05 May 2015
Arguably, it’s possible to establish the value of a financial asset, such as a company’s shares or bonds at any given moment thanks to the interaction of buyers and sellers, even if prices can change suddenly for reasons that appear unrelated to that company’s ‘fundamentals.’
However, a case currently winding through the judicial system in Monaco raises the problems inherent in determining the price of assets whose value lies more in personal taste and critical opinion than objective criteria – such as works of art.
Swiss art dealer and freeport entrepreneur Yves Bouvier has been accused of defrauding one of his best clients, Russian billionaire Dmitry Rybolovlev, over the sale of a work by American ‘abstract expressionist’ painter Mark Rothko. After extensive negotiation, Bouvier and Rybolovlev had agreed a price of €140 million for No. 6 (Violet, Green and Red), one of Rothko’s most famous pieces.
It subsequently emerged that Bouvier had bought the painting from Cherise Moueix, wife of Château Pétrus winemaker Christian Moueix, for just €80 million. Rybolovlev, whose estimated $10 billion fortune includes an art collection that cost as much as $2 billion and a majority stake in football club AS Monaco, complained to authorities. Bouvier was arrested and charged with fraud and money laundering.
The case hinges on whether Bouvier was simply a seller earning a handsome profit, or a broker working for Rybolovlev on commission and obliged to acquire the Rothko painting for him at the best possible price. It highlights the fact that the art market is opaque, largely unregulated and not subject to the pricing norms prevalent with other investments.
Many high net worth art buyers do not conduct their deals directly but rely on well-connected intermediaries such as Bouvier. Whether this makes them vulnerable to price manipulation, or simply shows their own willingness to pay too much for trophy assets, is a question that may well be tested in Monaco’s courts.