking her PR than she did with a financial adviser. Starr & Co. But so far the gambit is to point fingers at ACG but not explain how she got so far behind financially nor to give a sense of what her plan has been these last 14 months since she first got involved with ACG.

Since the news broke of her $24m loan from Art Capital Group, two questions have dominated the press coverage: why did she need so much money? and what was she thinking signing over everything for a short-term loan?

Allen Salkin in the New York Times tries to answer the first question. According to Salkin’s reporting–and its a shame to see anyone’s personal finances become a matter for public discussion–Leibovitz’s ill-fated renovations has put her in possession of around $6 million in West Village real estate in the form of three town houses. She lives and works in two and rents out one.

In addition, Salkin points to two lawsuits for $700,000 and a $1.4m tax lien (no, its not anything related to inheritance tax.)

None of this would explain how and why she got involved with Art Capital Group. Presumably one of her advisers thought they could raise short-term cash through ACG using her photo archive as collateral. This, after all, is ACG’s raison d’etre. They took possession of the negatives to further make the point. They typically only offer cash up to 50% of the value of the work they’re being offered. No one goes to them expecting to use them as an agent to sell because the terms are disadvantageous.

Nonetheless, according to the reporting published so far, Leibovitz took $5m out of a line of credit from Art Capital Group in June 2008. So far, that’s consistent with her legal, tax and potential mortgage liabilities.

In October, Leibovitz’s advisors made a deal with Phillips de Pury to be sole agent for her photographs (not her photography work.) Salkin takes a stab at explaining why the Phillips deal failed to solve her problems:

A deal with the auction house Phillips de Pury to sell portfolios of some of her prints for $33,000 did not go as well as hoped, possibly because the first sale of the works took place in October 2008, just as the art market fell apart. Colleagues and close business associates of Ms. Leibovitz are of two minds about how she might escape her financial bind. Some assume her talent and earning power can bail her out. “If anybody has the ability put these debts away though work, she has the energy and the opportunity,” Mr. Carter said. “She has an infinite capacity for work.”

Had Leibovitz’s advisors been counting on her “talent and earning power” to bail her out, they should have found a longer-term loan. Did they blithely assume they’d be able to roll over their deal with ACG? If so, that was a mistake. Since the December deal which increased the loan to $24m, ACG has shown it was serious by taking possession of her negatives and shopping around her body of work:

In fact, Art Capital appears to have been shopping the rights to Ms. Leibovitz’s photographs for several months. In a separate lawsuit the lender filed in State Supreme Court this April, it charged the photo agency Getty Images with going behind its back after it had begun talks over Ms. Leibovitz’s work.

The suit states that Art Capital had been in talks with Getty over a sale of Ms. Leibovitz’s archive, valuing it at more than $50 million. Art Capital alleged it also offered Getty a chance to hire Ms. Leibovitz to take freelance assignments. The suit charged that Getty then went directly to Ms. Leibovitz and signed her for $1.1 million to do eight shoots over two years.

In March, Getty announced in a press release that Ms. Leibovitz was “available for commission photography.” Art Capital charged that Getty’s signing of Ms. Leibovitz had made it difficult to sell her archive. […]

Until now, Ms. Leibovitz has closely guarded the right to reproduce her photographs. But should she lose control of her archive, her famous portraits of Whoopi Goldberg, Jack Nicholson and the like may one day be found on postcards in Times Square.

None of this gives us an explanation for why Leibovitz but perhaps that’s not our business. The issue that should concern us is the fact that ACG and Phillips have both failed to make a deal for what should be an enormously valuable body of work and the rights to exploit it. Is that a function of the credit crisis or a larger signal of big trouble in the photography market.

For Annie Leibovitz, A Fuzzy Financial Future (New York Times)