Panama Papers reveal how rich use art market to get richer | Fusion
▻http://fusion.net/story/288515/panama-papers-leak-art-market
Yves Bouvier is connected to five different Mossack Fonseca companies (Rybolovlev is comparatively modest, with a mere two), and would mark up the paintings he was selling by astonishing amounts. As Sam Knight has reported for The New Yorker, Bouvier started off by buying a Gauguin for $9.5 million and then selling it for $11.3 million, but soon got more ambitious. He bought a Picasso for $4.8 million and then flipped it to Rybolovlev for $34.4 million. He sold the oligarch a Klimt masterpiece for $183 million, including a $60 million profit for himself. There was also a Rothko that he bought for $80 million and sold for $189 million.
By those standards, the deal that caused the end of his relationship with Rybolovlev had a relatively low markup: Bouvier bought a Modigliani from Steve Cohen for $93.5 million, and then sold it to the Russian for $118 million. Add it all up, and Rybolovlev’s lawyers estimate that Bouvier overcharged his client by the hilariously specific, yet eye-poppingly enormous, sum of $1,049,465,009. Call it a nice round billion. (Rybolovlev declined the ICIJ’s request for a comment. A representative for Bouvier told ICIJ’s Bernstein that “his client used offshore companies for well-established legal purposes.” Mossack Fonseca has not yet commented on its involvement in art holdings, but has responded at length to the Panama Papers.)
Whether they were legal or not, those kind of markups could never be found in a transparent market. When everybody has the same information at the same time – in the stock market, for instance – dealers can get away with only the tiniest markups between where they’re buying and where they’re selling. In other areas where you’re selling unique and illiquid assets, like real estate, the markups are bigger, but still not enormous: The intermediary will normally end up collecting somewhere in the 2 to 3 percent range.
In the art world, by contrast, the most transparent companies of all – the auction houses – typically charge sellers about 12 percent, and buyers about 20 percent, for a total commission of more than 30 percent. And in private transactions, the slice taken by the middleman can be bigger still – even when prices get up into the $100 million range, as can be seen with the Bouvier-Rybolovlev transactions.