Rybolovlev ultimately invited me to La Belle Epoque because he has a story to tell, or rather explain. For the last year he has been at the center of the most astonishing scandal in the art world in years, an alleged billion-dollar fraud that has dealers, artists, and collectors sweating. At stake may be not just the money of an angry and very powerful man intent on recouping his losses but the thing the art world values more than anything: the freedom to operate in darkness.
In the early 2000s, Brazilian financier Edmar Cid Ferreira had embezzled funds from his business empire — and he needed a way to hide the money. He found it in Hannibal, a painting by American artist Jean-Michel Basquiat. Appraised by the art world at $8 million, Ferreira showed up at New York’s Kennedy Airport in 2007 with the painting and a bill of lading listing the value as $100.
These offshore companies can cross borders, invest and transfer cash between each other, and after creating a frustrating enough web of transfers and exchanges, as many of them as vague and anonymous as possible mid-transit, they can invest in money-making ventures. Over time, they build small empires in their target destinations, which for Russians are often Switzerland and the UK, particularly London. But that’s fairly basic. The real pros are a lot sneakier than that, using charitable organizations and nonprofits as their identity shields.
Of course, certain countries already impose AML regulations on the art world. The European Union Commission issued its 5th Anti-Money Laundering Directive in June 2018, which must be implemented by Member States by January 2020, and which in part expands its coverage of “obliged entities” to persons trading in art, acting as intermediaries in the trade of art, or storing art in freeports, if the value of the transaction or a group of linked transactions equals €10,000 or more. In the United States, although the BSA already applies to dealers in precious metals, stones and jewels, and thereby requires them to file Suspicious Activity Reports and comply with other AML obligations, no such rules currently apply to U.S. dealers in art.
Keep in mind that Kislyak is the same Russian ambassador who routinely met with numerous members of Trump’s campaign throughout 2016, discussing sanctions, Syria, and Crimea. If Trump really didn’t know what was going on, why is his son-in-law meeting with a bank that has spent years trying to avoid sanctions for laundering money for Putin’s inner circle and controlled by the Russian President himself? If we believe he was that oblivious, Trump’s ignorance of his own business operations would beggar belief.
A month later the Monte Carlo police arrested one Yves Bouvier, 52, Rybolovlev's longtime procurer of masterpieces, as Bouvier rang the buzzer at La Belle Epoque. A Geneva businessman described by Vanity Fair's French edition as "Swiss to the core," a man who "shuns both the mundane and the extravagant," Bouvier was well known in art circles as an art transporter and as the owner of mysterious storage facilities known as free ports—not as an art dealer or broker. He had been summoned to Monaco ostensibly to complete a long-delayed deal for his Russian patron, but he wound up in a jail cell instead, facing allegations of fraud and money laundering and the possibility of a long prison sentence.
I'm not going to bullshit you. Single shipments from Russia were between one and three million, which in the 60s was a lot of money. And these were regular trips-twice a month. It was raining money so I made my base in Beirut. Moneywise Beirut was a free banking market, so you could exchange a million dollars completely open on the square and no one would ask any questions. Of course you had to play the cat and mouse game with Interpol.
You need to use friends and trusted business associates and a willing collaborator at your desired destination to create a reliable bridge for turning your sanctioned or dirty money into sweet real estate so it can be liquefied when units are being sold or rented. Ideally, that collaborator needs to be in a bind and be willing to look the other way and not ask questions.
At our meeting at La Belle Epoque I put it to him: Had he been conned or was he negligent? The answer, he explained, went back to the early 1990s, before he and his family fled Russia. After the fall of communism, Rybolovlev, who originally trained as a cardiologist, switched to finance and became one of the first securities traders in Russia. One of his first moves as a financier was to take a majority stake in Uralkali, the former Soviet fertilizer monopoly, which subsequently increased its productivity five-fold. Boris Yeltsin was president. The economy of Russia was melting down. The rule of law had all but disappeared, and Uralkali's success made Rybolovlev a target. To protect himself from ambushes he sent a fleet of identical cars with identical license plates registered in his name into Moscow; he also moved Ekaterina and his wife Elena to Geneva.
In the interviews, Simpson is cagey about some of his business practices, and professes ignorance about the sources used by Christopher Steele, the former British intelligence officer who assembled the reports in the dossier. (Since lying to the committee would be a crime, it’s reasonable to assume his testimony is not deliberately false.) What’s most interesting is all the threads Simpsons mentions about possible Trump connections he’d reviewed with various Russians, with mobsters, and with others. For the most part, they’re just allegations: If Simpson has proof, it’s not disclosed in the transcripts. More often, they seem like tantalizing possibilities worth exploring more, but which Simpson was unable to nail down.
Los Angeles-based editor of Politech, ex-Soviet computer lobotomist. Specializes in, but not limited to, science, AI, the web, conspiracy theories, and statistics. His work has been featured in or mentioned by How Stuff Works, BusinessWeek, Discovery News/Seeker, The Shift With Drex, Le Monde, SEED, Bad Astronomy, Science To The People, i09, and RawStory, among others.
Meanwhile, Trump was exploring a foray into reality TV about a St. Petersburg-based MMA fighter and his son, Donald Trump Jr., told the media that “Russians make up a disproportionate amount of Trump assets,” a claim his brother Eric would take even further in 2014 when he said that Trump has “all the money [he] needs from Russia” and cited golf-loving oligarchs investing over $100 million in the family business. Eric would later deny he ever said any such thing, playing into his father’s campaign against “the lying media and its fake news” when this story was dug up earlier this year by journalists.
This would all just be face-palm silliness on the Times’s part, a reflection of its editorial disconnect between the culture pages and the business staff, if the story didn’t also glide over the real point of what is going on here. The best protected transactions in the art market are those that pass through the auction houses because those firms do the KYC due diligence that squelch money laundering. Auction houses have compliance staff and are easily monitored by the law enforcement which doesn’t crack down on large private transactions that take place through lawyers or dealers. The Times admits this when they point out that Jho Low passed KYC diligence before it was revealed that he was involved in the 1MDB transactions. After it was revealed, he is no longer able to access art markets through the auction houses.
But what we’re seeing is a pattern of Trump in the midst of wealthy foreigners engaged in money laundering schemes that center around real estate, and not bothering to vet any of them before doing business. Furthermore, there’s also the fact that he proudly claims to be the owner of more than 500 companies with very complex finances, which is a massive red flag in this context.
Once purchased, the art can disappear from view for years, even decades. A lot of the art bought at auctions goes to freeports – ultra-secure warehouses for the collections of millionaires and billionaires, ranging from Picassos and gold to vintage Ferraris and fine wine. The freeports, which exist in Switzerland, Luxembourg and Singapore, offer a variety of tax advantages because the goods stored in them are technically in transit. The Economist magazine reported that the freeport near the Geneva airport alone is thought to hold $100 billion (U.S.) of art.