"Top Art Dealers Are Subpoenaed In Possible Price-Rigging Scheme" was the bold-print headline on the front page of the New York Times on June 3, 1997. Then the Washington Post weighed in with "N.Y. Art Dealers Under Investigation" placed inside the front section on June 4. Finally, on June 5, the New York Post revealed its tabloid roots with the screaming headline, "Art dealers may be master cheats: feds."

None of the articles focused much attention on the roles of auction giants Christie's and Sotheby's, who were also subpoenaed to produce vast amounts of records, ranging from invoices to telephone bills dating back to 1992. Though the Justice Department investigation is strictly confidential, it is presumably seeking evidence of anticompetitive activity that would be in violation of the Sherman Anti-Trust Act.

In the most obvious scenario, a group of art dealers form a "ring" in which members agree not to bid against one another at auction. The idea is to keep sales prices down and, incidentally, defraud both the consignor and the auctioneer. After the public sale, a second, secret auction is conducted by the ring to arrive at the true price of the item. The difference between the two sale prices is then split up among the participants. This practice is known as "pooling" or "chill bidding." It is generally illegal under common law, according to attorney Ralph L. Lerner, co-author of Art Law.

A pastiche of world-class reputations are at stake in the investigation. The dealers implicated by the various newspaper articles range from Richard L. Feigen, known for both Old Masters and contemporary art, to William Acquavella, a world-class expert in Impressionist and modern art who is also noted for his joint-venture partnership with Sotheby's in their $142.8 million acquisition of the inventory of the Pierre Matisse Gallery in 1990. Feigen told the Washington Post, "Right now, we're not even players in the auctions. The sums are so enormous, we're lucky if we get paid to act as an agent. Even if the dealers wanted to collude, they couldn't." Feigen was the only subpoenaed dealer to speak on the record.

The Times also identified Colnagi, Simon Dickinson, Robert Haboldt (largely Old Master dealers), Kennedy Galleries (American art and antiquities), Knoedler & Company (largely contemporary), Otto Nauman, Newhouse Galleries and Herman Shickman (Old Masters, again). Additional subpoenaed deales include Didier Aaron, William Beadleston, Hirschl & Adler, PaceWildenstein and Rosenberg & Stiebel. The crazy-quilt line-up potentially covers everything from antiquities to contemporary art.

One well-known New York contemporary dealer, talking off the record, readily admitted knowing about ring bidding on various occasions in both New York and London salesrooms among a prominent group of international dealers. "It's not a surprise, it's something in the art business that we've known about for a long time." The dealer declined to give specific examples.

A private dealer in Old Masters said, "They're definitely ringing paintings and knocking them out [with a second auction] afterwards. They parade this around and brag about it -- it's a wide open secret. You can smell it. It's all done with a wink and a nod." The dealer mentioned that rings existed for Dutch paintings and that much of the activity was organized to evade taxes. "Some of these dealers have gotten very rich doing it."

But with nary a single figure willing to go on record with specific examples or names, the existence of rings is impossible to determine at this stage of the game.

One documented source of chill bidding was recorded in a 1991 no-contest plea to a federal charge of conspiracy to restrain trade, according to Lerner's Art Law. The New York gallery Bernard & S. Dean Levy, Inc., experts in American furniture, and Thomas Schwenke, a Connecticut antiques dealer, "had refrained from bidding against each other" at a 1986 auction at Christie's over a piece of misattributed American furniture. In a parked car outside the auction house after the sale, the two parties auctioned the piece off a second time.

"We wouldn't even think to get involved anymore, that's a thing of the past, " said Fred Levy, a fourth-generation member of the gallery. "We paid a $100,000 fine and that was it. It was an agreement with the government. I'm glad we have nothing to do with this investigation."

According to a number of anonymous sources in the trade, art dealers are collectively furious at the New York Times for reporting that the Justice Department is focusing "primarily on claims of wrongdoing stemming from dealers' practices rather than those of auction houses."

Dealers believe the New York Times coverage was slanted against them. The story downplayed the potential risk of indictment to the auction houses -- for instance, for collusion in setting both buyers' premiums and sellers' commissions at identical levels. "The auction houses are being investigated too," said one New York attorney with art-dealer clients involved in the probe. "That's what pisses me off....I know the auction house subpoenas called for all documents relating to any communication between them relating to the buyers' premium (the percentage charged buyers for objects acquired in an auction) and sellers' commissions (the percentage sellers have to pay the auction houses for property consigned for sale). In other words, to see if there was collusion."

"We can't say in written form we're a target of the investigation," said a high-ranking official at Christie's who insisted on anonymity, "but it's much more a dealer thing than the auction houses. The New York Times was going in the right direction from our sense of how things are progressing. If we were told by Justice we were a target, we'd be much more worried." The source further explained that a subpoenaed party does not necessarily mean that dealer or auction house is a "target" of the investigation. At some point the Justice Department must inform whoever becomes a target of their investigation.

Since such probes fall under the powerful instrument of the Grand Jury Subpoena (where it's illegal, for example, to plead the Fifth Amendment), all information about the investigations are top secret and known only to a handful of case agents and their superiors. "There are very strict rules about who can know about what has been subpoenaed," said one law enforcement source. No indictments have been issued and it is not even known if an actual Grand Jury has been assembled to look at the findings. That could be months away, according to several sources familiar with the inner workings of the Justice Department.

The existence of the probe first became public record as part of Christie's obligatory June 2 announcement to the London Stock Exchange regarding its bid to raise $75 million for the expansion of its offices to Rockefeller Center in New York. In its filing, Christie's also disclosed that its U.S. subsidiary "has recently received a Grand Jury subpoena from the Anti-Trust division of the U.S. Department of Justice seeking documents relating to the conduct of the U.S. art market."

"In any serious investigation," said one source, "they would have to have pretty serious inside information about it. These are really top-of- the-line people (in Justice). But sometimes they have very little information to go on and just subpoena the heck out of everything they can think of."

"They're asking for boatloads of material so no one knows what they're focusing on," said an attorney familiar with the subpoenas. Art-world observers who remember the high-flying `80s art boom, however, will recall frequent references to the art market as one of the last great unregulated markets.

Whether the investigation is a grand fishing expedition or a response to a specific complaint by an unhappy consignor is anyone's guess. Stay tuned.

JUDD TULLY covers the international art market for a variety of publications, ranging from Art & Auction to The Washington Post.