As the Art World Watches, an Oligarch Takes an Auction House to Court

In 2013, when Dmitry Rybolovlev, a Russian oligarch, was in the midst of buying $2 billion worth of art, one of the many works he purchased was “Tête,” a sculpture by Modigliani, for $83 million. That, he says, was the price Yves Bouvier, a man helping to handle the transaction, told him the seller would need to part with such a masterpiece.

But actually there was no other seller. Bouvier himself owned the sculpture, which he had quietly bought only months before at half the price, according to court papers.

For years, Rybolovlev has accused Bouvier of defrauding him in that and dozens of other transactions by posing as an art adviser negotiating sales on Rybolovlev’s behalf, when, in fact, he was secretly acting as an art dealer and often increasing the prices by tens of millions of dollars. Bouvier denies this.

Next week, the dispute — one of the art world’s longest-running and fiercest — moves to a Manhattan courtroom where Rybolovlev is suing Sotheby’s, the auction house involved in many of the sales. Rybolovlev’s lawyers say in court papers that Sotheby’s helped Bouvier cheat him, in part by creating inflated valuations for the art that served to conceal Bouvier’s large markups.

Sotheby’s has denied any wrongdoing, asserting it abided by industry best practices.

“At trial,” Marcus Asner, a lawyer for Sotheby’s, said in a statement, “the plaintiff will have to prove that Sotheby’s somehow knew that Bouvier was lying to Mr. Rybolovlev about what he, Bouvier, paid for the art when he bought it. But there’s zero evidence that Sotheby’s knew that Bouvier was lying.”

Regardless of outcome, the trial is expected to provide a rare window into the inner, often secretive workings of the art trade, where even buyers seldom know from whom they are purchasing treasures worth a small fortune.

“This case is the granddaddy of them all when it comes to what do we do in the art market in terms of conflicting loyalties and transparency,” said Nicholas O’Donnell, an art market lawyer. “It’s the ultimate cautionary tale of people proceeding without people really having clear expectations of everybody’s role.”

Adding to the intrigue is the fact that one of the artworks involved is the “Salvator Mundi,” a depiction of Christ by Leonardo da Vinci that is the most expensive painting ever sold at auction. Also rare is the prospect of an oligarch like Rybolovlev testifying — and being cross-examined — in a U.S. courtroom, according to Bill McCausland, a retired F.B.I. official who specialized in matters pertaining to Russia, focusing in large part on oligarchs.

“It is rather unique,” said McCausland, now a managing director with FTI Consulting, “to come out from the shadows a little bit, to be a little more public.”

The personalities involved are likely to ensure that the trial will be the highest-profile art market kerfuffle since the 2011 collapse of the venerable Knoedler & Co. gallery, which sold $80 million worth of fake Abstract Expressionist paintings, all created by a Chinese forger in Queens.

Bouvier, who is not a defendant in the case but whose name is likely to come up every day of the trial, once played a major role in the expansion of free ports as storage areas for art. Once one of the largest tenants at the Geneva Free Port, he also opened similar facilities in Luxembourg and Singapore, creating tax-free havens where masterpieces are stored. He has battled Rybolovlev’s accusations in legal disputes in Europe and Asia that ended after the parties reached a confidential settlement in Geneva late last year.

Rybolovlev, whom the U.S. Treasury Department and several congressional reports have identified as an oligarch, made his fortune in potash fertilizer after the collapse of the Soviet Union. He has bought a Greek island, Monaco’s soccer team and real estate around the world, including an oceanfront home in Florida formerly owned by Donald Trump.

Daniel J. Kornstein, a lawyer for Rybolovlev, said that the judge in the case, U.S. District Court Judge Jesse M. Furman, has “precluded any reference to the term ‘oligarch’ during the trial after we argued that Sotheby’s did not dispute that this is a pejorative slur without legal definition or significance.”

The four artworks involved in the trial are widely embraced as masterpieces. In addition to the Modigliani sculpture and the da Vinci painting, the two other works are paintings by Gustav Klimt and René Magritte.

Rybolovlev amassed these and dozens of other works in his collection between 2002 and 2014 with Bouvier’s help. But the relationship broke down following Rybolovlev’s chance encounter at lunch with an art adviser at the Eden Rock hotel on St. Barts in 2014. The adviser had represented the owner of a Modigliani painting that Rybolovlev had recently bought through Bouvier. But the amount he had paid, Rybolovlev discovered at lunch, had been many millions more than the price charged by the adviser’s client. Bouvier had kept the difference.

Rybolovlev went on to accuse Bouvier in court papers of defrauding him in the purchase of 38 works, 12 of which were bought in private sales arranged by Sotheby’s. In the trial to start Monday in New York, a company Rybolovlev used to buy art has accused the auction house of being complicit and suggested it had helped Bouvier because he had become a valuable client.

In a pretrial decision last year, Judge Furman denied many of Rybolovlev’s claims against Sotheby’s, ruling them either time-barred or suggesting he lacked evidence in those instances to show that Sotheby’s knew of any scheme or had helped Bouvier. But the judge allowed the jury trial to proceed regarding the four works.

In the case of the Modigliani, for example, the judge cited evidence that a Sotheby’s representative, Samuel Valette, had told Bouvier in a 2012 email that the sculpture was worth at least €70 million to €90 million, only to revise that estimate to €80 million to €100 million, less than 12 hours later. Bouvier forwarded the higher projection to Rybolovlev’s aides.

“From this evidence, a jury could certainly infer that Valette and Bouvier spoke in the intervening 12 hours and that Valette raised his estimate at Bouvier’s request,” Judge Furman wrote in his opinion last March.

Bouvier has long insisted he was always clear that he was operating not solely as an adviser, but also as an independent dealer. As evidence, he has put forward sales contracts for Rybolovlev’s first few purchases as proof he was openly operating as a dealer, free to charge whatever price Rybolovlev was prepared to pay.

But the Russian collector has said that Bouvier’s role evolved into that of commissioned adviser and agent, and that Bouvier pretended to play that role. He has emails in which Bouvier described negotiations with sellers that do not appear to have actually taken place.

For example, in 2012, Bouvier told Rybolovlev’s aide that the sellers of a Klimt, “Water Serpents II,” were looking for $190 million, but that he thought he could “twist them to get 185,” according to court papers.

“These negotiations did not happen,” Judge Furman wrote in his March opinion.

On the same day in 2012 that Bouvier wrote that email, one of his companies bought the painting for $126 million. Two days later, he invoiced Rybolovlev for $183.8 million.

“It’s a rare moment to see this level of transparency in these sort of art market transactions which are normally private and are not discussed even in open court,” said Amelia Brankov, an art market lawyer and chair of the art market committee of the New York City Bar Association.

Experts said they will be interested to see how Rybolovlev will reconcile pursuing his claim against Sotheby’s with the fact that other legal actions he has taken against Bouvier in various jurisdictions have not led to the sanctions he sought.

In the latest decision, the Geneva prosecutor’s office announced last month that it had closed its case against Bouvier after Rybolovlev’s lawyers withdrew a criminal complaint. Though neither side discussed the settlement’s terms, they both said there would be no further claims against one another. The prosecutor’s office said it had conducted several hearings, “which did not provide any evidence allowing sufficient suspicion to be raised against” Bouvier. However, Bouvier was ordered to pay the procedural costs.

In Monaco, a criminal investigation into Bouvier was dismissed when a court ruled it “had been conducted in a biased and unfair manner.”

At trial in New York, Sotheby’s will face accusations that it adjusted valuations upward to suit Bouvier before and after Bouvier sold works to Rybolovlev and also withheld information that would have alerted Rybolovlev that Bouvier was the true owner of the works he was buying.

“Plaintiffs argue that because each valuation was close or identical to the amount they paid for the relevant work, the valuations prevented them from uncovering Sotheby’s role in aiding and abetting Bouvier’s breach,” Judge Furman wrote last March.

When Rybolovlev bought the “Salvator Mundi,” in 2013, it had only recently been attributed to da Vinci but was already estimated to be worth tens of millions of dollars. In March of that year, Valette, the Sotheby’s representative, met Bouvier and Rybolovlev at a Central Park West apartment owned by a Rybolovlev family trust where the men inspected the painting.

In the ensuing weeks, Bouvier wrote to Rybolovlev’s aide to update him on negotiations that Judge Furman later concluded never took place. The seller, Bouvier wrote, had rejected offers of $90 million, $100 million, $120 million and $125 million, before finally accepting $127.5 million.

On May 2, 2013, Bouvier, not Rybolovlev, bought the “Mundi” through Sotheby’s by putting up a painting and cash valued at $83 million. A day later, he sold it to Rybolovlev for $127.5 million, according to court papers.

In early 2015, at a time when Rybolovlev was becoming suspicious, Bouvier asked Sotheby’s for a valuation for the “Mundi.” Valette suggested to a colleague at the auction house that they value the work at $125 million, but the colleague balked, according to the court papers.

In the end, Valette asked the colleague to change the valuation to 100 million euros, or roughly $114 million, Judge Furman found, and to edit the cover letter, “deleting any reference to Bouvier’s earlier purchase of the piece.” While the judge called attention to the alterations, and the jury will hear about them at trial, he ruled that the valuation was not evidence that Sotheby’s was complicit in fraud.

Rybolovlev later sold the work at Christie’s to a Saudi prince for $450 million, the most ever paid for an artwork at auction.

Experts say the jury trial may provide new guidelines for a more transparent art market.

“There is so much secrecy in the art world that buyers sometimes don’t know the amount of money being made by others in transactions,” said Leila A. Amineddoleh, an art and cultural heritage lawyer. “So this case will help to clarify the responsibilities and fiduciary duties owed to clients by dealers and auction houses.”