Russian Billionaire Seeks to Pull Sotheby's Into Art-World Fight

(Bloomberg) -- Russian billionaire Dmitry Rybolovlev was hunting for masterpieces when a Swiss dealer emailed his team about a chance to see “a bomb of beauty and sensuality.” The Russian flew to Vienna by private jet and was whisked off to view a canvas depicting women floating in a gilded sea, Gustav Klimt’s “Water Serpents II.”

Soon after the September 2012 viewing, the Russian agreed to buy the work in a deal that earned the Swiss dealer, Yves Bouvier, a 2 percent commission. But according to Rybolovlev’s legal team, there was more to the Klimt sale than the billionaire was told at the time -- a revelation that now threatens to pull Sotheby’s, one of the world’s largest auction houses, into the art world’s biggest international scandal.

Russian Billionaire Seeks to Pull Sotheby's Into Art-World Fight

There were a handful of people on site for the viewing including one man, Rybolovlev’s advisers say, to whom the Russian wasn’t introduced. Rybolovlev says he learned only later who the man was: Samuel Valette, Sotheby’s vice chairman of private sales worldwide. 

The Vienna viewing was the first time Valette and Rybolovlev appear to have crossed paths. But the Sotheby’s executive played a role in other sales involving the Russian billionaire as well, emails and documents reviewed by Bloomberg suggest. Valette wrote bullish assessments, which Bouvier forwarded to Rybolovlev’s team, about some of the same artworks that Bouvier bought privately through Sotheby’s and flipped to the Russian at higher prices.

Within weeks of the Klimt viewing, Rybolovlev agreed to buy the painting for $183 million from Bouvier and paid a deposit, according to an invoice of the deal. At the same time, Bouvier was negotiating to buy the work from private sellers through Sotheby’s for $112 million, according to emails and letters reviewed by Bloomberg.

That and other allegedly undisclosed price markups are at the heart of a global legal war over Rybolovlev’s acquisition of more than three dozen works by Da Vinci, Picasso, Monet and others. Rybolovlev alleges that Bouvier fraudulently misrepresented himself as an agent who was negotiating with sellers on his behalf for commission, when in fact he was secretly buying pieces himself, flipping them to the Russian and pocketing $1 billion in markups.

Bouvier’s lawyer, David Bitton, said his client was a repeat vendor in the sales, not Rybolovlev’s broker, and did nothing wrong. The Russian was a savvy customer willing to pay top dollar to assemble a world-class collection, Bitton said.

Sealed Filings

Of the 38 works Rybolovlev bought from Bouvier, Sotheby’s had a hand in the sale of nearly one-third of them to Bouvier, according to court filings. The publicly traded auction house, which denies any wrongdoing, is waiting to learn whether it will be drawn deeper into the legal battle. 

Rybolovlev’s lawyers now argue, in U.S. filings, that Sotheby’s “aided and abetted” Bouvier’s alleged fraud. They are seeking a broader airing of documents that Sotheby’s produced as part of legal proceedings related to the Rybolovlev-Bouvier feud in Monaco, Singapore and France. Those filings haven’t been made public. A federal judge in Manhattan has prohibited the documents from being released in other jurisdictions.

In October, Rybolovlev’s legal team asked the judge, Jesse Furman, to allow them to use the documents for a lawsuit in the U.K., where they say they plan to sue Sotheby’s, Valette and Bouvier. Furman could rule on the request early next year, lawyers in the matter say.  

“Sotheby’s seems to have helped Mr. Bouvier mislead and induce our clients into purchasing artworks at grossly inflated prices relative to the prices at which Mr. Bouvier obtained the artworks from Sotheby’s or other sellers,” Tetiana Bersheda, Rybolovlev’s Swiss lawyer, said in an email.

The auction house said that neither it nor Valette did anything wrong. Sotheby’s sold works to Bouvier as a principal and had no knowledge of any deals between Rybolovlev and Bouvier, it said in a statement. Sotheby’s and Bouvier joined forces in Geneva seeking a declaration from the court there that they’ve done nothing wrong, according to a joint filing on Nov. 17. The auction house learned only through news reports, long after the sales, about the amounts for which Bouvier was selling the artworks, it said.

Saverio Lembo, a Swiss lawyer representing Sotheby’s and Valette, said he didn’t want to comment on issues that are the subject of pending litigation in Geneva. A message left for Valette at Sotheby’s wasn’t returned.

Forwarded Emails

It’s unclear what’s in the documents that Sotheby’s produced under seal in the Rybolovlev-Bouvier battle, and all of them are prohibited from disclosing or discussing them. 

But the emails and financial transactions reviewed by Bloomberg provide further insight into Valette’s potential role in several deals beginning around 2011. 

While Sotheby’s is known for its high-profile auctions, Valette was a rainmaker in sales that take place outside the public view. Bouvier was the most prized client in Valette’s private sales business, and only a handful of people at Sotheby’s were privy to the details of those deals, people familiar with the situation have said.

In at least two instances, Valette offered informal sales assessments that were eventually forwarded to Rybolovlev’s camp. The assessments were in a range well above what Bouvier paid for those works in Sotheby’s private sales, according to the documents reviewed by Bloomberg. 

Russian Billionaire Seeks to Pull Sotheby's Into Art-World Fight

“The Tete is a unique sculpture,” Valette wrote in a July 25, 2012, email to Bouvier, referring to an Amedeo Modigliani limestone sculpture. While it’s “very difficult” to put a price on such a masterpiece, he wrote, it was likely worth 80 million to 100 million euros given the strong demand for modern sculpture and the market’s lack of better Modiglianis. The email was forwarded by Bouvier to a Russian adviser working with Rybolovlev. 

Bouvier agreed to buy the Modigliani for 31.5 million euros in a private sale brokered by Sotheby’s, according to a contract from the auction house dated Sept. 25, 2012. Rybolovlev agreed to pay 62.5 million euros for it, according to an invoice dated January 7, 2013.

Locked In?

In another instance, invoices suggest Bouvier bought a piece from a private seller only after Rybolovlev’s higher price appeared to be locked in. In November 2011, Bouvier sent the Russian’s team an email about Rene Magritte’s “Le Domaine d’Arnheim,” a nest of eggs with an eagle-shaped mountain in the background. Valette had written a few days earlier about a different Magritte that could fetch 40 million euros. Bouvier cited that assessment, writing that “Le Domaine” was worth at least that much.

Rybolovlev agreed to buy Magritte’s eagle from Bouvier for $43.5 million, according to an invoice dated Dec. 5, 2011. Bouvier agreed to buy the work from private sellers via Sotheby’s for about half that price -- $24.1 million -- according to a Dec. 8, 2011 sales contract. 

Bouvier denies having sold Rybolovlev pieces before buying them himself. Those “allegations are false and we will prove it in court if it comes to that,” Bouvier said through his lawyer. "One cannot rely just on invoices as proof of payment.”

There’s no indication in the emails that Valette or others at Sotheby’s knew that the expert’s assessments were being forwarded to the Russian and his advisers.

“Samuel Valette never prepared any valuations for me, only informal assessments of sales trends on the pieces,” Bouvier said through his lawyer.

New York Penthouse

Several months after the Klimt showing, Valette was on hand in 2013 when Rybolovlev viewed another work being offered through Sotheby’s -- Leonardo Da Vinci’s “Salvator Mundi” -- at a penthouse apartment in New York owned by the Russian’s daughter, according to court documents. 

Sotheby’s said in court filings that Valette didn’t realize who Rybolovlev was at the time but recognized him from a previous sale. Rybolovlev’s lawyers say they learned of Valette’s presence in the Da Vinci sale only from court filings and disclosures.

“Valette may have been in the building but was not in the room at the time Mr. Rybolovlev viewed the Klimt and the Da Vinci,” Bouvier said in his emailed statement. "I am surprised by this argument because Mr. Rybolovlev always wanted to view paintings alone because he was very scrupulous about the confidentiality of these transactions.”

Sotheby’s, asked whether it requires prospective buyers’ identities before providing an artwork for such a showing, said that its security protocols were followed.

Sotheby’s brokered the Da Vinci’s $80 million private sale to Bouvier, who flipped it to the Russian billionaire for $127 million. The consortium of dealers who sold the Da Vinci to Bouvier in 2013 threatened to sue Sotheby’s over the sale and reached an undisclosed settlement. Rybolovlev sold “Salvator Mundi” at a Christie’s auction in November for $450 million, shattering auction records.

Russian Billionaire Seeks to Pull Sotheby's Into Art-World Fight

International Disputes

Rybolovlev’s team wants to bring its latest case in London because the relevant Sotheby’s unit, and Valette, are based there. London courts have ruled on several high-profile international art disputes, and found against a dealer who hadn’t disclosed some profits he made from a sale.

Bouvier and Sotheby’s have joined forces in Switzerland to try to block Rybolovlev’s request to release the documents. They say Rybolovlev’s legal team made no effort to use the sealed documents in Monaco, where the dispute between the two men began.

“They tried in Singapore and it failed and then in Monaco where it’s going nowhere, and now in London,” said Bitton, Bouvier’s lawyer. “It’s really just forum shopping.”

©2017 Bloomberg L.P.