The Hidden Heart of The Art Market
As the story of a Russian billionaire allegedly being defrauded by a Swiss art dealer, began to circulate, there were a number of important questions that got raised.
For those of you who haven’t yet heard about this theatrical ordeal, Dmitry Rybolovlev filed a criminal complaint against Swiss art dealer Yves Bouvier after finding out Bouvier had defrauded him of over $22M for a Nude by Amedeo Modigliani.
Many details of this seemingly bizarre story of could be picked apart, but the aspect that I am most interested in is not the individual accusation of fraud. Instead, it is the deeper root issue, the often murky nature of the art world that gave rise to the purported fraud, that captured my attention.
It was December 31 2014 and Rybolovlev was entertaining Steve Cohen’s art advisor Sandy Heller. As they talked, Heller began to tell Rybolovlev about a beautiful Modigliani that he had just sold to an anonymous buyer for $93.5M. What Heller did not realize was the anonymous buyer, who had just paid Bouvier $118M for the exact same piece, stood before him.
Legally, this case hinges on whether or not Bouvier was acting as a broker, who is bound by law to get his client the best possible price or at least disclose the exact sale price, or if he was acting as a dealer, who has no such obligations. However, even if Bouvier is found innocent of all wrongdoing on account of his title as a dealer and not a broker, what does this say about the nature of the art world?
It is my contention that even if he were found to be acting as a dealer, Bouvier’s actions add more credence to an increasingly popular view that, in terms of behavior and practice, the art market looks and feels like the black market as opposed to a medium for the legitimate exchange of cultural assets.
What Bouvier’s defence demonstrates is that even with private sales done through a third party, prices can be hiked at the whim of the dealer, without the necessary constraints of accountability.
If we heard tell of a second hand car dealer unscrupulously raising prices by 26% just because he could, most of us would be mildly incensed. In this instance we should, at the very least, be deeply concerned by what this says of aspects of the art market at large and how it keeps average people from feeling comfortable investing in it.
Further still, as I continued to study this case, another question arose multiple times; does Rybolovlev’s grievance stem from a love of art, or does it stem from a purely fiscal viewpoint. Did he, as the collector, feel cheated out of the artwork he needed Bouvier to obtain for him at a fair price, or did he feel deceived because a financial asset he invested in would not perform as he has expected due to his purchase price?
Is Rybolovlev taking action because he was taken advantage of as he looked to secure art that he loved, or is he angry because it turned out his investment was not as good as he thought it was, like overpaying for a commercial real estate unit that has not yet been developed?
I submit that it is the latter. Though this does nothing to change the case’s background facts, it does change my perspective on them and again provokes further concern.
Among the art community, Yves Bouvier is often referred to as the Freeport King. To define them briefly, Freeports are essentially warehouses for the ultra-wealthy, where they store much of the world’s finest art and jewellery, resources, far from the eyes of the public and the hands of tax authorities.
Rybolovlev, like many UHNW art collectors, stores much of his art, including works by Picasso, Da Vinci and Matisse in these Freeports in the hopes that they can appreciate in price before then being sold off at a tax free profit. Incidentally, it was at the Geneva Freeport that our two protagonists met, in 2003.
As the founder of a fine art investment company, I’m well aware of how potent an art investment can be. I actively encourage our clients to invest in art, citing all of the facts that make it an attractive investment.
However, my decision to found the company was not born out of an unfettered desire for financial gain; it was born out of a genuine love of art and desire to make investment quality art affordable to the average household. Pairing clients with artwork that they love and that will appreciate in value is something I love about my work.
The thought of some of art history’s greatest and most valuable masterpieces being hidden away, to me, seems to be totally at odds with reasons for which they were created. Just as it would be injustice to the composer deprive the public of the opportunity to listen to Handel’s Messiah, so too is it an insult to the artists for their work to be stored away under lock and key.
Speaking purely as an art lover, the legal outcome of this case is secondary. Rather, this entire episode has served to reveal the grey areas with the art market at today; the areas where the lack of regulation which helps artists and collectors in turn can also marginalize new investors and remove the world’s masterpieces from public view.
Yes, fine art and high prices cannot ever be separated, but my desire is that those who are currently buying the world’s masterpieces would instead use the influence they have to lend these artworks back into the public sphere, where they belong.
By, Rayah Levy, Art Market Expert
Mutual Art, May 12, 2015:
http://www.mutualart.com/OpenArticle/The-Hidden-Heart-of-The-Art-Market/410DF80058218AFD
