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Art’s $1 Billion Question: Was Russian a Victim or Savant?

(Bloomberg) -- Is art collector Dmitry Rybolovlev an unwitting victim of fraud, or a savvy buyer who should have known what he was getting into? Was Yves Bouvier acting as his buyer’s agent, or simply as a dealer?

Depends on whom you ask. Which roles the men were playing as Rybolovlev bought hundreds of millions worth of paintings in recent years from Bouvier is at the heart of a feud that has gripped the art world, with previously unreported legal documents adding fresh ammunition to the battle.

Rybolovlev, a Russian fertilizer billionaire, accuses Bouvier, an art-world heavyweight who runs duty-free storage facilities from Geneva to Singapore, of overcharging him by $500 million to $1 billion during the course of a decade for works by Mark Rothko, Leonardo da Vinci and Pablo Picasso.

Rybolovlev has said in Monaco legal filings that he considered Bouvier his agent and that Bouvier betrayed that trust by repeatedly charging hidden markups of tens of millions of dollars. Bouvier and his lawyers have countered in interviews and court documents that the two never had a written agreement and engaged in hard-nosed business discussions between a seller and a good repeat buyer willing to pay market prices for top works.

Monaco Documents

Bouvier’s characterization of Rybolovlev as a sophisticated investor is supported by documents that Monaco prosecutors are reviewing in an investigation they launched after the collector filed a criminal complaint alleging fraud by Bouvier.

The Russian billionaire was authorized to appraise art, negotiate sales and participate in auctions on behalf of two of his family trusts because of his “expertise” and “special knowledge” of paintings, drawings and antiques, according to power-of-attorney documents signed by those trusts in 2005 and 2010.

The British Virgin Islands-based trusts empowered Rybolovlev to use his “special knowledge in any kind of artwork including but not limited to paintings, drawings, statues and antique furniture, investments in art and valuable items” to act on their behalf, including in negotiations with dealers and representatives of private art collections.

Rybolovlev’s art knowledge is beside the point, according to his camp.

“The level of art expertise of any of the victims of this massive fraud is irrelevant,” said a spokesman for Rybolovlev. “The underlying dishonesty resides in the structure of the hidden margins amounting to $1 billion, and how the victims were made to believe that these secret margins were part of the purchase price.”

A spokeswoman for the Monaco prosecutor’s office confirmed the investigation is ongoing and declined to comment further.

‘So Clearly Bright’

If a court takes Bouvier’s view that the two men were on equal footing as art experts, the documents could support the view that Rybolovlev should have known what prices were fair. “How could a Russian who’s become a billionaire, achieved all he did, and is so clearly bright, be taken advantage of by me?” Bouvier said in an interview last year.

For a look at how the Bouvier-Rybolovlev relationship unraveled, click here.

Asked for comments on the documents, Ron Soffer, the Paris-based attorney for Mr. Bouvier, said Rybolovlev directed the acquisition of one of the most important private art collections in modern times. “He certainly could not have been a novice in the field and this document confirms it,” Soffer said.

Rybolovlev alleges that Bouvier gave the impression he was securing a work for a certain price on his client’s behalf, but in reality was buying it for sometimes tens of millions less and pocketing the difference. Contributing to the impression that the men were acting as buyer and agent, Bouvier charged a 2 percent “commission” on most transactions, the lawyer said.

Bouvier and his lawyers have said he wasn’t a broker, adding that 80 percent of the bills he issued to Rybolovlev’s companies listed him as the seller. The 2 percent charges, they say, didn’t represent a broker’s commission but were instead a fee to cover administrative costs, including insurance, transport and condition reports and, in some cases, escrow accounts between down payment and final payment.

The battle -- which has made global headlines because of the prices the Russian paid for single canvases like the 140 million euros ($158 million) he spent on Rothko’s “No. 6 (Violet, Green and Red)” -- has highlighted the lack of transparency surrounding major art deals. It’s also one of several recent instances in which art-world luminaries have come under international scrutiny, U.S. authorities -- who are looking into transactions involving Bouvier, people familiar with the probe have said -- are also investigating whether several major collectors have paid proper taxes there on big art transactions.

Global art sales have cooled after years of booms, falling seven percent last year to $63.8 billion, but were still up by more than 60 percent from 2009.

Fertilizer Fortune

Rybolovlev amassed his wealth buying and selling fertilizer makers in Russia’s wild transition to capitalism. That fortune, which includes his ownership of the soccer team in Monaco, makes him the the 10th-richest Russian, worth an estimated $9.3 billion according to Bloomberg.

Bouvier was briefly arrested in Monaco in February 2015 in connection with the original criminal complaint Rybolovlev filed against him there in the matter. Monaco prosecutors in November refused Bouvier’s request to drop their investigation into the complaint. The two are also battling in Singapore, where in March 2015 Rybolovlev temporarily secured a freeze of up to $500 million of Bouvier’s global assets. That action, in a so-called Mareva injunction, was set aside in August.

Now, in an effort to gain a friendlier hearing, Bouvier’s attorneys earlier this month filed for permission to appeal a Singapore judge’s ruling to move the dispute to the city-state’s International Commercial Court. The case, Bouvier’s lawyers argue, should instead be heard in Switzerland, given the purchase of the 37 works took place primarily in the European country, where Bouvier lived until leaving for Singapore in 2009. Rybolovlev resided in Geneva until 2011, before he decamped to Monaco.

A spokesman for Rybolovlev declined to comment on the merits of the venues or on the Singapore proceedings, citing restrictions on communications imposed by the judge there.

--With assistance from Andrea Tan and Keri Geiger. To contact the reporter on this story: Hugo Miller in Geneva at [email protected] To contact the editors responsible for this story: Anthony Aarons at [email protected] Christopher Elser, Jeffrey D Grocott

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