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Dmitry Rybolovlev sues Sotheby’s auction house in the US for complicity in fraud

Sothebys NYC _ Wikipedia
@ Wikipedia

Several reputable international media outlets reported last week that the owner and president of AS Monaco, Dmitry Rybolovlev, is suing the renowned auction house Sotheby’s, which he accuses of helping his former art dealer, Yves Bouvier, to overprice several works of art.  


Although some of the initial claims were rejected by a US court, Dmitry Rybolovlev could win considerable compensation from Sotheby’s for the fact that the auction house allegedly helped Yves Bouvier to inflate the price of several works of art he had bought for the billionaire.

New York Southern District Judge Jesse Furman ruled last week that Sotheby’s must face claims in Rybolovlev’s lawsuit accusing the world-renowned auction house of aiding the billionaire’s former art dealer in overcharging him by hundreds of millions of dollars on 15 pieces of art.

U.S. District Judge Jesse Furman said Rybolovlev could pursue fraud-related claims over four works including “Salvator Mundi,” a depiction of Christ attributed to Leonardo da Vinci.

“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. A federal judge opened the way for a jury trial for the oligarch,” wrote Art Newspaper.

A 1-billion-euro fraud

The legal dispute between Rybolovlev, a Monaco resident and art collector, and Swiss art dealer, Yves Bouvier, started in 2015 when the AS Monaco president accused Bouvier of defrauding him of nearly €1 billion between 2003 and 2015 in the acquisition of 38 works of art for a total of €2 billion.

The art collector filed complaints in Monaco (for fraud that he claims was committed during transactions involving three paintings), in Switzerland (for the 38 artworks), in Singapore, and in New York. Although the case in Monaco was dismissed in 2019, Bouvier is still facing criminal charges in Geneva.

Rybolovlev demanded that Sotheby’s reimburse him 380 million dollars in his lawsuit against the auction house, which he said “aided and abetted” Bouvier in the acquisition of the artworks.

According to Rybolovlev’s US claim, Sotheby’s knowingly abetted Bouvier’s fraud on the artworks it handled. Bloomberg News reported that the tycoon claimed in the suit that he subsequently discovered that Bouvier, whom he’d hired as an art adviser, had purchased the works himself before flipping them to Rybolovlev for millions or tens of millions of dollars more. This would have by far exceeded the commission he should have received.

In a 76-page ruling dated March 1st, the New York Southern District Judge dismissed some of the claims, stating that for 11 transactions the evidence was expired or insufficient to conclude that Sotheby’s had known about the fraud. But he also stated that Sotheby’s must face fraud-related claims on the private sales of four works of art: the famous Salvator Mundi by Leonardo da Vinci, Gustav Klimt’s Wasserschlangen II (1907), Amedeo Modigliani’s Tête (1911-12), as well as Rene Magritte’s Le Domaine d’Arnheim (1962).

The US Judge considered as “supported by the record” the fact that Rybolovlev was the victim of a fraud committed by Yves Bouvier, wrote The Art Newspaper. The publication notes that the ruling details how Bouvier made huge profits on the works he purchased through Sotheby’s and gives an idea of the extent of their special relationship. Between 2005 and 2015, Sotheby’s registered more than 800 transactions with the Swiss art dealer.

For example, the ruling details how Yves Bouvier purchased Picasso’s Homme Assis au Verre for $62 million before selling it to the plaintiffs’ company for $107.5 million the same day.

Sotheby’s has said it had no knowledge of fraud, according to Reuters. The auction house insisted that it should not respond to Rybolovlev claims at all.

Sufficient evidence

According to the ruling, the plaintiffs submitted enough evidence to show that Samuel Valette, Sotheby’s Senior Director and Vice Chairman of Private Sales Worldwide for the Impressionist and Modern Art Department, “was aware of Bouvier’s price manipulation, the essence of his scheme.”

In relation to the Salvator Mundi by da Vinci, the Judge indicated in his ruling that “a reasonable jury could nonetheless find that [Sotheby’s actions] constituted a ‘substantial assistance’ to Bouvier’s fraud and breach of fiduciary duty.”

Moreover, the document explains that some works were sold to Rybolovlev by Bouvier before they were purchased from Sotheby’s by the Swiss art dealer. This was the case, for example, with Le Domaine d’Arnheim by Magritte, which Bouvier invoiced Rybolovlev for $43.5 million, three days before he had signed a purchase agreement with Sotheby’s for $24.1 million for the painting.

Dan Kornstein, lawyer for Rybolovlev’s family trusts, told Artnet News: “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 $200 million of damages inflicted to our clients. These are very important episodes of the case.”

An agreement without a trial?

In a statement published by Artnet News, the auction house insisted that, “Sotheby’s is pleased that the court’s decision on summary judgment dismissed the majority of plaintiffs’ claims for lack of evidence. The court also rejected 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.” The plaintiffs requested a summary judgment, but according to Judge Furman, such cases should go to a jury trial.

The New York judge, however, advised both parties “to try to settle this case without the need for a trial that would be expensive, risky, and potentially embarrassing to both sides”. To do that the Court directed the parties “to confer immediately about the prospect of settlement.”

As Reuters explains, the parties agreed to mediate, as ordered by the judge. A letter filed by Rybolovlev’s lawyer to the Manhattan Federal Court states that “the parties jointly report that we have conferred about the prospect of settlement and have agreed to proceed by mediation with a magistrate judge.”

However, Kornstein told the Financial Times that the plaintiffs “are eager to go to trial if mediation does not produce an acceptable settlement.”

Sotheby’s also confirmed that the auction house and the plaintiffs “have accepted the court’s recommendation to engage in settlement negotiations and have agreed to proceed by mediation with a magistrate judge.” If the case is not resolved through mediation, it will proceed to trial to decide whether the auction house “aided and abetted” an alleged fraud.