Art brokers and collectors clash

Publication September 30, 2015

Art owners and buyers beware: an inherent conflict of interest may exist when an art broker/dealer works with collectors while developing and growing their own business.

Picasso’s two faces: an art broker comes between an art buyer and its subject

A high-stakes feud was unfolding between an art broker and a billionaire buyer when, with unexpected magnamity, the billionaire gifted to Picasso’s step-daughter two portraits of her mother.

Catherine Hutin-Blay’s mother, Jacqueline Roque, was Picasso’s second wife, and the subject of two of his portraits. After Roque’s suicide in 1986, Hutin-Blay turned the paintings over to art broker Yves Bouvier’s partner for storage in a freeport—where goods are held in transit and free from customs duty—outside of Paris.

Bouvier, reputed to be the “king of freeports,” owned the facility where Hutin-Blay’s paintings were located. Under unclear circumstances, the two Picassos were transferred to Bouvier’s Geneva freeport, where the paintings were restored and sold to Russian billionaire Dmitry Rybolovlev.

In March, Hutin-Blay alleged that the paintings were stolen by Bouvier. Over the course of this same year, Rybolovley claimed Bouvier has been manipulating art prices when he became aware that he may have overpaid for a Modigliani by US$24.5 million—which he purchased through Bouvier for $118 million. Rybolovley learned of the alleged fraud when he met the seller, hedge fund billionaire, Steven A. Cohen, on a cruise the previous year and found out that Cohen had sold the Modigliani to Bouvier for $93.5 million.

Rybolovley had purchased a number of pieces from Bouvier, including the two Picassos. He has been pursuing Bouvier in courtrooms around the world, alleging that Bouvier had been overcharging him by millions of dollars for all of the art he purchased through Bouvier for his collection. The billionaire, despite returning the portraits to Hutin-Blay, continues to pursue his claims in courts around the world.

Working for free: verbal agreement between art broker and collectors fails

In a similar story, art collectors Eskandar and Fatima Maleki had engaged Amir Shariat to curate their art collection. Shariat handled an estimated 200 transactions on their behalf, from which the Malekis accused Shariat of making secret profits at the couple’s expense.

No written agreement existed between the parties and the Malekis stated that it was understood that Shariat would not earn any commission  on any of the deals but instead would be establishing his reputation in the art world. Evidentiary emails documents 44 transactions from which Shariat admitted making a profit. Once on the stand, Shariat admitted to his dishonesty. During a recess, the parties reached an undisclosed settlement.

Our take

When hiring an art dealer/agent/middleman, it is important to have a sound contractual arrangement in place to avoid disputes regarding the “marking up” of works by art brokers. Also, this conflict of interest may be compounded if the art broker also is in the business of warehousing collectors’ art.

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