The University of California, Berkeley may be one of the tightest concentrations of intelligence in the US, but it turns out to be capable of acts of stunning stupidity – as art lovers discovered this week with news that it sold a $1m sculpture by a prominent black artist for $150.

The work, by Sargent Johnson, one of the leading lights of the "Harlem Renaissance" of the 1930s, is finally on show in a gallery outside Los Angeles, after a bizarre chain of accidents and incidents, but now Berkeley is taking flak for mishandling an important work of public art.

The piece is a 22ft-long redwood carving commissioned using taxpayer funds to cover organ pipes at a school for the deaf and blind. After the building was taken over by Berkeley, it languished in storage and was mislabelled as belonging to the graduate schools, and then later put alongside the old furniture and bric-a-brac that the university put up for sale at its surplus store.

Nobody identified the piece as a Sargent Johnson, whose sculptures sell for more than $100,000 – even the tiniest carvings. The artist was one of the first African-American sculptors from California to achieve national renown for his work.

The provenance of the work was discovered only when Greg Favors – the art dealer who paid Berkeley $164.63, including tax, for the piece – called in Dennis Boses, another dealer, who in turn called in Depression-era art scholar Gray Brechin. Mr Favors sold the piece, at below its $1m valuation, to the Huntington Library of San Marino.

Mr Brechin's 2009 email to Mr Favors, expressing astonishment, was published in The New York Times this week and remains the definitive commentary on the saga: "You BOUGHT this? They SOLD it?"

Assistant risk manager for UC Berkeley, Andrew Goldblatt, said: “We do regret it. Something went wrong, and it just cascaded.”