The Collection by John Francis Kinsella - HTML preview

Bouvier was released the next day on a ten million euros bail. He thought that a deal could be reached, but some days later, the oligarch sued Bouvier in Singapore, then in Hong Kong, demanding a worldwide freeze on his assets.

Rothko No. 6 (Violet, Green and Red)

Shortly after, allegations were made in Paris that two Picasso portraits, which Bouvier had sold to Rybolovlev, had been stolen from their previous owner, Picasso’s stepdaughter.

The astonishing thing was nobody was aware of Bouvier’s activities as an art dealer, ‘a terrible conflict of interest,’ Larry Gagosian told the Times.

That all changed in November 2017, when there was a sudden and unexpected new twist in the drama. Salvator Mundi was bought by an unidentified buyer for the staggering sum of four hundred and fifty million dollars, at a Christie’s auction in New York, exploding all previous price records, and, exceeding by far the one hundred and twenty seven million paid to Yves Bouvier by Rybolovlev in 2013.

With the sale Rybolovlev made a stunning profit of three hundred million dollars over the price he’d paid for the painting, making it very difficult to demonstrate he’d been cheated by Bouvier on the forty odd other paintings he had bought from the dealer.

As for Bouvier, he denied any wrongdoing, explaining he had simply charged market prices and helped a good client build one of the world’s top art collections, including works by Leonardo da Vinci, Picasso, Rothko, Modigliani and Monet.

Unfortunately the sale of five of the other paintings by Rybolovlev resulted in a loss of one hundred and fifty million, compared to the prices he paid Bouvier.

 

Chapter 57

A Better Laundromat

As Theresa muddled her way through Brexit, others looked forward to London outside the EU as a better laundromat, where the rules could be bent to get even richer.

Sir Pat Kennedy, though he was a fervent Europhile, did not look at a deregulated London with a jaundiced eye if there were profits to be made. The City outside of the single market would certainly lose some of its lustre, but for certain it opened another door to an anything goes haven for tax dodgers, skimmers and gangsters.

Cash laundered through greedy British High Street banks had filled the pockets of Russian gangsters and corrupt politicians. The same bank’s had almost certainly served as a conduit for many a nefarious Kremlin hatched project.

The list of banks investigated for money laundering read like a Who’s Who of British banking, and it included INI, and that was just the tip of the iceberg that hid the services offered by specialised private banking firms.

The obvious question was how such huge sums of money escaped the supposedly hermetic regulations barrage.

Tens of billions had been illegally moved out of Russian through Moldova and Latvia as well as other murky banking centres, much of it invested in the London property market, or siphoned off to New York, Hong Kong, Singapore, and more recently Berlin, via offshore shelters, where it was also invested in property.

I, who lived in Chelsea with my Russian wife, embarrassingly fell into the same bracket of profiteers, though not a penny of my money had come from Russia, on second thoughts my work for Sergei Tarasov and the bank probably had contributed to my pile, somewhere upstream.

The parents of Alena’s classmates, at her private Russian school in Kensington, were unmistakeable very prosperous, who, according to Ekaterina, were mostly nouveau riches expats, many working in the City with commodity trading companies selling oil, gas and minerals.

According to Roman Borisovich, a former Russian banker turned whistle blower, ‘London was the most corrupt place on earth, in the sense that there was a higher concentration of dirty money per square foot here than anywhere else on earth...once you’ve got your money into the UK, it’s safe, because you have the rule of law and property rights.’

Sarah Kavanagh at Guthrie Plimpton regularly handled property sales for Russian buyers, on the recommendation of INI Moscow, many of whom had set up businesses in London to act as intermediaries in the Russian import-export trade and often through complaisant third party countries, circumventing sanctions, or as transit companies, acting as fronts, skimming commissions to fictitious agents with transfers to countries where the judiciary and financial authorities were corruptible.

Tens of thousands of properties were owned by offshore companies in the British Virgin Islands and other UK tax havens, from which huge sums of money were legally wired in payment for prime residential and commercial property acquisitions in London and the Southeast of England.

Murky capital to the tune of more than one hundred and fifty billion dollars had flowed into the City from non-identifiable sources, enough to destabilise the country’s financial system, transforming the UK into one of the world’s greatest offshore tax havens.

With the heat on property transactions it wasn’t surprising that launderers were turning their attention to the art market. It was so much easier to move a suitcase size painting worth tens of millions of dollars, weighing next to nothing, by private jet, from one capital to another.

Art objects escaped taxes, banking regulations, crime and anti-narcotics agencies, and they moved to and from auctions, exhibitions and museums with few questions asked.

Art could be stored in a Swiss bank vault, invisible to bus loads of gawkers on organised tours to enviously goggle at the homes of Russian billionaires on the streets of London.

Visible to all who took the trouble to look, over thirty five thousand top end London properties, many bought with black money, were owned by offshore based companies, or individuals, and in certain districts like Westminster, one in ten properties were owned by offshore entities with the real owners being unidentifiable.

The sale of art and property was full of contradictions.

When a property was sold a lawyer drew up a deed that laid out in black and white all the details of the sale, the names of the buyer and seller, a list of previous owners, prices, loans and many other interesting facts.

On the other hand when an objet d’art was sold the identities of buyers and sellers were anonymous. Often the buyer did not know who the seller was and vice versa. Inevitably this opacity did not escape the attention of money launderers and tax dodgers.

Although auction houses had reinforced certain rules as to the names of buyers and sellers there were many loopholes in the international art market, where the annual sales approached the one hundred billion dollar mark.

In one sensational scandal, US authorities accused a leading Malaysian businessman of recycling billions of dollars of stolen public funds through the acquisition of property and art. Works by Basquiat, Rothko, van Gogh and others were bought at auctions by an offshore company owned by one of the accused.

Malaysian businessman and art collector Jho Low had sold part of his collection of artworks, by Basquiat and Monet, at a steep loss, as the FBI investigated his financial dealings in the US and abroad.

Low had bought the Basquiat, Diamond Dust Heads, for near fifty million dollars at Christie’s in 2013.

In addition three artworks were pledged as part of the collateral for a loan of about one hundred million dollars from Sotheby’s Financial Services.

The FBI suspected part of the money Low had used to build his collection had come from a Malaysian sovereign wealth fund he helped to set up in 2009, known as 1Malaysia Development Bhd or 1MDB. The fund was set up in collaboration with the troubled former Malaysian Prime Minister, Najib Razak, the fund’s president of the board of advisers, who was now facing charges of charges of embezzlement, stealing government funds and bribery.

The UK government had welcomed rich Russians with open arms ever since the dawning of the oligarch generation following the dissolution of the Soviet Union and the fire sale of its assets.

Politicians of all shades applauded when oligarchs listed their ill gotten businesses on the London Stock Exchange, when they became the patrons of art buying treasures at Christie’s and Sotheby’s for out of this world prices, they even cheered when the bought football clubs.

Suddenly, after the Salisbury nerve agent attack, British politicians woke up, with Theresa May telling Parliament, ‘To those who seek to do us harm, my message is simple: you are not welcome here,’ adding, ‘There is no place for these people, or their money, in our country.’

A little belatedly if you ask me.

The Fitzwilliams Foundation and its forerunner the Adhoc think-tank, basing their estimations on INI InterBank data derived from official sources in Moscow, had calculated forty billion dollars of directly linked Russian money was floating around the UK, in bank accounts, property, business interests, aircraft, yachts and works of art.

To that it was necessary to add indirect investments in business and property through nebulous offshore holding companies in fiscal tax havens in the Caribbean, Switzerland and a host of other countries including Israel and Cyprus.

In total more than one hundred billion dollars of Russian cash has been squirrelled away in one form or another in the UK and its Overseas Territories.

Other observers, including my economist colleague, Thomas Thomas Piketty, estimated that more than half of the total wealth held by Russian citizens was based offshore, that is to say eight hundred billion dollars, controlled by a hundred or so individuals, this, however was not all held in the UK.

Piketty noted, ‘Rich Russians live between London, Monaco and Moscow.’ This of course was nothing new.

My principal insider source of information was of course INI’s different banking centres, London, Dublin, Amsterdam, Moscow and Hong Kong, through which money flowed in every direction, including a number of opaque doglegs where it was relabelled before continuing its route towards whiter than white investments, in for example the UK.

Sarah Kavanagh had an endless catalogue of anecdotes concerning Russian property buyers who flocked to London, with almost a tenth of her buyers of prime property from the former Soviet Union, which amongst other things had pumped up prices by some eight hundred percent in recent years. They were not the only ones, London had attracted the mega rich from every corner of the planet with their petrodollars and dirty money.

Amongst these were Roman Abramovich whose property on Belgrade Square was worth one hundred and fifty million dollars. Then there was One Hyde Park bought for over one hundred and thirty million, not forgetting Park Place, Andrey Borodin’s stately home near Henley-on-Thames, for one hundred and fifty million.

And when the ran out of properties to buy they bought art, and Ekaterina helped them.

British politicians from Blair to Cameron had courted Russians and their leader Vladimir Putin ever since he came to power, in spite of the trail of blood left by his deceased enemies, murdered or dead in suspicious circumstances on British soil, including my very good friend Michael Fitzwilliam who was swallowed by the Irish Sea.

Cameron’s argument was, Russia is resource-rich and services-light, whereas Britain is the opposite. He even boasted that Russian companies accounted for a quarter of share offerings on the London Stock Exchange, adding, ‘It means minimising the burden of regulation so that business and entrepreneurship can flourish.’

Encouraged by politicians, the biggest business consultancy firms and wealth management units had been leaders in advising Russians where best to invest and shelter their money. I should know, having advised INI over the last decade, and made a lot of money from it.

Government authorities and banks have consistently ignored the provenance of funds, allowing them to be spent on property and other assets, including art and cultural assets, making it difficult to unravel decades of questionable acquisitions and investments.

Some one hundred thousand UK properties were owned via offshore companies, which effectively blur their ownership, many of them are owned by Russians and were bought with dirty money.

A simple calculation shows the enormity of this investment, though certainly not all such properties are owned by crooks, but most were involved in some kind of tax optimisation scheme.

 

Chapter 58

An Important Visit

Sir Pat Kennedy was on duty in Beijing, where he had joined the British delegation for talks with Xi Jinping on trade relations. The delegation led by Theresa May was hoping to drum up business in the wake of Brexit, a rather futile hope considering the UK hadn’t had an extraordinary success given its one and a half centuries old link to Mainland China via its colony, Hong Kong, and its near half a century as a member of the EU, which had in no way prevented them from extending the UK’s existing trade with the Middle Kingdom.

Pat had just returned from Ningde, a small city one hundred kilometres to the north of Fuzhou, capital of the tea-growing province of Fujian in Southeast China. Fuzhou was a couple of hour’s flying time from Hong Kong in the bank’s jet and another hour by road to Ningde, home to CATL, one of the world’s largest makers of electric-vehicle batteries.

Pat’s mission was to invest in CATL’s new billion dollar plus factory, which would surpass Tesla’s mega-factory in Nevada. The existing facilities, on the edge of a dusty village nearby Ningde, were already vast, half an hour’s walk from one end to the other.

In spite of having lived and travelled nearly ten years in China, Pat never ceased to wonder at the extraordinary scale of things and how industries appeared from nowhere, almost overnight, as was the case with the electric-vehicle battery manufacturer, which was barely seven years old, founded by an engineer who had grown up in a nearby village.

INI Hong Kong was a step ahead of foreign investors as it was now a Chinese bank after having moved its headquarters to the former colony, which since the handover in 1997, was a Special Autonomous Region of China.

INI was a partner in an IPO to raise two billion dollars in funds to finance the battery project, as China set 2025 as the date for completely phasing out the production of fossil-fuel powered vehicles.

Pat had told Theresa May, China’s goal was to lead the world in capacity and technology. She wasn’t listening, on the one hand she was in the uphill battle of charming the Chinese, who had given her the sobriquet ‘Auntie’, which was not very flattering for an old lady whose ‘long nosed’ beauty was far from Chinese standards, and on the other in her no less embattled task of negotiating the UK’s exit from the EU.

Pat’s job was to be seen as a deal maker, by both sides, and he had rolled out the big guns to help, that is his Chinese family, the Wu’s led by Lili, who was now a glamorous figure on the front pages of Chinese women’s magazines.

CATL’s products, lithium-ion batteries, would soon be inside of almost every locally made electric vehicle, including Chinese manufactured VWs, BMWs, Toyotas and Nissans.

It was for this reason he and Lili would fly to New York, for a clan meeting, which coincided with two key art sales, where Tom Barton would bring him up on the latest news on South American lithium supplies.

The global race to secure lithium was on and INI was in positioned to play a leading role as Beijing was looking to import a lot more from South America, a major supplier with huge reserves in Bolivia, Chile and Argentina.

Mining lithium, cobalt and nickel for electric car batteries had revived the hopes of businesses like Glencoe, which after a disastrous year in 2016, was still one of the world’s biggest producers of cobalt, copper, zinc and nickel.

It was a paradox, an Irishman, head of a major City banking group, helping the hereditary enemy, London, out of the hole it had dug itself into.

The irony of the meeting at the Diaoyutai State Guest House wasn’t lost on Pat, it was Theresa May on the Chinese fisherman’s ‘hook’ as the name of the building translated.

Lili loved the state diner in honour of the British Prime Minister, during which May dodged posing questions of human rights, as had Emanuel Macron a month before. It was now the turn of European nations to Kowtow to the new emperor Xi Jinping.

The only negative point came when Liam Fox, the British International Trade Secretary, announced he didn’t want to see any form of customs union with the EU, contradicting the prime minster, who only the day before appeared to leave the door open to some vague sort of customs union.

Behind the talk of a bespoke deal and with less than twelve months to go to the fatal Brexit date, the British government staggered from one contradictory position to another, which was alarming for people like me living in London with an Irish EU passport.

If the worse came to the worse we’d up roots and move to Paris, a city I was beginning to appreciate, following the lead of Liam Clancy and my good friend Pat O’Connelly.

 

Chapter 59

A Missing Yacht

Pat Kennedy was concerned, a luxury super-yacht, Equanimity, said to be the fifty fourth biggest in the world was missing, the whole ninety metres of it, with its swimming pool, helipad, movie theatre, spa and sauna, plus staterooms for eighteen guests and quarters for its crew of twenty eight.

It wasn’t missing at sea in the conventional sense, but unfindable. Why did that concern Pat? Well INI Hong Kong had outstanding loans on the vessel, that was serious enough, though what was potentially more damaging was the fact the bank had financed Jho Low, now embroiled in a sensational case of corruption in Malaysia.

The yacht Equanimity, built by Oceanco in Netherlands in their Alblasserdam shipyard was delivered to her owner in 2013. The yacht’s interior has been conceived by Winch Design, lined with marble and gold leaf, and decorated with several very valuable works of art.

With its twin 4,828 horse power diesel engines, a top speed of 19.5 knots, and a fuel capacity of 271,000 litres, the yacht was capable of going anywhere, even crossing the Pacific to Panama City.

INI was on the hook for a quarter of a billion dollars for the yacht alone, plus another one hundred and fifty million for the works of art on board.

Naturally INI was insured, but Pat could not let a few swindling Malaysian crooks embarrass him.

The yacht was registered in the name of Jho Low, of Jynwel Capital, a Malaysian registered business. The vessel was said to have been bought with embezzled funds siphoned off from 1MDB, with the complicity of former Malaysian Prime Minister Najib Razak.

Low was wanted by the US authorities, on ‘suspicions of criminal mismanagement, fraud, bribery of foreign public officials, aggravated money laundering and misconduct in public office,’ and in connection with money laundering through American banks, they claimed he had transferred one billion in funds from a Malaysian state owned fund to a private account.

According to the accusations, 1MDB had formed a joint venture with a Saudi oil company, PetroSaudi International, through its Cayman Islands subsidiary.1MDB then transferred funds to the joint venture in relation to oil and gas exploration projects in Turkmenistan and Argentina. However, the funds were switched to a bank account in Switzerland, in the name of Good Star Limited, owned by Low, and nearly two billion dollars were laundered through US banks.

The Equanimity was believed to have sailed from Malaysia and Singapore to Bali, then to the Philippines, where the yacht’s Automated Identification System had been switched off, to make it difficult to track. However, Pat’s friend Sotero Lee had got a fix and had alerted the authorities who were now playing hid and seek with the yacht.

 

Chapter 60

A Search into the Past

As the Sommières investigation progressed I found myself thrust more and more into the past, the Paris of the first half of the 20^th century. To places like rue Richpanses, nearby place de la Madeline in heart of Paris, where the Bernheim family established an art gallery in 1906, after having moved from rue Laffitte.

The days when women wore long dresses and large hats was an age of elegance, when Paris with it wide boulevards was a city where a spirit of brash self-confidence reigned, a joie de vivre, where painters like Picasso set their creative spirit free in their often dilapidated studios, living their precarious carefree bohemian lifestyles in cafés and cabarets, whilst wealthy art dealers enjoyed their own elegant way of life in their fine hôtels particuliers, as did the Bernheim family.

The Bernheim’s was a family business, Josse’s grandfather Joseph Bernheim , and his father Alexandre Bernheim, a friend of Delacroix, Corot and Gustave Courbet, started by opening his gallery in 1863 at 8, rue Laffitte in Paris.

Paul Cézanne and Josse Bernheim at Aix en Provence in 1902

Alexandre Bernheim’s sons, Josse Bernheim-Jeune and Gaston Bernheim-Jeune organised the first Van Gogh exhibition in 1901, followed by exhibitions of many others who were to become renowned painters, including Cézanne, Matisse, Le Douanier Rousseau, Dufy, Vlaminck, Modigliani, Utrillo and Gauguin.

More than a century later their gallery still exists, on the corner of avenue Matignon and rue du Faubourg Saint-Honoré, where I went to learn more of the family history.

There I learnt the list of painters under contract to the Bernheims read like a who’s who of great 19^th and 20^th century artists.

Cézanne, unlike Monet, Degas, or Renoir, was ignored by his contemporaries, but Josse and Gaston Bernheim took him under their wings, exhibiting and selling his works as well as publishing the first book about him and his work. Others like Monet, Renoir, Rodin, Bonnard and Matisse became life long friends of the Bernheims and Josse in particular.

Then came the Great War and its aftermath, the Roaring Twenties of Ernest Hemingway, Scott Fitzgerald and James Joyce, followed by the Great Depression, during which France and Europe staggered towards a new war.

Château de Rastignac in Dordogne

With the Nazi Occupation, families like the Bernheims saw a dramatic reversal fortune. They, being of Jewish descent, saw their property seized by the Nazis and the Vichy regime, with their galleries and art collections confiscated.

After the war the Bernheims struggled to recover their property, a task made difficult by the disappearance of the ledgers in which records of their stock were kept.

In 1940, the Bernheims had sent thirty or so Impressionist and Post Impressionist paintings to the neoclassical Château de Rastignac, in Dordogne, for safekeeping. But in 1944, when the Nazis retreated, taking with them five truckloads of looted objects, they set fire to the château, in an terrible act of reprisal against the Resistance, it burned for five days and nights, and only the shell of the magnificent château survived.

Château de Rastignac in Dordogne The paintings hidden in the château since the beginning of the war, included works by Cézanne, Manet, Renoir, Toulouse-Lautrec, Matisse van Gogh. They were never recovered. Had they been destroyed in the fire or subsequently lost in the German retreat? In any case all trace of the works were lost.

It was one of the many tragedies that affected the world of art during that dark period of French history.

On the more positive side we discovered the Nazis had built up a considerable and very detailed database of the art works plundered from Jews and countries occupied during WWII.

It was created by Alfred Roseberg, head of the Einsatzstab Reichsleiter Rosenberg, a special task force set up by the Nazis for the purpose of looting their newly conquered territories.

One of their operations was the cataloguing of objets d’art that had belonged to French Jewish collectors, which had been brought to the Jeu de Paume, in the Tuileries Gardens in Paris, by a special unit that went by the name ERR Sonderstab Bildende Kunst, that is to say to organise the theft of collectors paintings and other objets d’art.

The Jeu de Paume in 1940, where several works from Alphonse Kann’s collection can be distinguished. These include Cézanne’s Le Grand Baigneur, a work by Fernand Léger, and les Dahlias au vase rose by André Bauchant

Today this is a searchable database that consists of scanned registration cards and quality photographs of some thirty thousand works, which may seem like a lot, but was small compared to the immense quantity of works of art stolen by the Nazis, however it would be extremely useful tool for our research as it specifically concerned France.

Rosenberg’s official role, in the system of Nazi ideology, was the development of research relating to Jewish life and Jewish culture, and his goal was to set up an institute dedicated to anti-Jewish studies. The Institute for Research on the Jewish Question was established in 1940, in Frankfurt. Then, following Hitler’s orders Rosenberg’s organisation proceeded with the seizure of works from cultural institutions, specifically, those in France, plundering vast quantities of cultural materials from archives, libraries, collections and museums.

Within days of the German Army’s victory march through the Arc de Triomphe, in June 1940, the sack began, as German agents and military personnel descended on Jewish book stores, shops and businesses, and any other institutions identified as Jewish or organisation proscribed by the Nazis including Masonic Lodges.

At the same moment, on the orders of Otto von Ribbentrop, units of the Geheimes Feldpolizei, backed by