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Gallery Owners Win Ruling in Kinkade Case

February 24, 2006|Kim Christensen | Times Staff Writer

"I liked Thom because I liked what he stood for," Hazlewood told the arbitration panel in April. "He had similar values that I felt that I had.... And when I looked at his paintings and listening to his background I could feel that, and so it made me feel better about his paintings."

Before going into the art business, Spinello testified, he owned video arcades in the Bay Area. Hazlewood said she worked as an executive administrative assistant for several companies.

Months after meeting the artist at a "Celebration of Light" event in Carmel in 1998, the couple enrolled in Thomas Kinkade University, a weeklong, $750 training for prospective gallery owners.

"We were told success story after success story, and of course the 'Thom story' and his Christian views and the way he runs his life," Spinello told the panel in late 2004. "And it just made you ... want to jump on board and be a part of it."

Spinello said in an interview that much of the "spiel" by Barnett and others at "TKU" revolved around the Painter of Light.

"The story we got is: Here is a guy who comes from a broken home and worked his way up from nothing," Spinello said. "Basically, it was the rags-to-riches story, and God was a major part of it."

Nothing was said about the risky nature of the art business, Hazlewood and Spinello testified, nor were they told that Signature dealers were already foundering in significant numbers. Instead, they said, they were led to believe that their business would flourish if they "followed the recipe" spelled out by Media Arts Group.

They opened their first Signature gallery in Charlottesville, Va., in May 1999. It was hardly off the ground, they contend, when the company started pushing them to establish another outlet in the same sales territory or risk having Media Arts Group put one of its own stores there. In late 2000 they unveiled a second gallery in Fredericksburg, -- about 70 miles away.

Working six or seven days a week, they testified, they earned no more than $60,000 a year in combined salary.

As they and other Signature gallery owners struggled to stay afloat, those at the top of Media Arts Group raked in huge incomes, according to testimony. Kinkade made $53 million in royalties from 1997 through May 2005. Barnett, as head of retail sales, averaged more than $2 million a year from 1999 to 2001 in commissions on sales to dealers.

In what the ex-dealers describe as a scheme to "stuff" their inventory channels to fatten Media Arts Group's coffers, they allege the company required them to buy two or three copies of each new edition of Kinkade's high-end canvas reproductions, some of which cost thousands of dollars but proved to be slow-selling "dogs." Spinello said they were not allowed to discount the pieces and could return them only if they bought two or three new prints for each one sent back.

"It was shoving inventory down our throats," Spinello testified. "All our money is tied up in this garbage, and we would have to buy 90 to get rid of 30."

The fatal blow, according to the arbitration claim, was what became known as the "Tuesday Morning sale."

Although Signature gallery dealers were strictly bound by Media Arts Group's pricing policies, the company sold some Kinkade paper prints to a clearinghouse that resold them to a company that framed them. In December 2001, the prints wound up in Tuesday Morning stores, a discounter that priced them far below what Signature dealers were required to charge.

Company officials testified that the sale was necessary to keep Media Arts afloat in a post-Sept. 11 slump and disputed the contention that the sale of paper prints seriously affected the Signature galleries, which dealt chiefly in the more expensive canvas reproductions.

However, Spinello testified that his customers went "ballistic" over the sale. Having previously been assured that Kinkade's art was never sold at a discount, and thus would hold its value, they felt betrayed and demanded refunds.

"The fallout was enormous," Spinello said. "It was the kiss of death."

He and Hazlewood closed their Fredericksburg gallery in March 2003 and shuttered their Charlottesville store eight months later. Now selling real estate for a living, Spinello said he and Hazlewood are deeply in debt.

"The sad part is I believed him, and I got a lot of people to buy his products and his paintings," he said. "Those people must feel about me the way I feel about Thomas Kinkade -- and that's sad."

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