Like all the best Russian oligarchs, Dmitri Rybolovlev made his billions by grabbing a state-owned business after the fall of communism. Rybolovlev’s business was potash.
Around 2002 Rybolovlev decided it was time to build a top class art collection. He did this for standard billionaire reasons, and also because he needed to get his wealth out of Russia because Putin was harassing him.
Rybolovlev needed a hand with this, so he hired a “colourless Swiss professional” art insider named Yves Bouvier to act has his agent.
Yves Bouvier wasn’t strictly an art dealer – he was what’s called a shipper. An art shipper’s role is to facilitate sales by moving art around the world on behalf of buyers and sellers. A shipper is meant to be a sort of trusted middleman. As The New Yorker put it,
“In sixteenth-century Venice, diplomats were instructed to employ illiterate valets, who would be unable to read any secret documents they were asked to carry. A transit agent “should by default be a blind man. That is the very nature of his job.”
But Bouvier wasn’t blind. He’d spent his whole life learning who had what pieces of art, what they paid for them, whether they were willing to sell, and how to persuade them. So he got to work building Rybolovlev’s collection.
Rybolovlev paid Bouvier a 2% commission on each sale, as his trusted agent. But Bouvier didn’t see the job in quite the same way.
Instead of acting as an agent – someone who finds the art at the best possible price – Bouvier was acting as a dealer. He was buying the paintings themselves and then flogging them to the clueless Rybolovlev at a massive markup.
The scam worked beautifully for over ten years. Rybolovlev happily spent more than $2bn building up his collection in that time.
The first cracks appeared in 2014, when The New York Times printed some industry gossip saying that a particular Da Vinci painting had sold for between $75-80m. Bouvier had charged his client $130m for it…
Then Rybolovlev started to wonder why his agent was so good at buying art, but totally unable to sell it…
It all came apart at a swanky luncheon in St Barts, where Rybolovlev ran into a dealer of the previous owner of one of his paintings. The game was up.
In the lawsuit, Rybolovlev is claiming Bouvier bilked him for more than a billion dollars of the total of $2 billion he spent on his art collection. And the amazing thing is that the art world is so unregulated that it’s not clear Bouvier broke any laws! He could yet get away scot free.
Beware colourless professionals
The investment lesson here is clear: when it comes time to move your billions into a discreet international asset class, don’t trust the Swiss.
Okay, how about this: beware colourless professionals.
A suit and tie is a crappy guarantee of a person’s integrity. The agent who scams you probably won’t be a Swiss art dealer. But he might be a suburban bank manager who tries to convince you to sign away your generous annuity policy (this happened to a friend of mine). Or he might be a stockbroker who calls with exciting trade ideas. Or an estate agent who convinces you now’s the time to sell your property. Or a pension fund manager who skims 1% per year without beating the market.
Remember the line from yesterday’s piece about Facebook: if you’re not the customer, you’re the product.
Unless you’re paying directly for your financial advice, you should be careful. Be careful of anyone who’s paid on commission, or on a percentage of the assets they manage.
That’s why I’m proud of our business model here at Agora Financial.
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