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MOCA’s Confusion-Sowing Declaration of “Independence” (plus the details of Eli Broad’s penalty clause for museum mergers)


The uncertainty regarding LA MOCA’s future, caused by a demonstrably under-performing board and administration, reached new heights late yesterday with the museum’s release of a three-sentence statement titled, “MOCA Trustees Committed to Independence.” Intended to provide some clarity regarding the museum’s murky prospects, it only muddied the waters further:

The Board is in agreement that the best future for MOCA would be [emphasis added] as an independent institution. [That's different from saying that MOCA must be independent.] The Board understands that this will require a significant increase in MOCA’s endowment to ensure its strong financial standing. We are working quickly toward that goal, while at the same time exploring all strategic options, to honor the best interest of the institution and the artistic community we serve.

From this, journalists jumped to the understandable conclusion that MOCA had turned down the merger proposal that it had solicited from the Los Angeles County Museum of Art. In two late-night tweets, Wall Street Journal reporter Kelly Crow indicated that MOCA’s statement had created more confusion than clarity. She apparently was told, after posting a report on the Wall Street Journal‘s website, that a LACMA merger had not yet been ruled out. (I have a query in with MOCA, seeking clarification.)

As every journalist knows, a headline (written by editors, not the author) is not always an accurate reflection of an article’s substance. The unequivocal word, “committed,” in the headline of MOCA’s official statement contrasts with the ambiguity of the text itself, which only says that independence would be the “best future” (i.e., preferred option) and that the board now “understands” the need for a “significant increase in MOCA’s endowment.” (Slow learners?)

More significantly, the board stated that it is still “exploring all strategic options” [emphasis added].

My guess is that the board’s overdue “understanding” that it needs to raise more money was reinforced by concrete concern over the penalty clause contained in the agreement governing Eli Broad’s bailout offer, which was signed in December 2008 by Broad and the co-chairs of MOCA’s board. Broad drove a hard bargain to insure that MOCA would remain independent if it wanted to receive (and keep) his $30-million benefaction ($15-million as a matching pledge; $15-million in exhibition support over five years).

Other journalists have already reported the merger-restricting provisions in the complicated bailout agreement (a copy of which I have now obtained). What I haven’t yet seen is a description of what would happen, under the terms of the agreement, if the board overroad Broad and decided that a merger (such as the one proposed by LACMA) was the most promising way to insure MOCA’s future.

The bailout agreement has a giveback provision that would kick in if MOCA defied Broad’s wishes by merging with a museum within 100 miles of MOCA’s Grand Avenue facility, thereby creating an entity in which MOCA’s existing trustees constituted a board minority.

Before such a marriage could be consummated, here’s what would have to happen, according to the terms of the Broad agreement:

First, a special committee would be have to be formed, consisting of one representative chosen by Broad, one chosen by MOCA and one jointly chosen by those two representatives. The three committee members (whose decisions would be made by majority vote) could not be affiliated, directly or indirectly, with either Broad or MOCA.

The special committee would then have to make a determination that MOCA was in “Exigent Circumstances,” meaning that it was afflicted by least one of the following conditions:

—MOCA was unable to operate without a budgetary deficit for two consecutive fiscal years after fiscal 2010. (I have a query in with the museum as to whether it ran a deficit in fiscal 2012; its 2011 tax return showed a $316,000 surplus. Back in January 2012, MOCA had reportedly projected a fiscal 2012 deficit of $1.2 mllion.)
—MOCA was unlikely to be able to operate without a budgetary deficit, because of a “Force Majeure Event” (i.e., war, riot, earthquake)
—MOCA was in need of “fundamental action” to prevent “bankruptcy, dissolution, possible loss or liquidation of the Museum or its collections or violations of law or contractual obligations.”

If the committee found that such “Exigent Circumstances” did indeed exist, it could not merge with a museum within a 100-mile radius until it determined that such an arrangement “would be in the best interests of the Museum.” At that point, the merger could proceed, even without Broad’s blessing.

However, there’s a kicker: If MOCA did go ahead with such a merger without Broad’s approval, it would have to reimburse him for all of the money he had given to MOCA under the $15-million matching pledge. As of last July, MOCA had raised only $6.25 million towards Broad’s $15-million match, all of it before the arrival of its current director, Jeffrey Deitch. That amount, plus whatever additional match money Broad may have contributed since July, would presumably have to be given back to him, under the terms of the bailout agreement, if a MOCA merger with LACMA or another nearby museum proceeded against his wishes. (I have queries in with MOCA and Broad as to whether the match amount has increased since July.)

Under the 2008 agreement, Broad could also make his own proposal for remedying MOCA’s financial plight. Implementing that proposal would not trigger the penalty clause. Presumably, adoption of a proposed partnership that has been discussed, at Broad’s suggestion, with the National Gallery of Art would not compromise MOCA’s independence or trigger any reimbursement to Broad. However, that proposed arrangement would fall far short of solving MOCA’s pressing problems: It reportedly does involve any offer of financial assistance.

So what are the “strategic options” that MOCA is now “exploring,” in the words of yesterday’s cryptic official statement? Judging from Kelly Crow’s above-linked tweets, it appears that a LACMA merger has not yet been entirely ruled out. The University of Southern California (with its well-oiled fundraising machine) and the National Gallery may still be contenders for cooperative arrangements. (Details of what’s being discussed with USC have not yet been disclosed. Educational institutions are exempt from Broad’s merger strictures.)

Meanwhile, where does the possibly jilted LACMA stand on all this? It professes to want only the best for the object of its desire. Here’s LACMA’s response, issued late yesterday, to MOCA’s declaration of independence:

Anything that will strengthen MOCA and maintain its commitment to contemporary art and to downtown Los Angeles is good for the art world and good for this city. We continue to offer our support for MOCA’s future and look forward to seeing its vibrant program continue.

an ArtsJournal blog