in the back
The artful dodgers
Money laundering , Issue 1529
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SOLD! Tamara De Lempicka’s Un Port Sous La Lune, which went for $665,000 at Christie's New York
WHERE would the richest oligarchs and friends of Vladimir Putin turn when sanctions threatened their lavish spending habit with the world’s top art auction houses? To the United Kingdom, of course, with its helpful lawyers, bankers and identity-concealing shell companies.

A report from the US Senate investigations committee looking into how “Russian oligarchs appear to have used transactions involving high-value art to evade sanctions” reveals the fortunes that brothers Arkady and Boris Rotenberg squirrelled through Sotheby’s, Christie’s and Bonhams in New York and London, both before and after they were sanctioned following Russia’s invasion of Crimea in March 2014. That they could carry on putting their millions into Magrittes, Renoirs and Dalís owed everything to the enthusiasm of the art houses for the oligarchs’ dubiously acquired riches, and Britain’s friendly company laws.

In 2016, the Panama Papers, obtained from inside law firm Mossack Fonseca by the Süddeutsche Zeitung and shared by the International Consortium of Investigative Journalists, revealed a series of shell companies owned by the Rotenbergs and Arkady’s son Igor, set up by London-based lawyer Mark Omelnitski. He also worked with a US art dealer called Gregory Baltser, whose most important clients were the Rotenbergs – operating through the shell companies.

Suspicious funding
In 2013, one of Arkady’s Russian industrial companies sent $124m to a British Virgin Islands company, Highland Ventures Group Ltd, which served as the source of the funds for the art purchases. A clue to where this kind of disposable money comes from emerges in the latest EU sanctions list stating that companies controlled by Arkady Rotenberg – a friend of Putin going back to the latter’s St Petersburg KGB days – have won $7bn of Russian state contracts just since 2014, many without competition.

Until the 2014 sanctions, to fund an art purchase Highland Ventures would transfer funds to a Belize company called Steamort Ltd, which would buy the work. The auction houses turned a blind eye to the suspicious funding. When Christie’s compliance department questioned the unknown ownership of Steamort in 2012, a London “business development manager” replied: “Steamort/Grigoriy [sic] Baltser have been [a] regular client of Christies. Just today he participated in a sale in London and is bidding tomorrow as well… I personally know [him] very well. Is it possible for me to get this documentation to you after the sale. He is bidding on 19 lots!”

When the issue still wasn’t resolved a month later, with a big sale approaching in New York, the Christie’s “client adviser” for Baltser wrote: “London can accept the verbal confirmation of the beneficiary [sic] owner of the company (as an exception). This is a very important client of ours who actively buys in various Gold Sale [ie top-dollar] categories. We worked very hard to encourage this client to participate in the sales.” Days later, the owner of Steamort was reported to the Christie’s money laundering team to be one Luisa Brown. No trace of her could be found and no evidence was provided that she was the owner, if she existed.

MAT MATES: Arkady Rotenberg with his old chum Vladimir Putin
‘Oligarchs on the list’
Baltser even persuaded Christie’s to enter into a “partnership” in which Omelnitski would assure the auction house that Baltser’s anonymous clients presented no money-laundering concerns. As the US Senate committee put it incredulously: “To be clear, Mr Baltser put the same attorney who established and maintained shell companies to mask the Rotenbergs’ ownership in charge of his new venture’s AML [anti-money laundering] compliance.” Sotheby’s declined to partner with Baltser formally, although its Russia and Europe chairman at one point confided in an email: “It looked quite impressive to me – to have… oligarchs on the list.”

In the committee’s words, Sotheby’s “continued business as usual”. It was rich business, too. Highlights included Dalí’s Monstruo Blando Adormecido through Sotheby’s London in December 2012 for $2.35m, and Lyonel Feininger’s Brücke II at Christie’s London for £4.8m in February 2014. “Following the imposition of US sanctions… Mr Baltser added a step,” reported the committee. This took the form of a UK limited liability partnership called Baltzer LLP, owned by shell companies registered in Cyprus and the BVI. “Steamort generally wired funds to purchase the art to Baltzer LLP. Mr Baltser would then take title for the purchased artwork in the name of Baltzer LLP and wire the funds to the auction house from his Baltzer LLP account.”

Russia sanctions were a threat to the auction houses. A Sotheby’s employee wrote that “quite a few of our clients are affected by this”. At Christie’s, one emailed that there were “familiar faces on the sanctions list”. But Christie’s Russia managing director was defiant. The firm, he wrote, needed to “focus on the fact that there is [sic] huge amounts of money currently being repatriated to Russia from overseas. This will lead to a lot of money needing to be invested in ‘safe’ assets which means being able to sell [post-sanctions] locally becomes increasing [sic] interesting”. (Few will have remitted more than the Rotenbergs.

In the four days between Barack Obama’s announcement of Russia sanctions and the naming of the Rotenbergs, shell companies linked to them sent $120m home.) Rather than retreat from Moscow, Christie’s saw more opportunity. Its Russia MD continued that “even in this economic climate Christie’s is still investing in its Russian operation by going ahead with the new office [which opened in 2015]. So look at the positives”.

A money-launderer’s Silk Road
Sales to the now sanctioned Rotenbergs through the new LLP arrangement remained positive, the committee finding a further $22m of transactions. At a modern art auction at Sotheby’s New York in May 2014, Baltzer LLP bought six lots for $6.8m. In November at Christie’s in New York, Baltzer snaffled Tamara De Lempicka’s Un Port Sous La Lune for $665,000. Others still selling to Baltzer included Bonhams and Phillips.

Banking for all this business followed what has become a money launderer’s Silk Road: Russia, to the Baltics, to the west. For most this meant: the BVI company Highland Ventures’ account at Gazprombank in Moscow transferring funds to Steamort’s account at the Tallinn Business Bank in Estonia, which then wired the funds to Baltzer LLP’s account at Barclays in London.

When the Panama Papers revealed the ownership of the Rotenbergs’ shell companies, Barclays investigated accounts connected to Omelnitski and shut them down (including Baltzer LLP’s). Sotheby’s, Christie’s and Phillips stopped dealing with Gregory Baltser and Baltzer LLP in the course of the Senate investigation. As ever, however, it wasn’t until evidence was placed right under their noses and they had no alternative that the dealers and bankers walked away from a suspect client. Many more still lurk behind paddles being anonymously raised in the world’s top auction rooms.

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CORE BLIMEY
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