The Russian-owned public sale home Phillips is in an unsure monetary place, in line with audit information that have been reviewed by the Guardian.
A latest audit carried out by a UK accounting agency discovered that the home is counting on ensures—inside monetary offers made with outdoors backers to safe funds on auctioned artworks—offered by two founders of the home’s guardian firm, a Russian luxurious retailer. These ensures, plus growing money owed, have reportedly compelled Phillips right into a state of affairs the place it faces “material uncertainty.”
In response to an ARTnews inquiry, a Phillips spokesperson stated the questions raised about its financials don’t have an effect on its enterprise internally. “Phillips regularly assesses its expenses on a regular basis. There are no planned adjustments to the company’s operations and staffing,” the spokesperson stated.
The information reviewed by the Guardian said that the dynamic may probably place “significant doubt” on the enterprise’s stability.
Phillips, one of many three largest public sale homes on the earth, oversees places of work in New York, London, and Hong Kong. It is owned by Leonid Fridlyand and Leonid Strunin, the founders of Mercury Group, a Moscow-based luxurious retailer.
Auditors raised flags concerning the public sale home’s monetary stability due to dangers to its £90 million ($110 million) in property and uncertainty over its homeowners’ capacity to shoulder potential losses. Some £95.9 million ($117 million) will probably be owed by Phillips to Mercury’s firms within the subsequent yr; £57.8 million ($71 million) is owed to the Russian group over a interval of undisclosed years, although Phillips is owed £59.8 million ($74 million) by the Russians’ firms.
Phillips guardian firm’s “exposure to the Russia/Ukraine conflict” was additionally listed as a potential monetary danger to the home. Access to the Mercury Group’s funds, together with potential publicity to monetary laundering and reputational dangers, may pose points for the home, in line with the paperwork.
In March of final yr, following the invasion of Ukraine, public sale homes got here underneath additional scrutiny for his or her involvements with high-profile Russian shoppers and their fiduciaries overseas. Phillips advised ARTnews in late February 2022 that it didn’t count on Western sanctions on Russia and its enterprise elite to have an effect on the homes operations or its gross sales.
Records reportedly confirmed that the Mercury Group was transitioned to a tax haven registered within the British Virgin Islands round every week earlier than Russia invaded Ukraine.
In a press release to the Guardian, Phillips stated that its guardian firm had made “significant” investments within the firm, regardless of it being a small a part of the Mercury Group’s general portfolio, since its acquisition was accomplished in 2012. The sale of the home was initiated in 2008; the home in the end went for $60 million. It stated that its homeowners count on to see these investments finally repaid.