Art World Infamy: Inigo Philbrick – Asset Class (Ep. 1)

0:01I'm Eileen Kinsella, and this is Art World Infamy, a podcast miniseries from Artnet News. In the spring of 2020, Inigo Philbrick, once one of the most talked-about young art dealers in the world, was arrested on the island of Vanuatu. The charge? Orchestrating a brazen$86 million fraud that shook the art market to its core. How did a rising star in the art world build such an empire of lies, and why did so many people trust him? Even people who love art often admit they don't understand the art market. Why do prices soar into the millions for a banana taped to a wall or a Banksy that shreds itself live on stage?

0:44The answer is, there are rules, but they're murky. The art world runs on trust, secrecy, and handshake deals, creating a system that rewards insiders and obscures the real value of what's being traded. This is the story of a young dealer who gamed that system. Across four episodes, we'll trace the rise and fall of Inigo Philbrick and ask a deeper question. How did the art market become a playground for high finance? And just how far can you take things before it all comes crashing down around you?

1:36On the evening of May 15, 2019, at Christie's Auction House in Rockefeller Center, all eyes in the contemporary art world were focused on rabbit, a shiny, stainless steel sculpture of a faceless bunny by art star Jeff Koons. It was offered from the collection of late Condé Nast publishing magnate Cy Newhouse, and it sold for a whopping$80 million. You have it, sir. $80 million. To some, the rabbit is the holy growl of contemporary art. To others, the pricey bauble is the ultimate symbol of art world excess. us. Regardless, the bidding war that night made Coons the most expensive living artist in the world and stole the show.

2:22From afar, in their home in Berlin, two seasoned collectors, husband and wife Daniel Temple and Loretta Wartenberger, were following the auction closely. But it wasn't the rabbit they were interested in. They were tracking a far less expensive, but to them, no less important artwork, a black and white, untitled, photorealistic painting of Pablo Picasso by an Italian-Swiss artist named Rudolf Stingell. Number 33 is the Stingell of Picasso of 2012. Here he is, wonderful picture of 2012. We start the bidding at$4 million,$4 ,200 ,000 for the Stingell. Stingell is himself something of a rock star as far as artists go.

3:01His playful, conceptual approach to painting and his use of unorthodox materials like styrofoam made him a hit with contemporary collectors starting in the 1990s. Owning a Stingle is like being in on an inside joke in the art world, and his increasing popularity had sent prices for some of his works beyond$10 million. Wurttenberg and Temple had acquired their Stingle years earlier for$7.1 million. Now, they were about to find out just how much profit they would reap on their savvy investment. Who knew? It might even spark a bidding war. At least this is what they'd been told by Enrico Filbrecht, a young, up-and-coming art dealer who they had been working with in recent years.

3:44Sure, at five-five then. Yours it is, at five million five hundred thousand. Yours, at five-five. Nine-three-six. Well done. Jud Grossman is the sole proprietor of boutique law firm Grossman LLP. He specializes in art-related lawsuits and disputes. These can range from everything such as a disagreement between experts about ownership or authenticity to the purported condition of an artwork or not receiving payment after consigning or selling a piece. Because there is not an actual dedicated body of law for art, legal disputes can be complicated and can often be decided by laws governing, for instance, copyright, or fair use.

4:29These are the types of cases that Judd takes on. He plays a big part in this whole saga, so you'll be hearing a lot from him over the course of this series. I've always said that if a motion picture were to be made, the movie would start in the sales room at Christie's at that evening auction, where multiple people in that room believed they were the consignors of the piece, only to learn later that they weren't and everything blew up. What Judd is referring to and what's important to know is that at the time, Stinkle had become the focus of an increasingly popular yet often risky form of art investment known as fractional ownership.

5:06It involves selling shares of a painting based on the overall purported value to multiple investors who are promised a profit when the work is resold for a higher price. However, in this case, the fractions didn't add up. It started very similarly to all of his other schemes, where he was purporting to sell multiple interests in the same painting to multiple parties. 50 % plus 50 % plus 50%, the math just doesn't work out. So basically he was selling multiple interests to multiple parties in the same work, totaling greater than 100%. percent. This young art dealer, Inigo Philbrick, had promised or pledged part ownerships in the Stingel painting to various investors.

5:52Inigo had been advising Wurttenberger and Temple for several years and was concocting ever more intricate and complicated deals with the promise of pure profit by speculating on rising markets for certain art stars. What made Inigo stand out to them was less about his tactics and more about the margins he was promising. A dealer I spoke to described him to me as a, quote, kind of a secondary market assassin, pure speculation, end quote, adding that he attached himself to certain markets that were perceived as blue chip and rising with exponential profits. Without getting too much into the weeds, the transactions took different forms, which complicated things as a legal matter.

6:31But there were some questions about whether one of those transactions was actually a sale or was it really a loan that Inigo was taking in return for pledging that painting as collateral. In the other instances with Fine Art Partners and with Sat Finance, who was our client, Inigo was purporting to sell interests in the painting. And so when the work ultimately made its way to auction at Christie's in an evening sale, you had those three different groups, each thinking it was the consigner of record, each thinking it was entitled to its share of the proceeds from the sale, not knowing the others were involved at all.

7:04Further complicating matters, deals like this are often done on a handshake basis, with shockingly little documentation and paperwork about the transaction, or full knowledge of the work's whereabouts. Inigo was Christie's auction point person on this sale, even though the House allegedly knew that he wasn't the actual consigner and was acting as an agent.

7:27Jud Tully is a veteran art market reporter who has been closely following auctions and a wide range of related issues for more than three decades and has more recently turned to filmmaking. His first documentary is about the elusive artist David Hammons, titled The Melt Goes On Forever, The Art and Times of David Hammons. Like many art market observers, over the course of his career, he's witnessed the shifts and changes, including increasing levels of risky hedging and speculation in the way that business is conducted in the art world. Fractional ownership, it's like a danger zone. There's some companies that only do that.

8:05You might as well invest just in equity, safer or whatever. But I think it's almost like the cryptocurrency arena and life in the pixel world. I own these pixels. Do you want to sit down with me and I can show you 5 ,000 images of something?

8:29Further underscoring the risks of treating art as an asset, several advisors told me they refused to be involved in these types of deals. even if their clients request it. For them, building and curating a collection is done with the goal of enjoying it for the long term. Of course, it's great to look at what you own and know the value has increased over the years. That's what a good eye and savvy acquisitions are about. No one wants to hear that art they own plummeted in value or that the particular artist has fallen out of favor. But theoretically, pure profit is not and should not be the only reason for collecting art.

9:03Todd Levin, an elite art advisor, takes a similar approach. He's been in the business for decades and advised some of the top collectors in the world. I will not work with clients who even want to get involved with that. And this is not to say anybody's bad or good or right or wrong. It's just my feeling there's a different kind of advisor for people who want to engage in those sorts of modalities. I'm not your guy if you want to get involved with fractional shares and stuff like that. I'm more of a collection builder. People I tend to work with, I work over very long periods of time, 10 years, 20 years, quarter century, and more.

9:40And we're building significant collections that might rival institutional collections, but are simply being held by a private individual as opposed to a public. Assetization, if you want to call it, of art is really, really dangerous for art. And while treating art as an asset and structuring all manner of speculative deals around a particular work is nothing new, What did change as the art market boomed over the past two decades is the speed with which values and prices escalated, as well as the frequency of complicated deals. Ben Godsell, an art market veteran, spent time at Phillips Auction House and is now an independent dealer and advisor.

10:21He's also a co-host of the Nota Bene podcast, which bills itself as, quote, the podcast version of a boozy lunch at St. Ambrose, end quote, a reference to the popular chain of cafes and an art world hangout, particularly the Upper East Side location. Ben previously worked at Phillips, one of the biggest auction houses in the world. He knows that co-owning artworks has been a part of the industry for a long time and will continue to be part of the trade. This includes both private sale transactions and deals made for auctions, though obviously details about what he has seen or can share are limited.

10:54Dual and joint ownership of artworks, especially by dealers, has been going on for like hundreds of years. Art funds have existed for, you know, almost 100 years. I was just reading a book talking about one that was started in the 1960s. I know that wasn't 100 years ago, but that wasn't the first one. In a world where things are increasingly expensive, it made sense where people would try and find advantage. So yes, there was an increase of these things, although I think there's a real historical lineage. But in my experience, at that point in time, all the people I worked with that it might appeal to become a third-party guarantor, for instance, they were coming from generally a place of love of the artwork.

11:29For those who are unfamiliar with the term, a third-party guarantor is a description for an individual who steps up to strike an outside or independent deal with an auction house. The idea is that the person agrees to back or buy the work at auction for an agreed minimum price, locking in a layer of protection for the auction house and ensuring it will sell. If bidding is lackluster or non-existent, the person buys the work as agreed and takes it home for a price that is healthy but doesn't reflect heated or intense bidding. If it happens to be the case that bidding competition is stiff and the price soars, the person does not necessarily win the work but shares in some of the upside profit in exchange for having taken on some risk.

12:10Like other financial strategies, it's based on pure speculation. One expert I interviewed for a 2019 story during the height of dealmaking described third-party guarantees as, quote, magic for the auction houses because it allows them to get the seller and at the same time pass on the risk, end quote. On the other hand, it's not always magic for the guarantor themselves. That's because, as one art law attorney told me, he had numerous clients who unexpectedly, and sometimes unhappily, went home with artworks they took a gamble on after competition failed to materialize. So let's say that you step up to be a third-party guarantor on a Claude Monet Waterlilies painting, one of his most popular and famous subjects.

12:54It could be a painting with a minimum price of$5 million that you think might get as high as$7 million because of demand and competition when it's eventually offered in the auction room. However, as most gamblers know, you can never predict actual action, be it at the Super Bowl or a Sotheby's evening sale. If bidding soars way past the minimum, you won't go home with the artwork, but you'll share in the upside profit in exchange for having assumed the risk. In the opposite scenario, if bidding is thin or barely meets the minimum, now the painting is yours. It's great if you love those water lilies, but it's a bummer to say the least if you don't, and now you're out$5 million for a work you don't love, So you'll either be staring at it on your wall or putting it in storage.

13:37And you can bet it will take a substantial amount of time before you're able to resell to recoup your investment, especially if you don't want to incur a fire sale price. I think in part because of the commoditization of art, people looking at it in many ways as a pure investment and its own asset class, you see the rise of fractional interest purchases, for example, where someone goes into the transaction never intending to have it on their wall to enjoy it. But as an investment, you see a lot of companies, business models are based on this, Masterworks and others who are quite good at it. And it's very positive overall.

14:13But the rise in those sorts of transactions, the lowering of the barrier to entry or access, increasing market participation by people who really don't know the area that well, I think gives rise to more problems than we were seeing. Not because there's more bad actors, because more things can just go wrong in those situations. However, the details of the art buying agreement with the previously mentioned collectors Daniel Temple and Loretta Wurtenberg, who operated under an entity known as Fine Art Partners, or FAP in the art world, were pure speculation and a gamble that prices would trend upward, based solely on Inigo's assurances.

14:50Their agreement with Inigo involved a group of artworks in constant rotation that they would aim to buy and sell strategically, with the aim of reaping profit on in-demand artists and works. These included works by Wade Guyton, Yayoi Kusama, Christopher Wohl, and of course Stingle, all of whom had been enjoying robust markets. Let's take, for instance, one of the works they acquired together, an untitled stainless steel sculpture by minimalist art star Donald Judd. It was purchased for$2.2 million and had a target resale price of$2.8 million. That means they had been assured they would get a roughly$600 ,000 profit, which seems like a great situation.

15:30The issue? There was no stipulated timeline. Would they get that$600 ,000 appreciation in six months, one year, or five years? Not only was the timeline not specified, no one can predict how the often fickle art market will regard a particular work in future auction seasons. As if these deals weren't complex enough, some of the artworks involved were also part of fractional deals. So at the same time Inigo was telling fine art partners about great art investment opportunities he had identified, he was also busy finding other co-investors to sell shares of those same artworks to. Sasha Pesco, who operated under a company called Sat Finance, was one such investor.

16:13He ponied up around$3.5 million for what he believed was a 50 % share of the Stingal Picasso. so. Pesco eventually turned to Judd Grossman for help. So not only was Inigo structuring numerous deals in this manner, both for auction and private transactions, he was leaning heavily into promotion of Stingel. He was known to refer to himself as Stingel Damas, a riff on the 16th century French astrologer and seer. He centrally placed in the Stingel market, and I'd say that And on the secondary side, it's fairly rare for paintings to transact without my having some sort of tangential involvement, just because I'm also someone who gets called for advice a lot by both other dealers and collectors.

16:59And sometimes I have someone calling me for advice about a picture they're selling, while I'm simultaneously getting someone else calling me and asking if it's a good painting and they should buy it. Charlotte Burns is another veteran art market journalist, and these days, she and former Artnet executive editor Julia Halperin co-author the Burns-Halperin Report, a groundbreaking look at representation of female and African-American artists in museum collections. Burns has been tracking the art market long enough to recognize what seemed like a good play. I think where Inigo was really smart is that he just really concentrated on a few artists.

17:33Like he wasn't trying to corner the market in like 20 artists. He wasn't trying to hop onto trends. He was trying to make markets. He was trying to really get in on, like, a few really specific market artists. Judd Tully also noticed Inigo's penchant for Stengel and how the painter ironically became the source of his downfall. I mean, I couldn't put four sentences together about the work of Rudolf Stengel. In a way, Stingell, for Inigo Philbrick, became an albatross with this famous image of Pablo Picasso that wound up at auction at Christie's in 2019, or the kind of house of cards, whatever you want to call it, where they found out that he was manufacturing false documents to show what didn't happen.

18:41Much of the rise of financialization of the art world is also closely linked with broader interest in art and art prices. Art market and auction coverage were once buried in major newspaper and magazine sections. However, the rise of contemporary art and art fairs in the early aughts, fueled in part by new and growing interest from hedge fund titans like Stephen Cohen and Ken Griffin, who shelled out nine-figure prices for blue-chip paintings, only helped broaden global interest and make it more mainstream. Having covered the art market for many years, Charlotte is also keenly aware of the shift in perception of the art world, namely the change in what was once an extremely niche industry to one that has slipped into front-page coverage and pop culture conversation.

19:24The thing about the art world is that it benefits from this perception that it is an incredibly glamorous, fun industry. And the art world, especially the major market players, they've really, really tried to stoke that story over the past couple of decades, but really decade and a half. And you've seen the media narrative really shift too, which is also propelled by the internet sort of causing a fragmentation in media. So art market journalism, in the time that we've been writing about the art market, has really shifted from being very trade focused. You're doing kind of service journalism, writing for the trade about like brown furniture is no longer fashionable.

20:09And here's what happened in the day sales to writing for a vast potential audience that's going to click through and help save the trade. It's like the entire readership basis has changed and the market's been a portal for that. And that's a fundamental shift in the way that the purpose of journalism and art market journalism has even existed from when I first started covering it. And it was like page 67, boring stuff for a specific audience. And then like at the end, it's like page one, there's a billion dollar sale. And it's like Very much designed as a honeypot to draw in a big spending potential billionaire audience who might get lured in by the glamour of the art market as a potential store of value and a fun place to be.

21:02I remember Alexander Gray saying to me once, like, it became the global golf course, you know, especially in New York where there isn't a really great golf course. Like, the art world is, like, a great place for people to catch up. And I remember a collector saying that to me once. It's a really great place when you retire, when you've made a lot of money. It's a really great place to hang out with like-minded people. You travel the world, you see interesting stuff. When your kids are grown up and you've made a lot of money and business, you need to have a kind of social life. The art world can basically provide that for wealthy people.

21:32So, amid the fascination with wealth and rising prices, the appearance that someone is raking in money at a fast and furious pace is rarely questioned in a rising market. From what I've seen of the art market, the art market is very welcoming to everyone with money. It's sort of where you go to clean your image. The art world is very, very welcoming to anyone from any regime with any particular opinion, with any politics. Name your vice, name your conviction, name your regime. The art world will welcome you. So I don't know that this is an industry where we are particularly condemned. It's really not the place.

22:17It's sort of the place where we'll say, fantastic, do you want to sponsor a pavilion at Venice next year?

22:25By 2013, the stage was set for Inigo to thrive. He took full advantage of the upside of the fast-rising contemporary market and seemed to be single-handedly spinning success and massive profits out of thin air. In the next episode, we'll look at how the brazen young dealer got his start with an internship at a prestigious London gallery where he immediately caught the attention of the iconic gallery owner and shot to the top by raking in profits on resale. We'll also take a look at how the opaque, secretive nature of even seven-figure art dealing often operates on a casual handshake or verbal basis, allowing for the type of wild representations and inflated values that Inigo felt free to make.

23:06Trust is one thing, but handing over millions of dollars for an artwork you don't even know the whereabouts of is another matter entirely.

23:18Art World Infamy is produced by Sonia Manalili. To stay on top of what happens in this saga, join us next week for a new episode. And if you would like to hear more stories and analysis from across the art world, subscribe to The Art Angle on Apple Podcasts, Spotify, or wherever you listen to podcasts. Thanks for listening.