The Frauds and Feuds That Defined the Art World in 2016by and
What do a Russian billionaire, Donald Trump-impersonator and Malaysian bon vivant have in common? They all found themselves under scrutiny thanks to the art they bought or sold. Authorities and collectors from Singapore to New York have made claims of money laundering, hidden markups and flat-out scams running amok in the opaque art trade. On Thursday, a Paris court cleared a member of the powerful Wildenstein family of art dealers of tax fraud. Here’s what you need to know about some of the notable legal cases that have roiled the art world in the past year.
Wildenstein Tax Fraud Trial
WHO: French tax authorities vs. art dealer Guy Wildenstein
WHAT: Wildenstein, 71, a fourth-generation scion of the wealthy art-dealing dynasty, was cleared by a French court of attempting to avoid taxes by concealing paintings and other assets. Prosecutors said he should get a four-year prison sentence and pay a 250 million-euro ($264 million) fine. The trial lifted the veil on the family’s business secrets, including the existence of an offshore trust for 2,500 paintings valued at $1.1 billion. Guy said he didn’t learn of many of the financial machinations until his father Daniel died in 2001.
STATUS: French judges cleared Wildenstein on Jan. 12.
The Potash Billionaire vs. the Free Port King
WHO: Dmitry Rybolovlev vs. Yves Bouvier
WHAT: The dispute between Russian fertilizer billionaire turned art collector Rybolovlev and Bouvier, an art dealer with an empire of high-end storage facilities in free ports around the world, rumbles on two years after Bouvier’s arrest in Monaco. In a complaint filed in the Mediterranean principality, Rybolovlev alleged that Bouvier, acting as his agent, overcharged him as much as $1 billion in putting together a $2 billion collection of works by Leonardo da Vinci, Pablo Picasso and Amedeo Modigliani. Bouvier says he was a seller, not an agent. The case, even if it never goes to trial, has shone a spotlight on the Geneva Free Ports and the art traded within its underground bunkers. Bouvier’s art-storage company Natural Le Coultre is the largest tenant there. Rybolovlev also filed a case in Singapore, where Bouvier is a resident.
STATUS: A Singapore court is expected to rule in early 2017 on whether it’s the appropriate jurisdiction for the case.
Alec Baldwin’s Wrong Painting
WHO: Alec Baldwin vs. art dealer Mary Boone
WHAT: Baldwin, an acclaimed Donald Trump-impersonator on Saturday Night Live, sued New York art dealer Boone for selling him the wrong Ross Bleckner painting for $190,000. Baldwin long admired Bleckner’s 1996 painting “Sea and Mirror" and asked Boone, who represents the artist, to find it. Baldwin got a Bleckner painting, but it turned out to be a version different from the one he wanted. Boone hit back with allegations that Baldwin avoided New York City sales tax by shipping the painting to California and then immediately bringing it back to Brooklyn.
STATUS: The case is pending.
Shvo’s Alleged Dodge
WHO: Manhattan District Attorney Cyrus Vance vs. real-estate developer Michael Shvo
WHAT: Shvo, who once turned an old New York City gas station into a pop-up art installation, dodged more than $1 million in state and local taxes over six years while buying paintings, jewelry, furniture and a Ferrari, Vance said. In addition, Shvo Art Ltd. avoided at least $275,000 in taxes on profits from the sale of fine art and furniture, according to Vance. Shvo claimed the company and its assets were located offshore, the complaint says, but the business was really at his offices and homes in New York City and the nearby Hamptons seaside resort.
STATUS: Shvo pleaded not guilty and was released on $500,000 bail while awaiting trial.
Justice and the Malaysian Playboy
WHO: U.S. Justice Department vs. financier Jho Low
WHAT: 1MDB, the investment and development fund owned by the Malaysian state, is in the crosshairs of U.S. prosecutors who say money was siphoned off to buy real estate, investments and art works. Low, known for partying with U.S. celebrities Lindsay Lohan and Paris Hilton, allegedly laundered more than $400 million in funds misappropriated from 1MDB, according to the Justice Department. Low bought paintings by Jean-Michel Basquiat, Claude Monet and Vincent van Gogh, and pledged some of the art to secure a $107 million loan from Sotheby’s, prosecutors say. Sotheby’s wasn’t accused of wrongdoing, but the case highlights how auction houses are turning into shadow banks, lending outside the regulated financial system.
STATUS: Low has previously described his role with 1MDB as informal consulting that didn’t break any laws. His relatives have been fighting to keep the family’s possessions from being seized by the U.S.
Going After Gagosian
WHO: New York Attorney General Eric Schneiderman vs. art dealer Larry Gagosian
WHAT: Schneiderman went after mega-dealer Gagosian for not paying taxes, claiming Gagosian Gallery’s California affiliate, Pre-War Art Inc., sold and shipped almost $40 million of art to customers in New York without collecting or remitting state and local sales taxes. In addition, Schneiderman claims the gallery sold a significant volume of art in New York that was shipped out of state without paying the required taxes.
STATUS: The case was settled in July 2016 with the gallery agreeing to pay $4.28 million while denying any wrongdoing.
Paying Up on the "Virgin Mother"
WHO: Schneiderman vs. New York real-estate developer Aby Rosen
WHAT: Rosen avoided taxes on $80 million worth of fine art, according to Schneiderman. Known for displaying works by Jeff Koons and Damien Hirst at marquee properties such as the Seagram Building and Lever House, Rosen settled the case and agreed to pay back-taxes on 200 pieces. Those included a Hirst sculpture, "Virgin Mother," which Rosen bought for $2.5 million.
STATUS: Rosen agreed in May 2016 to pay $7 million while denying wrongdoing.
Duel over Picasso’s Lover
WHO: Apollo Global Management founder Leon Black vs. the Qatari royal family
WHAT: A fight over Picasso’s plaster sculpture of his lover Marie-Therese Walter has played out in three countries. For years, it was a prized possession of Maya Widmaier Picasso, born of the artist’s affair with Walter. Gagosian, the New York art dealer, bought the work in 2015, according to him for $106 million for resale to Black. But an agent for Sheikh Jassim bin Abdulaziz Al-Thani, and the Qatar Museums had a competing claim, saying they had struck a deal in 2014 to purchase the work from Maya Widmaier Picasso for 38 million euros ($40.5 million).
STATUS: Case settled out of court in June 2016. Black won the work and Qatar received an undisclosed settlement sum.
The Reference Shelf
- A Bloomberg Businessweek feature describes the battle over the Wildenstein art empire.
- Bloomberg Pursuits profiles Dmitry Rybolovlev.
- The New York Times examines the Alec Baldwin affair.
- Bloomberg News articles explore art buyers under scrutiny and auction houses functioning as shadow banks.
- Forbes offers a guide to how art collectors can stay out of tax trouble in New York.