MANHATTAN (CN) — Following five hours of closing arguments on Monday, a federal jury will begin deliberating whether the famed international auction house Sotheby’s aided and abetted a Swiss art dealer’s scheme to mark up the prices of masterpieces sold to a Russian tycoon by tens of millions of dollars.
Russian billionaire Dmitry Rybolovlev claimed in a 2018 lawsuit that Sotheby's defrauded two British Virgin Islands trusts he controls by helping art dealer Yves Bouvier in overcharging him by tens of millions of dollars on 38 artworks he purchased for $2 billion between 2003 and 2015 — while collecting a 2% commission fee on the eight- and nine-figure deals.
Five years later, Rybolovlev’s civil case against Sotheby’s stood trial in the Southern District of New York across three weeks in January, but only in connection to four specific artworks sold to his trusts through the worldwide auction house and fine art broker: Leonardo da Vinci’s "Salvator Mundi;” Rene Magritte’s “Le Domaine d’Arnheim;” Gustav Klimt’s “Wasserschlangen II;” and Amedeo Modigliani’s limestone sculpture “Tête."
According to Rybolovlev’s attorney Zoe Salzman, Sotheby’s allowed one of the company's private sales executive to submit “inflated estimates under Sotheby’s name” in coordination with Bouvier’s scheme to overcharge Rybolovlev’s art purchases, “all without consequence.”
Sotheby's made $19 million off the sales of artwork to Bouvier that he sold at inflated prices to Rybolovlev, Salzman told jurors.
Salzman, an attorney with the firm Emery Celli Brinckerhoff & Abady, urged the jury to hold Sotheby’s accountable for facilitating Bouvier’s fraud, “to shine a light on the lack of transparency that plagues the art market.”
Central to Rybolovlev’s case was Leonardo da Vinci’s 500-year-old painting of Christ holding an orb in this left hand, "Salvator Mundi,” which the fertilizer baron had purchased through Bouvier for an inflated $127.5 million, and later found out through a New York Times story had actually sold to an undisclosed private collector for between $75 million and $80 million, in a private transaction brokered by Sotheby’s New York in May 2013.
At trial, Rybolovlev’s lawyers established Bouvier had paid $83 million for the da Vinci painting.
Salzman illustrated to jurors that Sotheby’s netted $3 million in compensation from of just the $44.5 million secret markup alone added to the price Rybolovlev paid to buy “Salvator Mundi,” while Bouvier took $1.27 million off just the inflated price at which he flipped the painting.
“That’s double dipping,” she said. “That’s fraud.”
According to Rybolovlev’s case in chief, the total compensatory damages owed by Sotheby’s for aiding and abetting breach of fiduciary duty for the sale of just the “Salvator Mundi,” including statutory pre-judgment interest, is approximately $92.6 million.
Rybolovlev later sold the “Salvator Mundi” painting at Christie's in 2017 for a record-setting $450 million.
Sotheby’s has denied any wrongdoing, and asserts that the auction house followed its standard operating procedure and best practices.
The auction house, represented at trial by law firm Arnold & Porter Kaye Scholer, emphasized in its closing summation on Monday afternoon that it had nothing to do with Bouvier's purported fraud and insisted that Rybolovlev’s squabble should be with Bouvier.
“No one at Sotheby’s knew about Bouvier’s lies, and that’s enough, you can find there’s no fraud or no aiding and abetting fraud right there,” Sotheby’s attorney Marcus Asner told jurors repeatedly. “There’s not a single scrap of evidence,” he remarked.
Asner pointed out that Rybolovlev’s art buyer had never formalized any agency agreement with Bouvier, and never asked to view any contracts with the sellers from whom Bouvier said he was buying art.
“If he thinks he paid too much, he can, and should, take it up with Yves Bouvier,” the lawyer snipped in the defense’s closing summation.
Insisting that Rybolovlev is an “extremely accomplished” and highly supplicated businessman, Asner told jurors, “You can, and should, hold his feet to the fire.”
“They relied on his purchase price, and they relied on his spin,” he said. “Bouvier was Rybolovlev’s guy.”
Last week, Rybolovlev withdrew his claim for aiding and abetting fraud with respect to the auction of Modigliani’s “Tête” sculpture — which was sold to Rybolovlev’s buyer for $81 million, double the $40 million Bouvier paid — but retained aiding and abetting fraud claims based on the purchase by Rybolovlev’s family trust, Accent Delight International.
The verdict form will ask jurors if they found Sotheby’s aided and abetted in fraud in the purchase of each artwork individually, and if so, to assign separate compensatory and punitive damages for each one.
Bouvier is not named as a defendant in the civil suit at trial in Manhattan federal court, but he has separately faced criminal charges in France, Monaco and Switzerland, though the last of these charges have been dismissed following a confidential settlement in Geneva.
U.S. District Judge Jesse Furman, the Obama-appointed judge presiding over the case, repeatedly reminded the two parties that they could still settle the remaining claims outside of court, noting in an opinion that a trial “would be expensive, risky and potentially embarrassing to both sides.”
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