Chinese Art Dealer in Unpaid YSL Bronzes Furor Weeps (Update1)
By Le-Min Lim

March 10 (Bloomberg) -- Cai Mingchao, the Chinese art dealer who is refusing to pay for the $40 million Qing bronzes he successfully bid for in the Yves Saint Laurent auction, wept when he realized that his credibility was shot and he may now have to close his business.

Cai, 44, spoke in an interview after turning away hundreds of calls from reporters about the Feb. 25 sale. He was praised in China for walking away from the bronzes, which were plundered by foreign troops, and has been condemned by other dealers.

In the world of high-end art sales, where millions of dollars worth of items may sell on the basis of a phone call or handshake, defaulting is seen as unprofessional.

“This has damaged me: I have lost the business I love,” said Cai, in his office in the southeastern city of Xiamen. Cai said he had bid with the intention of paying, then had second thoughts and decided it’s wrong to do so. He again denied acting in concert with China’s government.

The Christie’s International sale is renewing debate in art circles on the moral and legal right of auction houses to sell controversial items, including those that some nations regard as looted. Cai’s default may also heighten calls for more checks on bidders. Art transactions were worth 43.3 billion euros ($54.5 billion) in 2006, according to a 2008 report by the European Fine Art Foundation.

International Law
Christie’s has always held that the sale of all of the Saint Laurent items, including the sculptures, was legitimate because the items had legal titles. Not so, said an ad hoc group of lawyers in China that in January threatened to sue Christie’s for offering the animal-head bronzes, saying it contravened international law.

The mid-18th-century sculptures of a rabbit and a rat were taken from the Old Summer Palace in Beijing by invading French and British soldiers in 1860.

The 1995 United Nations Unidroit Convention limits claims on stolen cultural artifacts to within 50 years of their theft.

On Feb. 23 in Paris (Xiamen is seven hours ahead of France), a court ruled that the sale could go ahead. Hours later, Cai called Christie’s Shanghai-based business development director Wang Jie from his favorite leather couch on his dark-wood, second-floor office and registered to bid.

“I thought to myself, ‘It’s impossible to find these items again,’” Cai said.

No Documents
On the afternoon of Feb. 25, Cai said, Wang called to say Christie’s agreed, after an internal meeting, that he would have three to four months to settle the bill if he won. None of the agreements was documented, Cai said. That contravenes Christie’s own terms-of-sale rules, stated at the back of its brochure, that “a prospective buyer must complete and sign a registration form and provide identification before bidding.”

Christie’s Hong Kong-based spokeswoman Kate Malin would not verify Cai’s identity and said the company would not comment on the bronzes sale because of client confidentiality.

It’s not uncommon for auction houses to let their best customers and those they consider wealthy bid on big-ticket items without asking guarantees or proof of ability to pay, said George Sutton, a Minneapolis-based analyst with Craig-Hallum Capital Group, who covers Christie’s rival Sotheby’s. French billionaire Francois Pinault owns London-based Christie’s.

“Something like this isn’t good for the reputation of the auction house,” said Sutton, “And will cause the need for change. This suggests possibly that change should happen.”

“These days,” said Cai, “you can’t even get a loan of 10,000 yuan ($1,289) without pledging your house or car as collateral, and I could just bid on an item worth hundreds of millions of yuan with one phone call.”

Buzz Cut
Cai’s black, unbuttoned choker-collar suit hung loosely on his tanned 5-foot-2-inch frame. He wore a buzz cut, rubber-soled black canvas shoes and a three-day-old moustache. Cai moved as quickly as he spoke, with a Fujian accent that flattened loud vowels. He smoked three Kent cigarettes in 30 minutes, sometimes struggling to hold back more tears.

Cai, a native of Xiamen, wouldn’t say how much he’s worth. The third of a cloth merchant’s four children, he said he inherited some money and made the rest in stocks and real estate. Cai said he left Xiamen’s art school at 18 and started in business by renting a store trading cloth. In 2005, he opened Xiamen Xinhe Art International Auction Co. after leaving the state-backed Xiamen Auction Co. where he said he started the art-sale department.

Ming Buddha
In October 2006, Cai made headlines when he paid a record HK$117 million ($15 million) for a Ming Dynasty Shakyamuni bronze Buddha at a Sotheby’s auction in Hong Kong. Cai said he settled the bill in three months and it shouldn’t matter how he did so. He said he still owns the Buddha, which is kept in a safe.

“He has a very good reputation with art dealers,” said Roger Keverne, 62, head of his namesake gallery and chairman of Asian Art in London, an annual exhibition by the city’s galleries. Keverne said he’d met Cai in Beijing and Hong Kong in the past few years. “I found him charming, his manners immaculate. I have only heard good things about him.”

At about 2 a.m. Xiamen time on Feb. 26, the last day of the Saint Laurent sale was under way in Paris. With seven lots to go before the bronzes came up, Cai got a call from Christie’s Asia Deputy Chairman Ken Yeh to prepare to bid. Cai watched the auction live from a Phoenix Television broadcast. First came the rat head. Cai looked on as the bidding on Lot 677 climbed from 9 million euros to 10 million euros to 11 million euros.

“Just as they were about to close the deal, I went in,” said Cai. “I felt if I didn’t bid, I will lose it forever.”

Bid Applause
He offered 12 million euros. A rival countered with 13 million euros, so Cai went up to 14 million euros -- the final bid. Applause broke out. Next up was the rabbit head. Cai’s 14 million-euro bid beat a rival’s 13.5 million euros and he secured the second bronze.

“At that time, maybe I didn’t consider if I could pay for them,” said Cai. “At the most, I would sell some of my ceramics to pay for them.”

Hours after the auction ended, the State Administration of Cultural Heritage responded to the sale with a circular requiring Christie’s to detail the ownership and provenance of artifacts it brings into or out of China. When Cai heard of this, he started to question his purchase.

“I felt an internal struggle,” he said. “I felt, ‘If I paid this money and I can’t get the goods, what do I do?’”

Unpaid Adviser
That afternoon, Cai called and asked for a meeting with Niu Xianfeng, a Beijing-based deputy director of Ministry of Culture affiliate National Treasures Fund, which helps retrieve lost relics abroad. Cai has been an unpaid adviser with the fund since December 2007.

Cai said he kept calling Christie’s Wang between Feb. 26 and March 1 seeking the bill and the condition report of the bronzes. Cai said Wang told him Christie’s was chaotic and that people were away and that he should try later. Cai said he didn’t get any documents from Christie’s about the sale. Christie’s Malin declined to comment about this.

Cai came to think that accepting the bronzes was like buying “two time bombs and placing them at home, not knowing when they will explode.” Asked if he considered that before bidding, Cai said he couldn’t tell what prompted him to, just that he felt “mixed emotions” when the sculptures were on the block.

On Feb. 28, Niu and colleague Wang Weiming arrived at the Xinhe office and Cai told them he won the auction.

Officials ‘Shocked’

“They were shocked,” Cai said. “Then they said, ‘Good, good, we thought foreigners had bought them.’”

Niu didn’t answer his cell phone seeking comment.

Cai said he asked Niu and Wang to organize a news conference in Beijing under the National Treasures Fund’s banner to end speculation on who bought the bronzes.

After his March 2 news conference, Cai had the art world speculating on his motives and whether he had state backing. That night, he flew back to his office in Xiamen, a city of 2.5 million people just across the sea from Taiwan, sat on his couch and wept.

A March 4 Xinhua commentary compared Cai’s default with not paying ransom to kidnappers. “Paying would encourage more such stealing, and make the robbers happy,” the commentary said.

Berge’s Choice
Pierre Berge, partner of the late Yves Saint Laurent and the man who put the art collection up for sale, will keep the bronzes at home if they don’t sell, Agence France-Presse reported on March 3, citing him in an interview with French radio. Berge couldn’t immediately be reached for comment.

“If he wants to keep them at home, let him do it,” said Cai.
Hong Kong antiques dealer Yumi Kunizuka, whose family consigned a collection in London in 1989, said this case is not so much a lesson in law and art-auction protocol than manners.

“The whole matter could have been handled with more grace and wisdom by Christie’s, Berge and Cai,” said Kunizuka. Berge could have done more for Saint Laurent’s memory by not flaunting the bronzes, Christie’s shouldn’t have agreed to auction the items and Cai was unprofessional in what he did, Kunizuka said.

Hong Kong, where the auction house and main rival Sotheby’s hold biannual art sales, is Christie’s hub for the sale of Chinese antiquities, with revenue of more than HK$1 billion last year. Including other art categories, Christie’s Hong Kong sales last year tallied $452.3 million, about 11 percent of its total.

Export License
On March 6, Xinhua said, citing Cultural Heritage Administration Director Shan Jixiang, that its circular on Christie’s “does not limit the return” of the bronzes. According to the terms of sale stated in Christie’s brochure, it’s “the buyer’s sole responsibility to obtain any relevant export or import license. The denial of license or the delay in obtaining licenses” don’t justify the rescission of sale.

China isn’t the only nation trying to repatriate lost treasures, said He Shuzhong, founder of Beijing Cultural Heritage Protection Center, a nongovernmental organization.

Last week, the Indian government said it facilitated the return of independence leader Mahatma Gandhi’s personal effects from a New York auction after the Indian public decried the sale. Indian liquor magnate Vijay Mallya paid $2.1 million for the items, which included Gandhi’s glasses, sandals and pocket watch.

Bounds of Law
Retrieving the items should be done in a calm way that is within the bounds of law and respectable conduct, said He. Rash actions in the name of patriotism would backfire, he said.

Art-auction defaults aren’t new. In 1987, Australian businessman Alan Bond bid a record $53.9 million at Sotheby’s New York for Vincent van Gogh’s “Irises,” then a record price for any work of art, and couldn’t pay for it. The painting had to be resold.

In September last year, Sotheby’s sued Cnet Inc. founder Halsey Minor to recover $16.8 million that the auction house said it’s owed for three pieces he bought at sales. Later that month, Minor sued Sotheby’s for not disclosing that the consignor of a painting he bought owes the auction house money.

The default on the bronzes purchase raises the question of how well auction houses perform their due diligence and whose interest they represent. Christie’s brochure states it “acts as agent for the seller.”

Auction houses make most of their commission from buyers, who pay up to 25 percent of the hammer price on their purchases, as they lower or waive commission for sellers to secure the right to represent the most valuable collections.

European Auction

The dispute marred the most successful auction in Europe, with 373.9 million euros raised and 96 percent of lots sold including the bronzes. Cai’s winning bid totaled 31.5 million euros, including Christie’s 3.5 million-euro commission.

In Cai’s 2,000-square-foot office, hydraulic-powered mahogany doors opened to reveal a sanctum lined with ceramics and Buddhas dating back as far back as the 14th century.

He swiped his wallet across a section of wall embedded with an electronic lock and a secret stairway appeared, leading to an underground showroom with hundreds of antiques.

Cai said that, fearing for his reputation, he’s canceling Xinhe’s spring sale, which tallied 47.4 million yuan last year, one of the Fujian province’s biggest. The fall sale may also be called off.

If he could do it again, Cai isn’t sure he would bid for the bronzes.
“No one (in the government) knew what I was doing,” said Cai. “Even if they knew, they wouldn’t look for me. Why should I help? I am not on their payroll.”

He said he’s now trying to pick up the pieces of his life. If he ends his art-auction activity, Cai said he may focus on his real-estate and securities trading businesses.

“When I turn on my cell phone and walk out of this place, I really don’t know what kind of life I will have,” he said.

To contact the writer on the story: Le-Min Lim in Hong Kong at lmlim@bloomberg.net
Last Updated: March 10, 2009 03:33 EDT