Galleries win fraud ruling

An arbitration panel Thursday awarded $860,000 to two former Thomas Kinkade Signature Gallery owners who accused the self-proclaimed “Painter of Light” and his company, Media Arts Group Inc., of fraudulently inducing them to invest in the business – and them ruining them financially.

While not singling out Kinkade in its finding of fraud, the panel ruled that the Morgan Hill-based company and one of its executives, Richard F. Barnett, “failed to disclose material information” that would have dissuaded Karen Hazlewood and Jeffrey Spinello from investing $122,000 to open the first of their two Virginia galleries in 1999.

The arbitrators, in a 2-1 ruling found that Kinkade and other company officials used the artist’s familiar Christian-oriented themes to create “a certain religious environment designed to instill a special relationship of trust” with the couple, who have since divorced.

“Media Arts through its agents Thomas Kinkade, Ken Raasch and Barnett, in particular, held itself out to be acting on a higher plain,” the panel said in its written opinion, adding that the men frequently used terms such as “partner,” “trust,” “Christian” and “God” to convey a sense of “higher calling” to Hazlewood and Spinello.

The panel’s decision marks the first major loss for Kinkade and Media Arts Group in litigation brought by former dealers.