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As art theft case develops, a family business divides

FBI questions brother's role

It was one of the biggest unsolved art thefts in state history -- until it was solved in January in the strangest way, with a Watertown lawyer's admission that he had secretly held seven masterpieces stolen from a Stockbridge collector for almost three decades in the hopes of one day profiting from them.

And the case of the purloined paintings continues to bear bitter fruit.

The FBI is investigating a prominent Boston real estate developer as a possible conspirator in the case, the Globe has learned. And the fallout from the expanded probe has pitted brother against brother, hastening the breakup of a multimillion-dollar Boston family partnership.

The longstanding business ties between Paul L. Palandjian, 39 , president of the Intercontinental Real Estate Corp., and his older brother Peter, the corporation's chairman and chief executive, were severed late Friday, lawyers for the two men said, after weeks of intense, private negotiations.

It is by any measure a significant split: Intercontinental oversees about $3 billion in real estate assets and manages another $1 billion in investments for its clients. The bitter business divorce was hastened by the allegations about Paul Palandjian's unlikely role in the art theft case and his brother's anger and sadness about it.

According to Paul Palandjian's lawyer, Tracy A. Miner, a partner at Mintz Levin Cohn Ferris Glovsky & Popeo, this is how the businessman got entangled in the case:

Sometime in 2004, Paul Palandjian had considered buying several of the paintings from Robert M. Mardirosian, a criminal defense lawyer and trusted family friend, who had obtained stolen works in 1978 under murky circumstances.

But when the deal to buy the works failed to come off, Palandjian agreed to help arrange the sale of four of them through Sotheby's auction house. In exchange for his role in consigning for auction, he was to get a percentage of the sale proceeds. The four paintings have been appraised at $1.2 million.

Paul Palandjian knew the works had been stolen long ago, Miner said, yet he dealt with Mardirosian because he believed Mardirosian's claim that he had legally obtained them from a man who died without heirs.

However, Paul Palandjian's claim of innocence about the paintings' provenance has gained a powerful opponent: his brother and business partner.

Peter Palandjian, 42, said he repeatedly warned his brother that Mardirosian could not possibly have clear title to the paintings. And his lawyers, partners at Wilmer Cutler Pickering Hale and Dorr, said both Palandjian brothers had been told by their late father that Mardirosian, a friend and business associate, was holding some stolen paintings.

That version of events was sharply challenged by Miner, who said the elder Palandjian brother initially supported the plan to buy the paintings. Peter Palandjian bridled at that, saying in a statement this week: ``I had nothing to do with this matter. I repeatedly told my brother not to get involved with the paintings."

The dispute has driven a deep wedge between the brothers and helped fuel efforts to end their partnership, with Peter buying out Paul's interest in Intercontinental and continuing to run the company. Peter Palandjian decided to address the issue out of fears that his brother's dealings with Mardirosian could harm Intercontinental's reputation or draw the firm into the fray.

Investor confidence is a prerequisite for Intercontinental's operation. Its main business is supervising four real estate funds that are financed by private investors, pension plans, insurance companies, and banks. The funds own nearly 40 properties throughout the United States, including 1 Bulfinch Plaza and 100 Franklin St. in Boston and office buildings and shopping plazas in Chicago, West Palm Beach, Fla., Austin, Texas, and Providence.

Seven paintings, including a Cezanne, had been stolen from the Stockbridge home of Michael Bakwin during the Memorial Day weekend of 1978. Most of the suspicion centered on a 31-year old Pittsfield resident, David T. Colvin, but Colvin was never prosecuted. Seven months after the robbery, he was shot to death in a dispute over a gambling debt.

The whereabouts of the paintings remained a mystery until this year. Then in late January, Mardirosian told the Globe in an interview that he had gotten hold of them a few weeks after the theft when Colvin, seeking legal representation on another criminal case, walked into his Watertown office carrying the paintings in a plastic bag. Mardirosian said Colvin left the paintings behind in the plastic bag in an attic bedroom, where the lawyer says he came upon them more than a year later.

Mardirosian's admission touched off an FBI criminal investigation into why he did not return the stolen paintings to Bakwin as soon as he gained control of them. Mardirosian, 72, told the Globe he kept them because he wasn't sure who owned them and had hoped ultimately to gain a 10 percent finder's fee for their return.

Currently residing in France, where he now works as a painter and sculptor, Mardirosian declined to be interviewed about the case's latest twist -- Paul Palandjian's role -- saying only, ``The day will come that the truth will come out, and when it does, you will be shocked."

Mardirosian continues to hold the two least valuable paintings stolen from Bakwin's house, portraits by Jean Jansem .

Special Agent Gail A. Marcinkiewicz, spokeswoman for the Boston office of the FBI, confirmed that agents were investigating all elements of the case but she declined to answer specific questions about the probe.

Miner contends that her client diligently tried to determine that Mardirosian had good title to the paintings. She presented two e-mails that Paul Palandjian sent to Sotheby's seeking its assurances on the question. Sotheby's return e-mails said a representative had checked with the Art Loss Register, a firm that tracks stolen paintings, and could ascertain ``no problem" with the paintings' ownership.

Julian Radcliffe, chairman of the Art Loss Register, explains how that could be. In an interview, Radcliffe said he had been rebuffed in his efforts to determine who had Bakwin's stolen paintings and decided to resort to a ruse to penetrate the mystery. The key for Radcliffe was to get the paintings into Sotheby's hands, knowing that he could then get a judge to put a halt to the sale. And so , he said, he gave false assurances to the auction house about the paintings' ownership to make sure the consignment went through.

Paul Palandjian then arranged with Sotheby's to have the four paintings flown from Geneva to London: two portraits by Chaim Soutine, an early 20th century expressionist, and two others by French painters Maurice Vlaminck and Maurice Utrillo . They were confidentially listed for Sotheby's June 2005 auction with Paul Palandjian as consignment owner.

Once Radcliffe determined that the four paintings were in Sotheby's control, Bakwin's lawyers in London filed suit to begin the legal process to stop the auction.

Even if the FBI decides that Palandjian was innocently duped and should not be prosecuted, his consigning the paintings for auction could prove financially costly for him. The London judge who ordered that the auction be stopped has ruled that Mardirosian is responsible for reimbursing Bakwin and the Art Loss Register about $4.5 million in investigative and legal fees. Radcliffe said Bakwin's lawyers intend to add Paul Palandjian's name to the case as being responsible for at least part of those costs.

Stephen Kurkjian can be reached at kurkjian@globe.com.

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