Russian collector sees red over art dealer’s bills

Colourful case: Fertiliser tycoon Dmitry Rybolovlev (above) claims he was misled into paying too much for artworks. (Valery Hache, AFP)

Colourful case: Fertiliser tycoon Dmitry Rybolovlev (above) claims he was misled into paying too much for artworks. (Valery Hache, AFP)

Is art collector Dmitry Rybolovlev an unwitting victim of fraud, or a savvy buyer who should have known what he was getting into? Was Yves Bouvier acting as his buyer’s agent or simply as a dealer?

Depends on who you ask. Which roles the men were playing as Rybolovlev bought hundreds of millions of dollars worth of paintings in recent years from Bouvier is at the heart of a feud that has gripped the art world, with previously unreported legal documents adding fresh ammunition to the battle.

Rybolovlev, a Russian fertiliser billionaire, accuses Bouvier, an art-world heavyweight who runs duty-free storage facilities from Geneva to Singapore, of overcharging him by between $500-million and $1-billion during the course of a decade for works by Mark Rothko, Leonardo da Vinci and Pablo Picasso.

Rybolovlev has said in Monaco legal filings that he considered Bouvier his agent and that Bouvier betrayed that trust by repeatedly charging hidden mark-ups of tens of millions of dollars. Bouvier and his lawyers have countered in interviews and court documents that the two never had a written agreement and engaged in hard-nosed business discussions between a seller and a good repeat buyer willing to pay market prices for top works.

Monaco documents
Bouvier’s characterisation of Rybolovlev as a sophisticated investor is supported by documents that Monaco prosecutors are reviewing in an investigation they launched after the collector filed a criminal complaint alleging fraud by Bouvier. 

The Russian billionaire was authorised to appraise art, negotiate sales and participate in auctions on behalf of two of his family trusts because of his expertise and special knowledge of paintings, drawings and antiques, according to power-of-attorney documents signed by those trusts in 2005 and 2010.

The British Virgin Islands-based trusts empowered Rybolovlev to use his “special knowledge in any kind of artwork — including, but not limited to, paintings, drawings, statues and antique furniture, investments in art and valuable items” — to act on their behalf, including in negotiations with dealers and representatives of private art collections.

Rybolovlev’s art knowledge is beside the point, according to his camp.“The level of art expertise of any of the victims of this massive fraud is irrelevant,” said a spokesperson for Rybolovlev.
“The underlying dishonesty resides in the structure of the hidden margins amounting to $1-billion, and how the victims were made to believe that these secret margins were part of the purchase price.” A spokesperson for the Monaco prosecutor’s office confirmed the investigation is ongoing.

‘So clearly bright’
If a court takes Bouvier’s view that the two men were on an equal footing as art experts, the documents could support the view that Rybolovlev should have known what prices were fair. “How could a Russian who’s become a billionaire, achieved all he did, and is so clearly bright, be taken advantage of by me?” Bouvier has said.

Ron Soffer, Bouvier’s Paris-based attorney, said Rybolovlev directed the acquisition of one of the most important private art collections in modern times. “He certainly could not have been a novice in the field and this document confirms it,” Soffer said.

Rybolovlev alleges that Bouvier gave the impression he was securing a work for a certain price on his client’s behalf, but in reality was buying it for sometimes tens of millions less and pocketing the difference. Contributing to the impression that the men were acting as buyer and agent, Bouvier charged a 2% commission on most transactions, the lawyer said.

Bouvier and his lawyers have said he wasn’t a broker, adding that 80% of the bills he issued to Rybolovlev’s companies listed him as the seller. The 2% charges, they say, didn’t represent a broker’s commission but were instead a fee to cover administrative costs, including insurance, transport and condition reports and, in some cases, escrow accounts between down payment and final payment.

The battle — which has made global headlines because of the prices the Russian paid for single canvases, such as the $158-million he spent on Rothko’s No 6 (Violet, Green and Red) — has highlighted the lack of transparency in major art deals. It is also one of several recent instances in which art-world luminaries have come under international scrutiny. 

United States authorities — who are looking into transactions involving Bouvier, people familiar with the probe have said — are also investigating whether several major collectors have paid proper taxes there on big art transactions.

Fertiliser fortune
Rybolovlev amassed his wealth buying and selling fertiliser-makers in Russia’s transition to capitalism. That fortune, which includes owning the football team in Monaco, makes him the 10th-richest Russian, worth an estimated $9.3-billion.

Bouvier was briefly arrested in Monaco in February 2015 in connection with the original criminal complaint Rybolovlev filed against him there in the matter. Monaco prosecutors have refused Bouvier’s request to drop their investigation. 

The two are also battling in Singapore, where in March last year Rybolovlev temporarily secured a freeze of up to $500-million of Bouvier’s global assets. That action was set aside in August. Now, in an effort to gain a friendlier hearing, Bouvier’s attorneys have filed for permission to appeal a Singapore judge’s ruling to move the dispute to the city-state’s International Commercial Court. The case, Bouvier’s lawyers argue, should be heard in Switzerland, given that the purchase of the 37 works took place primarily in that European country, where Bouvier lived until leaving for Singapore in 2009. Rybolovlev resided in Geneva until 2011, before he decamped to Monaco.

Rybolovlev’s spokesperson would not comment on the Singapore proceedings, citing restrictions on communications imposed by the judge there. — Bloomberg

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