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Russian billionaire blames Sotheby's for losing millions on art

The case stems from $2 billion Dmitry Rybolovlev spent from 2002 to 2014 to acquire a world-class art collection

Dmitry Rybolovlev. Photo via AP

By AP

LAST PUBLISHED 09.01.2024  |  10:04 AM IST

Sotheby’s defended itself at a trial Monday against accusations that it helped defraud a Russian oligarch out of tens of millions of dollars, saying it knew nothing of wrongdoing by an art buyer who advised the billionaire on buying works by famed artists like Amedeo Modigliani and Leonardo da Vinci.

Sotheby's attorney Sara Shudofsky told a jury in an opening statement in Manhattan federal court that billionaire Dmitry Rybolovlev was “trying to make an innocent party pay for what somebody else did to him."

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Shudofsky said the fertilizer magnate, a savvy businessman who has run highly successful businesses, had “good reason to be angry with himself" after spending hundreds of millions of dollars to buy art masterpieces without taking “the most basic steps" to protect himself from a broker who cheated him.

“Sotheby's didn't know anything about those lies," the attorney said. “Sotheby’s had no knowledge of and didn’t participate in any misconduct."

She spoke after Rybolovlev's lawyer, Daniel Kornstein, insisted that a London-based Sotheby's executive was part of a group of executives who were in on an elaborate fraud.

“As a result of participating in the fraud, Sotheby's made a lot of money," Kornstein said. “Sotheby's had choices, but they chose greed."

The trial is likely to provide a window into how high-stakes transactions involving art enthusiasts worldwide develop and their importance to the operations of auction houses that rely heavily on their reputations as they match up some of the world’s wealthiest investors.

Rybolovlev, 57, who bought a Palm Beach mansion from Donald Trump for about $95 million in 2008, is expected to testify. In 2016, as Trump readied himself to become president, he called the deal “the closest I came to Russia" when he was questioned about his ties to the country.

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In one order last March, Judge Jesse M. Furman urged lawyers to work toward a settlement to avert a trial that would be “expensive, risky, and potentially embarrassing to both sides."

The case stems from $2 billion Rybolovlev spent from 2002 to 2014 to acquire a world-class art collection through purchases by two of his companies: Accent Delight International Limited and Xitrans Finance Limited.

To carry out the purchases for Rybolovlev's home in Geneva, Switzerland, he relied heavily on Yves Bouvier, an art broker who claimed he could save Rybolovlev money by handling negotiations for art in return for a 2% commission, Kornstein said.

Before long, Bouvier became such a trusted friend of the billionaire that he attended small birthday parties for Rybolovlev and his daughter and joined him at soccer matches, the lawyer said.

“Bouvier turned out to be a con man" who bought works of art from Sotheby's and sometimes nearly doubled the price before he resold the art to Rybolovlev, Kornstein said.

“If you’re the buyer and operating in darkness, you have no way of learning that unless the auction house knows about it and can help you out," he said.

In all, Bouvier pocketed $164 million through his “secret markups" and another $6.4 million by collecting his 2% commission, Kornstein said.

The lawyer told jurors to look at documents including emails that “don't lie" and would prove that auction house executives knew what was happening. He urged them to ignore what he predicted would be “fairy tales" from Sotheby's witnesses.

A message sent to a lawyer for Bouvier to seek comment on the accusations against him and a settlement Bouvier reached with Rybolovlev several weeks ago in a Swiss court was returned with the message that it had been forwarded to Bouvier's representative.

In all, Rybolovlev had accused Bouvier of defrauding him through sales of 38 art pieces, including Picasso's “Homme Assis au Verre" and Rodin's “Le Baiser," “L’Éternel Printemps" and “Eve," but the judge last year disqualified from the trial many of the dozen or so works bought in private sales through Sotheby's on various legal grounds.

Among the four works at issue in the trial was de Vinci's “Salvator Mundi," a depiction of Christ as “Saviour of the World," which Bouvier bought from Sotheby's for $83 million, only to resell it to Rybolovlev for over $127 million, which Kornstein said was a “secret markup" of over $44 million.

In 2017, Rybolovlev arranged for Christie's to sell it and it went for a historic $450 million, becoming the most expensive painting ever sold at auction.

Other artworks that Kornstein said involved improper markups that will be addressed at the trial were a Modigliani sculpture and paintings by Gustav Klimt and Rene Magritte.

In 2018, Rybolovlev was included on a list that the Trump administration released of 114 Russian politicians and oligarchs it said were linked to Russian President Vladimir Putin.

However, he was not included on a list of Russian oligarchs sanctioned after Russia attacked Ukraine, and Kornstein told the jury that his client hasn’t lived in Russia in 30 years.

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