New York, Concrete Jungle Where Fraud is Handled!

In a stunning twist in the ongoing Rybolovlev v. Bouvier art fraud lawsuit, New York Southern District Judge Jesse Furman ruled that Sotheby’s, the world renowned auction house, must “face fraud-related claims on private sales made on four works”: da Vinci’s Salvator Mundi, Magritte’s Le Domaine d’Arnheim, Klimt’s Wasserschlangen II, and Modigliani’s Tête. Nevertheless, as Vincent Noce reports, Judge Furman ended up dismissing a large part of the plaintiff’s (Rybolovlev’s) complaint, “considering that, for 11 transactions, there were not sufficient elements to conclude that Sotheby’s had knowledge of the fraud.”

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This development is part of a larger set of international lawsuits, spanning eight years and multiple jurisdictions, and involves the Russian billionaire-turned-art collector and chairperson of football club AS Monaco, Dmitry Rybolovlev. In these series of suits, Rybolovlev is attempting to “recoup $1bn from [Yves] Bouvier [a Swiss art dealer] after first claiming in 2015 that he was overcharged by the dealer on 38 works of art purchased for a total of $2bn over the course of a decade.” It is truly the “biggest legal fight the art world has ever witnessed,” writes CNN’s Nina dos Santos, and has been aptly given an even more Hollywood-esque name: The Bouvier Affair. 

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The entire affair began in 2015 when Rybolovlev claimed “he was ripped off buying multi-million-dollar masterpieces” by Bouvier, “who says it was just business.” Supposedly, Bouvier—who was Rybolovlev’s agent, helping him to acquire  an impressive art collection between 2003 and 2014—agreed to take a 2% fee from the sales, but, according to Rybolovlev, the Swiss art dealer managed to “swindle him out of as much as 40%.” 

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In order to put this controversy into perspective, let us consider the most famous artwork that has been caught up in this extensive legal battle: Leonardo da Vinci’s Salvator Mundi. Bouvier purchased the painting, on Rybolovlev’s behalf, for $75 million. Allegedly, he ended up charging the Russian oligarch $127.5 million, a 170% price increase. Furthermore, Rybolovlev asserts that Bouvier “had stolen about $1.1 billion over the years from him.” Bouvier, of course, denies these allegations, with the reasoning that “as an independent dealer,” he is able to “determine the profit margins he wanted.” Rybolovlev wanted to push for a federal investigation into the sale of this artwork, but his query was stopped after, according to Rehs Art Galleries, the Russian “recouped his losses since he ended up selling the Da Vinci at Christie’s New York in 2017 for $400 million (or $450.3 million with added premiums),” ultimately winning a hefty profit of about $300 million.  

Leonardo Da Vinci, Salvator Mundi, oil-on-panel, 1499-1510 (Image: ArtNews.com)

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The Russian oligarch filed two complaints against Bouvier in Geneva in 2017 and 2019, brought the case before the Monaco High Court in 2019 and the Geneva Prosecutor’s Office in 2021, and took legal action in Singapore in February 2021, to little success. Nevertheless, out of all the lawsuits filed in Monaco, Singapore, Hong Kong, Bern, and the canton of Geneva, one lawsuit, the subject of this article, stuck, and is still making international headlines to this day. On October 2nd, 2018, this “Bouvier Affair” reached new heights when “Rybolovlev filed a $380m lawsuit against Sotheby’s in a Manhattan federal court.” He maintained that “Sotheby’s helped Bouvier defraud him, listing thirty-eight different transactions between 2004 and 2014 where the Russian billionaire alleges the auction house knew of Bouvier’s plans to overcharge Rybolovlev.” But this did not come out of the blue. There is a whole history behind the animosity between Rybolovlev and Sotheby’s—in November 2017, Sotheby’s and Bouvier jointly sued “in order to block a lawsuit the Russian oligarch was planning to file in the UK.” 

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The 2018 court papers claim that “Sotheby’s knowingly and intentionally bolstered the plaintiffs’ “trust and confidence in Bouvier and rendered the whole edifice of fraud plausible and credible” by brokering certain sales and inflated valuations.” Furthermore, various members of Sotheby’s staff were named, such as Alexander Bell, the co-chairman worldwide of Sotheby’s Old Master Paintings and Samuel Valette, the vice chairman and head of private sales.At the time, Sotheby’s called the case “desperate” and “entirely without merit,” averring that “it did not engage in any wrongdoing.” Sotheby’s maintains that “the title for these works passed directly to Bouvier and that it did not have prior knowledge of whom the dealer may have intended to sell them to once he acquired them.” 

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It is truly a messy lawsuit between Rybolovlev, Sotheby’s, and Bouvier. While Bouvier asserts, in multiple statements to the Art Newspaper, that he was merely “observing the New York lawsuit from afar,” there is no doubt that Sotheby’s and Bouvier have an extensive history dating back to 2005. Noce notes that the 76-page ruling dating March 1st, 2023 from the New York Southern District details the ways in which “Bouvier made huge profits on works he purchased through Sotheby’s. It also gives an idea of the extent of their privileged relationship: from 2005 to 2015, Sotheby’s registered more than 800 transactions with the Swiss dealer.”

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Rybolovlev (left) leaving court in 2017. (Image Courtesy of Observer)

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Bouvier’s argument, that he “regularly invented negotiations with a seller,” is, according to Noce, “a usual tactic for dealers and in no way a criminal offence.” In the case of Le domaine d’Arnheim by Rene Magritte, court documents from 2011 show that “Bouvier invoiced Rybolovlev $43.5m, three days before executing a purchase agreement with Valette, for $20m less.” Let me extend the question to the reader (and let the record show that the author is indeed neutral in this scenario): does this seem like a “regularly invented negotiation with the seller” to you? 

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Rene Magritte, Le Domaine d’Arnheim, gouache and oil, 1962 (Image: ReneMagritte.org)

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To add to the hubbub, Amadeo Modigliani’s limestone sculpture Tête, Sotheby’s had “estimated the fair market value of the sculpture to be €8m [$8.65m]...Valette sent Bouvier a formal email, estimating the value at €70m to €90m [$75.69m-$97.32m].” About 12 hours later, it seems that “Valette sent Bouvier an almost identical email, this time valuing the sculpture at €80m-€100m [$86.5m-$108m].” Judge Furman’s ruling explains that this evidence could allow a jury to deduce that “Valette provided Bouvier with materials inflating the price of the sculpture—circumstantial evidence of Valette’s knowledge of Bouvier’s scheme.” When the painting was sold in 2014, any mention of Bouvier’s company was omitted in the painting’s provenance which, according to the ruling, made a “substantial contribution to Bouvier’s frauds.” In an email to another employee, Valette wrote: “Maybe better to cover the tracks slightly and designate as: Property from a Private European Collection.”

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Amadeo Modigliani, Tête, limestone, 1911-1912 (Image: Christie’s)

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When questioned about his involvement in these sales, Valette reasons that he had no idea who the owner was and claims that he “was never aware of Bouvier’s deals.” Nevertheless, the evidence shows that “Valette also “coordinated a viewing of the Klimt where he saw Rybolovlev,” two weeks before the sale” and that “Valette presented the painting [Salvator Mundi] to Rybolovlev at his penthouse on Central Park West.” 

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Jumping back to 2023, Judge Furman ruled that, in the case of the sale of the Salvator Mundi, Rybolovlev “provided evidence that Sotheby’s knew Bouvier purchased the Salvator Mundi...[on his behalf]...and that Valette worked closely with Bouvier to adjust its valuation.” Moreover, the ruling highlights that “Sotheby’s executives’ heavy involvement in the negotiations, combined with the viewing that Valette co-ordinated, are sufficient evidence of Sotheby’s substantial assistance to Bouvier.”  

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Perhaps the most interesting part of the judge’s ruling is the section wherein the record suggests that “beginning with the sale of Magritte’s Le Domaine d’Arnheim (in December 2011) and Modigliani’s Tête (in January 2013)...Valette adjusted his estimated valuations of these two works to suit Bouvier, before Bouvier sold the works to Plaintiffs … Plaintiffs have thus presented evidence that Valette was aware of Bouvier’s price manipulation, the essence of his scheme.”

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While it seems that Rybolovlev was victorious on multiple fronts, the judge dismissed a majority of the plaintiff’s claim—a win for Sotheby’s—and is only asking the defendant to face “fraud-related” and “aiding and abetting” claims for the four above-mentioned artworks.

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Gustav Klimt, Wasserschlangen II, oil on canvas, 1904-1907 (Image: Wikimedia Commons)

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Both sides are eager to claim their own victories in the months to come, but Judge Furman advises “that the parties should try to settle this case without the need for a trial that would be expensive, risky, and potentially embarrassing to both sides.”

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The lawyer for the Rybolovlev family trust, Dan Kornstein, says, “Judge Furman carefully analyzed the facts and agreed with many of our arguments. Although not all transactions involving Sotheby’s survived the summary judgment, our remaining claims account for over $200m of damages inflicted to our clients. These are very important episodes of the case.” If Rybolovlev has been forum shopping for this long, then there is no doubt that he is ready to go to trial, especially as Judge Furman opened the door for a jury trial. It appears that Rybolovlev will take any chance he can get to settle his score, as Widewalls notes “the remaining lawsuits could still account for $200 million in damages.” 

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Sotheby’s first statement, on the other hand, expresses optimism for the future of this case: “Sotheby’s is pleased that the court’s decision on summary judgment dismissed the majority of the plaintiffs’ claims for lack of evidence. The court also rejected the plaintiff’s own motion for summary judgment in its entirety. Sotheby’s will continue to defend this case vigorously and looks forward to prevailing on the remainder of the case at trial.” Their second statement, however, indicates that they “have accepted the court’s recommendation to engage in settlement talks, and have agreed to proceed by mediation with a magistrate judge.” In this case, it seems that Sotheby’s risk-assessment determined that exposure to a jury verdict will result in a higher payout than what could be negotiated through a mediation, with the added bonus that settlement out of court would remain private and confidential.

According to Reuters, the parties eventually agreed to negotiate through a mediation, but in a statement to the Financial Times Kornstein said that the plaintiffs “are eager to go to trial if mediation does not produce an acceptable settlement.”

As we can see, this case is far from over. As The Art Newspaper writes, “after eight years of an epic battle played out across the globe, the Russian collector Rybolovlev will have his day in court, and in no less an arena than New York.” Stay tuned for more updates!