Bloomberg has delved into the filings on the Shagalov case to unearth the other issue in the case. Sotheby’s resold the Haring tarp for $4.4m to the third-party guarantor after going back to the other bidders. Shagalov complained that the work was being sold below market value. He made that claim based upon a letter of intent from a Spanish buyer:
Two months after Sotheby’s sued, Shagalov says he found a potential buyer for the Haring work on his own — Marco Mercanti, founder of the Madrid-based art firm Oblyon. Mercanti conditionally agreed to pay $5 million through a financing agreement with JPMorgan Chase & Co., according to court papers. Shagalov says that offer — memorialized in an October letter filed in court — is evidence that Sotheby’s failed to get the best possible price on the resale.
Unfortunately, the letter offered seems to have been back-dated to before Sotheby’s demands for payment from Shagalov. That has raised a a separate set of issues about the lawyers. But on the point of the reasonable value of the work, Mercanti seems to have evaporated as a serious buyer once the legal issues surrounding the work were revealed to him and his firm.
There’s a deeper issue here that Bloomberg points out that Shagalov’s lawyer, Mathew Hoffman, has been remarkably frank about. As the art market continues through nearly a decade of steadily rising values, there are more and more buyers out there who engaged in highly leveraged art-trading.
Shagalov’s business, based in Great Neck, New York, is “always the same, which is borrow money, buy art, sell art, pay loans back,” his attorney, Hoffman, said at a Jan. 9 hearing, according to a transcript. “This was an ordinary course of business transaction for him.”
One has to wonder how many art buyers out there are equally leveraged.