Monday, November 12, 2007

A different kind of risk


Asked by me in an interview for The Art Newspaper in 2003 whether Sotheby's were over-exposing themselves by taking up vendor guarantees (or 'principal positions'), Sotheby's Chief Executive Bill Ruprecht (left) said:

"You take a different kind of risk when you take a principal position and I expect to be rewarded for that."

It seems those rewards were thin on the ground at Sotheby's recent New York Impressionist and Modern sales. A few days ago, while trying to shore up the company's sliding share price, Ruprecht revealed that the principal positions his company took at the Imp and Mod sale resulted in a $14.6 million pre-tax loss (more on that here).

In the same series of interviews conducted for The Art Newspaper, Christie's CEO Ed Dolman (right) told me, "Guarantees are absolutely here to stay. There's no question about that, unless there's legislation against them, but I can't see that could ever happen."

I wonder whether today Dolman has the same confidence in the art market's ability to resist external regulation as he had four years ago just prior to the great art-rush. Recent revelations would suggest that it's only a matter of time before the Securities and Exchange Commission, or whatever agency monitors ethical behaviour in today's financial markets, steps in. After all, art has now become little more than a crudely tradeable asset class and perhaps ought to be regulated accordingly.

With Sotheby's and Christie's clipping the tickets in and out, swinging from the chandeliers, and offering kick-backs to dealers for early paddle-waving, surely it's only a matter of time before high-end fine art auctions are exposed for what they are — an elaborate form of insider-trading.

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