Sotheby’s, a Prized Client and His $47.5 Million Leonardo Markup
(Bloomberg) -- On a mid-March day in 2013, a package arrived at the Manhattan penthouse belonging to the family of Russian billionaire Dmitry Rybolovlev.
Inside was a discovery said to be worth upward of $100 million: the Lost Leonardo.
Everyone in the art world knew the story. “Salvator Mundi,” purchased at an estate sale in Louisiana, had turned out to be the work of Leonardo da Vinci.
Rybolovlev wanted it. So that March day, the painting, a depiction of Christ, was quietly conveyed to the Russian’s aerie above Central Park from Sotheby’s, on the Upper East Side. Unpacked there, it let loose one of the most astonishing scandals to hit the art market in decades.
Sotheby’s ended up brokering the sale of “Salvator Mundi” -- but not to Rybolovlev. Instead, the masterpiece went to Yves Bouvier, the billionaire’s long-time art dealer and also one of Sotheby’s most important clients. The price was $80 million, far less than many had expected.
But that wasn’t the end. Within days, Bouvier turned around and sold the painting to the Russian for $47.5 million more.
Now, three years later, Rybolovlev and the collectors who sold “Salvator Mundi” wonder if they were played, and by whom.
The group that discovered, restored and sold the lost work, which includes the Old Masters connoisseur Robert Simon, have told Sotheby’s they plan to sue, claiming they lost out on many millions. That’s what publicly traded Sotheby’s claimed last week in papers it filed in federal court in Manhattan to block such a suit, saying it fulfilled its obligations.
At the center of this story is one of the thorniest questions in the roughly $60-billion-a-year business of fine art: What do auction houses like Sotheby’s really owe to the people who buy and sell art? The answer is far from clear.
“One of the major conflicts in the art world is that auction houses represent both parties to the sale, and they never really know if their interests are being protected," said Julian Agnew, a London art dealer.
Sotheby’s, in court documents, says it didn’t know what Bouvier was up to. The auction house says it fulfilled its obligations and that the Simon group is, in effect, suffering from sellers’ remorse.
Simon and his associates say they were stunned by New York-based company’s recent filing.
"It was clearly filed by Sotheby’s to spin their egregious behavior in the face of media scrutiny rather than for any legal purpose,” the group said in a statement. “We had been participating in good faith efforts to resolve our claims against Sotheby’s in a private, confidential manner. Now that Sotheby’s has chosen to air the dispute publicly, we will correct these distortions and describe the true facts in appropriate court actions."
They have yet to file a response and declined to answer specific questions. Brian Cattell, a spokesman for Rybolovlev, declined to comment.
This article is drawn from information in the Sotheby’s court filing and other court documents, as well as from people familiar with the deal and the art world.
Sotheby’s, in court filings, says it sent “Salvator Mundi” across Manhattan that March day so the painting could be viewed by Bouvier, who was a potential buyer and wished to remain anonymous. Sotheby’s says it didn’t know Bouvier planned to sell the Leonardo to Rybolovlev.
"This is not a case seeking damages -- our suit is a request for the court to set the record straight and silence any claims of wrongdoing that might be leveled against us," Sotheby’s said in a statement. "The sellers suffered no loss, and certainly suffered no loss due to Sotheby’s."
Rybolovlev, for his part, says Bouvier misled him and should have been acting on his behalf. He has filed a complaint in Monaco, saying Bouvier betrayed his trust by repeatedly charging hidden markups. Bouvier has countered that the pair engaged in hard-nosed business discussions between a seller and a sophisticated repeat buyer willing to pay what the market would bear.
Now, though, attention is shifting to whether Sotheby’s did right by the Simon group, the sellers it was representing.
“If Sotheby’s had the consent of the owners to sell the painting, you can hardly blame them for selling it to someone who flipped or made a dishonest profit from it,” Agnew said. “But if they were in partnership with Bouvier to get him the best possible deal, that’s another matter.”
Richard Lehun, an attorney specializing in art and fiduciary law, says when an auction house agrees to act on behalf of a seller, as a rule an "agency relationship” is created. That means the auction house is legally bound to act exclusively in the interests of the seller, including getting the best possible sale conditions and price.
"But unless the complaint gets litigated in court or the contracts are made public, we won’t know the extent of the agency relationship between the sellers and Sotheby’s,” Lehun added.
Though Bouvier brought Sotheby’s into the deal, the auction house says it fulfilled its contractual obligations.
Ron Soffer, a lawyer for Bouvier, said Simon and his fellow sellers were art professionals who made a huge profit on a voluntary sale.
"This is nothing more than a story about a company purchasing a painting for an agreed-upon price and then selling that painting for an agreed-upon price,” Soffer said. “Any insinuation beyond that is totally baseless."
At the time of the sale in 2013, Sam Valette was a rainmaker in Sotheby’s private sales division and a rising star in the Impressionist and Modern department. His most prized client: Bouvier. Their relationship, though, was a closely guarded secret. Only a handful of staff members were privy to the details of their deals, according to people familiar with the matter.
When the Leonardo came up, the usual rules applied, those people said: Valette was in charge at Sotheby’s, and Bouvier talked only to him.
Unlike auctions, private sales can be sealed with a handshake and a wire transfer. It’s a lucrative business involving networks of collectors and dealers who try to figure out who wants to buy what, and for how much.
At Sotheby’s, private sales steadily climbed from 2008 to the year of the Leonardo sale. The private business accounted for more than 18 percent of the firm’s sales in 2013 and declined to 10 percent last year. According to two people familiar with the matter, Bouvier’s subsequent falling-out with Rybolovlev accounts for much of the decline.
Agreeing on a price without an auction for a work as rare to the market as the “Salvator Mundi” was never going to be easy.
Transfer to Texas
The painting, bought at an estate sale for less than $10,000 and later restored and authenticated, was trucked to Texas in 2012. There, Maxwell Anderson, the grandson of the playwright of the same name, had taken over at the Dallas Museum of Art with the hopes of energizing the Old Masters department. The asking price at the time: $150 million.
Anderson compiled alternatives to an all-cash purchase, including a long-term profit sharing agreement that would kick back royalties for years to come. Donors lined up, but after eight months, the two sides were still far apart on price.
"One of the saddest days of my career was packing it up and sending it back to New York," said Anderson, who started hearing that a Russian billionaire -- he wasn’t sure who -- was interested in the painting. "We just couldn’t raise the cash needed to buy it,” he said.
The seller’s group was distraught.
"We felt beat up," Simon said in an interview before Sotheby’s filed its complaint. "The emotional ups and downs of the last several months had taken a toll on everyone."
But the group still had a promising lead. The Russian billionaire was interested and had made an appointment to view the painting, according to a person close to the deal. They were still hoping to get as much as $150 million.
Then they were approached by Sotheby’s. Now it appeared they had not one but two potential buyers. Valette told the group he was representing one of Sotheby’s biggest clients, according to a second person close to the talks.
Sotheby’s arranged for their client to see the painting, which it insured for $150 million.
And that’s how “Salvator Mundi” ended up in the penthouse owned by Rybolovlev’s family that afternoon. Bouvier was there, along with Valette from Sotheby’s.
Only later did Sotheby’s learn that Rybolovlev had been talking to the sellers himself. According to its court papers, Bouvier had asked to take over the negotiations and arranged the viewing.
With Bouvier as his representative, Rybolovlev canceled the meeting he had scheduled with the sellers, according to the first person close to the deal.
Down to one prospect, the group proceeded to strike a deal. The final negotiations took place in Paris in April 2013. Sotheby’s Valette was among those present.
But the negotiations were handled by others. The collectors relied on one of their own, Warren Adelson, a well-known dealer specializing in American fine art.
For the undisclosed buyer, a new person arrived. Though he is identified in the court filing only as Bouvier’s agent, he was Jean-Marc Peretti, according to the second person close to the deal.
Peretti, largely unknown outside art circles of Paris and Geneva, donned a retro Members Only jacket and spoke only French. He hammered the sellers on price, said the second person close to the deal, pushing it below the $100 million that the sellers had proposed ahead of the meeting.
Emails sent to Peretti’s lawyer weren’t returned. Valette also didn’t respond to requests for comment.
Eventually, the price was settled at $80 million, plus a $3 million commission for the auction house. The Sotheby’s staff urged the sellers to take the deal, saying that it was a good price.
Unbeknownst to the sellers, though, a side deal was in the works: Bouvier was negotiating with Rybolovlev independently.
Some details appear in an email produced by Rybolovlev’s lawyers as part of federal court filings to support the Russian billionaire’s own case against Bouvier.
In the undated email, Bouvier wrote to one of Rybolovlev’s representatives that when he offered the sellers $100 million for the Leonardo, it was "rejected without a moment’s hesitation." Driving the price down was “terribly difficult," he continued, but $127.5 million is "a very good deal.” And, for Bouvier, one worth nearly $47.5 million.