Minnesota law is supposed to protect artists from galleries that sell their artwork and don't hand over the proceeds. But at least five artists say that hasn't helped them collect thousands of dollars owed by a Minneapolis art dealership whose owner went back into business under a new name.

Artists Kristi Stewart and Gregg Rochester recently won judgments for thousands of dollars against Art Holdings Corp., whose majority owner was Greg Hennes. But Hennes closed Art Holdings and started a new business, Hennes Art Co.

In an interview with Whistleblower last week, Hennes said that because the artists sued his former firm, he's "not personally liable for any of this debt."

"A lot of people didn't get paid," he said. "It's an unfortunate situation. But I didn't benefit from it."

A Minnesota law dating to 1983 states that the proceeds from the selling of art "must be held in trust by the consignee for the benefit of the consignor," the artist. The proceeds "must first be applied to pay any balance due" the artist, unless the artist "expressly agrees otherwise in writing."

One of the authors of the bill, Minneapolis attorney John Roth, said it has helped protect artists in some situations, such as getting their art back when galleries go bankrupt. But he said the statute should be revised to hold principals liable, even if their art companies cease operations. To enforce the law, artists have to hire their own lawyer and take it to court.

"The problem is there's no regulatory authority in Minnesota designated to enforce certain state and federal regulations," said Ben Wogsland, a spokesman for Attorney General Lori Swanson. "This appears to be one of those laws."

In 1989, Hennes founded Art Holdings. A one-man art consulting firm blossomed into a company that did $7.5 million in sales during its peak, following a 2004 partnership with the Marshall Fields department stores, Hennes said.

But when Marshall Fields stores became Macy's, many from Marshall Fields' interior design staff -- "our primary sales persons" -- left the stores, Hennes said. Art Holdings and Macy's parted in 2008, but the company's downward spiral already had begun.

Three years ago, Hennes was named Entrepreneurship Alumnus of the Year by the University of St. Thomas. Since he closed Art Holdings, Hennes, 48, opened Hennes Art Co. in downtown Minneapolis.

To Hennes, it's a new business start. To Stewart, who "considered Greg a friend," it's "a corporate veil."

Art Holdings sold 21 pieces of Stewart's artwork, she said. Though there was no written contract -- a common arrangement between artists and dealers -- Hennepin District Judge Kerry Meyer ruled in July that Art Holdings breached a contract by not paying Stewart and awarded a judgment of $8,135, plus attorney's fees. But the judge ruled that there wasn't enough evidence to show that Hennes personally benefited or intentionally misled Stewart.

Kenneth Kunkle, Stewart's attorney, now tells clients to get personal guarantees from art company owners.

Rochester, of Amery, Wis., won a judgment for $2,570 against Art Holdings. Other artists claiming that Hennes owes them money for art sold include Joan Bellin of Hopkins; Kristen Arden of Scandia, and Jodi Reeb-Myers, of Eden Prairie. And then there's the Venture Bank, which liquidated the assets of Art Holdings. Hennes says his former company had a debt approaching $1.2 million to Venture Bank.

"The problem with the industry is verifying: Is this an accounts payable, a transaction with a vendor?" said Venture Bank President Mike Zenk, "Or is this a consignment where the artist owns it until they're paid? I don't think there's a lot of professionalism in those relationships."

Hennes said he filed for personal bankruptcy Tuesday.

"We honored agreements," Hennes said. "It was a cash flow [issue]. I never had any intention about violating the law."

Paul Levy • 612-673-4419