Here Comes The Money: Philippe Segalot’s Carte Blanche

by Paddy Johnson on November 22, 2010 · 1 comment Newswire

Phillips de Pury Carte Blanche

Carte Blanche, the November 9th contemporary and post-war auction at Phillips de Pury, makes headlines over at The Economist. Run by Christie’s department head-turned-private dealer Philippe Segalot, the event broke sales records and raised eyebrows. The latter, and arguably the former, is mostly because Segalot was allowed to bid on works on behalf of his clients; he collected both a cut of de Pury’s buyer’s premium and a consultancy fee from his clients.

Writer Sarah Thornton does a good job of running through the details of the show. As she reports, Segalot bid against his assistant, Ali Rosenbaum, and his business partner, Franck Giraud. All three were representing clients. There were seven “irrevocable bids” placed before the auction started, six of which were bought by Segalot and his assistant. The tactic, in which anonymous third-party investors ensure the sale of a work above a specified minimum in exchange for a cut, offloads the risk of an embarrassing buy-in.  As Thornton tells it, “an investor takes a larger cut of the price if it exceeds the guarantee.”

Meanwhile, not all the works that fetched high prices have been desirable in the past. Warhol’s painting of Elizabeth Taylor, “Men in Her Life”, has never been popular — since it was made in 1962 it’s been privately owned only once, for three years, and has spent its remaining lifetime being passed from dealer to dealer. While unnamed experts estimate the painting’s worth at approximately $15 to 25 million, Segalot, bidding on behalf of a client, bought it for $63.4 million. He told Thornton there was “no question in my mind that ‘Men in Her Life’ was the quintessential Warhol”, which, even if he really believes this, seems out of step with the problem. Good collectors and buyers are patient and wait for lean prices. The market shows little evidence that this image will ever be worth that much again.

Thornton’s piece has prompted a Facebook note from Jerry Saltz calling for market regulation (though he acknowledges that he’s generally opposed to the concept). I’m not an art market expert, but in this situation it seems like there should be a legal obligation on the part of Segalot to disclose his third party investors. After all, couldn’t those anonymous investors be Segalot or one of his many partners? This would mean he’d make an even bigger fortune out of a windfall involving an obvious conflict of interest between his activities and those of his clients.

As for the rest, it sounds sticky, but there’s at least the appearance of transparency. If clients don’t feel comfortable with him having a stake in the sale of auction items he’s bidding on for them, obviously they shouldn’t use his bidding services. Seeing as how there’s no reason to think Segalot will bring a collector a good price though, the real question to be asked here is why are people using his services? Thornton points out one scenario in which collector José Mugrabi overpays for two works, but unloads another for far more than its estimate; surely, though, he’s not the norm. Something doesn’t seem right here.

{ 1 comment } November 23, 2010 at 4:17 am

this third party guarantee/irrevocable bid thing has been problematic for quite a while now. It essentially wraps a veneer of seeming market liquidity and transparency around a traditional private sale.

In this case, though, if Team Segalot was bidding and winning, it’s also possible that they were executing those irrevocable bids, not bidding them up among themselves. It would depend on which bidder each agent was representing on each sale. While it’s not foolproof, the winning bidder numbers should at least give a hint of what individuals walked away with.

That Mugrabi Elizabeth Taylor Warhol inflation, though, smells really fishy. Also, it was painted in 1962, not ’55.

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