Trial Starts as Auction House Sotheby Sued by Russian Oligarch for Abetting Art Sales Fraud

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By Matthew Russell Lee, Patreon Substack

SDNY COURTHOUSE, Jan 8 –  Sotheby's defrauded two British Virgin Islands companies controlled by Russian oligarch Dmitry Rybolovlev, the companies alleged in a lawsuit in the U.S. District Court for the Southern District of New York that Inner City Press first reported on in 2020. It involved inflated art prices.

On July 15, 2020 SDNY Judge Jesse M. Furman held a proceeding. Inner City Press covered it.  

While the lengthy conference had a series of discovery issues, there was also discussion of a settlement.

And Judge Furman ordered that defendants "shall submit a copy of the settlement agreement by email to the Court for in camera review."

Jump cut to January 4, 2024, the Thursday before a Monday trial to last the rest of the month. Plaintiff's counsel argued to have the BVI company, Accent Delight International, listed in the Sotheby's opening demonstratives, and that no reference be made to Rybolovlev's "lieutenant," saying that term connotes organized crime.

Judge Furman denied the motion, saying it mostly connotes the military. He granted Sotheby's motion to bar plaintiffs from saying some 2012 pay records were withheld or even missing, saying it should be "unavailable." The nine jurors are to be selected on January 8, then openings.

On January 8, Inner City Press live tweeted the opening statements, here

Plaintiff's counsel: Sotheby's behavior should not be countenance. This work is called "The Head" or the "Tete," one of four works of art at the center of this case. I'll show you a greedy middle manager at Sotheby's, he greased the wheels for the fraud

 Plaintiff's counsel: Sotheby's lent its brand to a fraud. The plaintiff relied on Sotheby's letterhead, but Sotheby's betrayed the trust that it trades on.

 Plaintiff's counsel: The dots will come together- the Dorian Gray portrait of Sotheby's will unfold in this courtroom, the real disturbing face. Everything started around 2002. Dmitry Rybolovlev is a very successful business man. He was born in the Soviet Union...

Plaintiff's counsel: Yves Bouvier wormed his way in. He said he would charge a 2% fee Judge Furman: I remind you what the lawyers say is not evidence. Bouvier speaks French, Rybolovlev speaks only Russian. You can't accept his testimony for its truth

 Plaintiff's lawyer Dan Kornstein: Bouvier wrote to Dmitry about a Van Gogh, it speaks twice about the owner of the painting. You will see the letter. Bouvier was not a deal but an agent who would get a commission based on the case. There were 4 early contracts

Plaintiff's lawyer Dan Kornstein: Bouvier was grooming Dmitry for bigger deals. He was almost part of the family. He called Dmitry by a nickname. They went to soccer matches together [Rybolovlev owns Ligue 1 football club AS Monaco]

 Plaintiff's lawyer Dan Kornstein: Bouvier made $1 billion from transactions with Dmitry - he was a fraud, and Dmitry was a victim. Bouvier would go to Sotheby's, he would buy art - the negotiations were phony. They have stipulated to that
Sotheby's: Objection!

Judge: Lawyer's statements are not evidence. That, we'll see after openings. Plaintiff's lawyer Kornstein: Bouvier would mark it up 50%. Dmitry didn't know. The key is, Bouvier was defrauding Dmitry into thinking he was buying at the price of the original seller

Plaintiff's lawyer Kornstein: Here's now much of the compensation of Sotheby's Samuel Valette came from Dmitry deals - almost all of it. They never disclosed what was really going on. The da Vinci, Bouvier ripped Dmitry off, mark up of $44 million....

 Plaintiff's lawyer Kornstein: Here are Bouvier's commissions. For the Magritte, he gets $870,000 in addition to his mark up of tens of millions of dollars. On the da Vinci, he took $1,275,000 then the mark up - it's double dipping, you're not supposed to

Plaintiff's lawyer Kornstein: The Tete was auctioned later, it's not as simple. The damages the plaintiff is seeking here, the core of it, is the mark-ups. The commissions were $6.4 million. The double dipping, the mark-ups, were $164 million. This is astronomical

Plaintiff's lawyer Kornstein: What was Sotheby's Valette doing? He was there at the meeting at Dmitry's apartment in Manhattan. Bouvier waits in the lobby for Valette. They go up & shake hands. There were questions about authenticity, Valette is reassuring Dmitry

 Plaintiff's lawyer Kornstein: Later Valette tried to claim he didn't know it was Dmitry's apartment. It does to his credibility-- Sotheby's lawyer: Objection! Judge: Sustained. Counsel, this is not for argument, but a preview of the evidence. Plaintiff's lawyer Kornstein: Sotheby's has never retracted this in the court papers --

Sotheby's lawyer: Objection!

Judge: What counsel says is not evidence. Proceed. Plaintiff's lawyer Kornstein: Valette will testify he knew Bouvier and Dmitry were close

 Plaintiff's lawyer Kornstein: Valette was aware that Bouvier was quickly flipping works of art to Dmitry. He was going up to Dmitry's apartment for the da Vinci - but no one did anything about this at Sotheby. He was doing his Wild West performance.

 Plaintiff's lawyer Kornstein: Here they're talking about Sam, which is Valette, & the "Russian would not buy at auction." Here, Valette writes to other at Sotheby's, The client does not speak English, the deal require an interpreter. Sotheby's knew about mark ups

Plaintiff's lawyer Kornstein: Here's about the Magritte. Sam is telling Bouvier that the owner of the Magritte is willing to sell for $25 million. So they cook up emails that Bouvier will pass on to Dmitry, using Valette's formal signature block at Sotheby's

 Plaintiff's lawyer Kornstein: Here they change auction to private sale, dollars to Euros. The sculpture, he compares it to a sale at Cristie's - but they increased the price. Where it was being passed on to Dmitry, he would use Vous, not Tu. Dmitry only had Vous

 Plaintiff's lawyer Kornstein: Look at this email - Valette says, maybe we should cover the track slightly. That could be the title of this case, Covering the Track. Now look at this- Sotheby's: Objection! Judge: You're going to need to wind it up

 Plaintiff's lawyer Kornstein: Sotheby's is letting the valuation be driven up Sotheby's: Continuing objection, your Honor. Judge: Understood. Kornstein: Valette writes, Let me know if this valuation suits you. Then with Bell he deletes a line, to erase Bouvier

Plaintiff's lawyer Kornstein: They covered it up! Sotheby's was in on it, this is very good proof. Bouvier insisted on complete secrecy.  Judge: Please wrap it up. Kornstein: Valette flew on Bouvier's private plane. They got horse show dinner tickets in Hong Kong

Plaintiff's lawyer: Sotheby's wants a Wild West environment, not in the public interest. Trust is fragile. Sotheby's should be called out. Return a verdict and award punitive damages. Judge: We'll break before the defense opening Thread will continue here

 Jury leaves. Judge Furman: That was more of a closing than an opening. And you said 40 minutes but it was an hour and eleven minutes. Sotheby's: We have just over an hour. Judge: Keep it shorter than that, for the jurors. Counsel asks, Can we discuss- Judge: No

Judge: No, keep it to the end of the day. [Judge leaves the bench.

 OK - Sotheby's opening. Sotheby's lawyer: As you'll hear, Mr. Valette was doing his job, to get Bouvier to make strong bids for art. In the case of the Magritte, he provided Bouvier with accurate information. For the da Vinci, he gave photos, to facilitate a deal

 Sotheby's lawyer: Bouvier's firm always paid for the art. When he did next was up to him. Sotheby's did not know that Bouvier was lying. Sotheby's only found out in 2015, with Mr. Rybolovlev made allegations against Bouvier

 Sotheby's lawyer: After you hear the evidence the court is going to instruct you on the law, for each of these transactions they have to show that Sotheby's had actual knowledge that Bouvier was committing a fraud, and that it substantially assisted.

Sotheby's lawyer: I'm going to use "Mr. Rybolovlev" as a shorthand... He speaks Russian.  These were private sales. The Tete, Mr. Rybolovlev brought back to Sotheby's. Bouvier had a transport business & his free port. He was a dealer in art, you'll hear about that

 Sotheby's lawyer: What Bouvier decided to do with the art he bought, it was not Sotheby's business. Dealers are competitors of Sotheby's, they have rich customers all over the world just like Sotheby's. Bouvier had a Russian billionaire, there were many of them

 Sotheby's lawyer: You will hear from Mr. Valette that he learned that Mr. Rybolovlev was a client of Mr. Bouvier. That's not disputed. Sotheby's checks it counter parties, if they are a sanctions list, but is not responsible with what the counterparty does next

Sotheby's lawyer: Magritte was a preeminent surrealist. Mr. Valette sent information to Mr. Bouvier... Sotheby's didn't know that Bouvier fabricated negotiations. Bouvier bid only $31 million for the Tete. Mr Valette was surprised. But it was the seller's decision

Sotheby's lawyer: Bouvier bought the Tete; Bouvier owned the Tete. After that, Sotheby's had no knowledge. Bouvier claimed he paid $37 million and a painting by Degas. Plaintiff's quarrel here is with Yves Bouvier

 Sotheby's lawyer: This was a photo of the Salvador Mundi, by the old master Leonardo da Vinci. It was first sold at an estate sale in New Orleans for under $10,000. Mr. Rybolovlev bought it for $127 million

 Sotheby's lawyer: Sotheby's earned a compensation for the auction of the Tete... If you showed a pie chart of Mr. Valette's income, the percentage would not by over 90, more like 50%.  Plaintiff has to show fraud - but he reliance was unreasonable

 Sotheby's lawyer: Mr. Rybolovlev founded a bank, and ran a potash company. He took it public and accrued $7 billion Rybolovlev's lawyer: Objection! Judge: Overruled. Sotheby's lawyer: He bought a soccer team... But for art, he did not put the terms in writing

Sotheby's lawyer: Mr. Rybolovlev said he found Mr. Bouvier "like a Swiss banker." He never asked him for any documentation.  Plaintiff claims that the insurance valuation for the da Vinci was created in good faith. Harry Smith the expert will say it was too low

 Sotheby's lawyer: Mr. Rybolovlev is angry at Bouvier. You may find he has good reason to be angry with himself.  We will ask you to say NO, and rule for Sotheby's on all counts. Thank you. Judge: Jurors, don't discuss the case. Take your notebooks with you

Jury leaves. Sotheby's lawyer Asner: Your Honor, you misstated the standard of proof on the fraud claims. Judge: My bad. I'll say something, that it's what I say at the end of the evidence that controls. I'll let you go.

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