Jeremiah, I believe you have to look at the undertone of the situation. Think of it this way, Hemlock is a trained, professional killer who is retired. Sure, he's a college professor but for him to be stable he has to have something in his personal life that brings balance and sanity, a way to connect with humanity and in his case it's art which is his refuge. This is normal considering that almost every movie showing a hit man in depth is involved with something like this.
It's not that Dragon threatens him with the menace of the IRS but rather it's the point of what he holds personal and private, a place that gives him solace is threatened to be taken away from him and the idea of Pope is indicating that he (Hemlock) wouldn't have any control over where his peace of mind would end up.
It was a strong enough suggestion that got him into doing what Dragon wanted which brings another element that I want to discuss real quick.
Hemlock later discovers that it was his own friend that was killed and question Dragon as to why he didn't notify him about it in the beginning. I could only think of the reason being that Dragon wanted to see if he could finally bend Hemlock's iron will with a threat where as through the many years of using him, he could not. Dragon did seem to be mischievously playful.
Would Dragon actually have confiscated Hemlock's gallery of works if he had refused the sanction? I don't think so because he needed Hemlock badly and probably had many more tricks up his sleeve to convince him to do it. That's how I saw it.
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