An Affair of the Art

Phillips auction house and the end of romance for Simon du Pury and Louise MacBain.

An Affair of the HeartWhen Simon de Pury needed a C.E.O. for his struggling Phillips auction house, he hired his millionaire girlfriend, Louise MacBain. Ten months later, after she warred with his partner, she had to leave. But MacBain, now owner of Art & Auction magazine, hasn’t gone quietly.

There were those who pronounced the first weekend of August 2003 a victory for Louise T. Blouin MacBain, a 44-year-old self-made multi-millionaire who in March had purchased the art world’s most influential trade magazine, Art & Auction. A victory, that is, over her former boyfriend and boss, Simon de Pury, 51, chairman of the international auction house Phillips, de Pury & Luxembourg, more commonly known as Phillips. That Saturday night the strawberry-blonde divorcee hosted four prominently positioned tables at the annual benefit for the Watermill Center, an arts foundation started in 1992 by the internationally acclaimed playwright and impresario Robert Wilson. MacBain’s guests included Bianca Jagger and the designer Calvin Klein.

The dinner dance is considered to be a highlight of the Hamptons summer social calendar. Thanks to Wilson’s avant-garde cachet, it is a glamorous charity event, one that pulls even the art crowd out of their homes. The 600-strong guest list invited to this year’s Cuban-themed evening included actors Isabella Rossellini, Sarah Jessica Parker, and Harvey Keitel; playwright Edward Albee; and art-world figures Dorothy Lichtenstein and Lisa de Kooning. In that glittering crowd MacBain worked the room with an easy confidence. She is a beautiful woman, with her striking-colored hair, trim figure, and thin, angular cheekbones. One guest commented that she looked radiant, like a woman in her 20s, in her simple gray-and-black, knee-length, floral-print dress with spaghetti shoulder straps. A photograph that ran in New York magazine the following week showed her on the dance floor looking up eagerly at her dance partner, the architect Richard Meier. He had his hand low on her hip, and her hair was swirling about her shoulders.

“She seemed to be in great form,” says a person who was there. “Everyone was looking at her to see how she’d behave; everyone was looking to see if there’d be any drama [with de Pury].”

Of particular interest to the cognoscenti was that the Watermill benefit is thought of in art circles as practically belonging to de Pury. Every year for the past six years, the raven-haired Swiss auctioneer, much admired for his immaculate manners, penetrating blue-green eyes, and intimidating Rolodex, has conducted the after-dinner charity auction of works by such artists as Tom Sachs, Roy Lichtenstein, Chuck Close, and Ross Bleckner. In fact, it was de Pury who introduced MacBain to the event and to many of its patrons, including Robert Wilson. It was also de Pury who introduced MacBain to contemporary art.

In previous years, one guest recalls, when MacBain and de Pury were still a couple, she had been one of the most frequent bidders in the auction; this year, no matter how much de Pury mopped his forehead as he attempted to whip the crowd into a frenzy, MacBain never raised a finger. For the rest of the evening, she and de Pury-who mostly remained glued to his new girlfriend, the half-Vietnamese, half-Spanish model and artist Anh Duong, 42-did not exchange so much as one word, disappointing those who were keeping a surreptitious lookout to see how the former couple would behave when they encountered each other.

It is perhaps the worst-kept secret in the art world that MacBain and de Pury’s romance ended 10 months after he hired her to be C.E.O. of Phillips. Her stint there is regarded, at least in his mind and in that of his longtime business partner, Daniella Luxembourg, a 53-year-old Israeli-born art dealer, as a terrible mistake. It is certainly true that, since MacBain resigned last December, the auction house, which just three years ago was poised to compete with Sotheby’s and Christie’s, has been brought to its knees. “MacBain nearly tanked the business,” says someone involved with the company’s recent transactions. But others, including many former employees, point out that the auction house had serious troubles well before MacBain got there. “Simon and Daniella destroyed that company,” says one. “The first thing a competent person [they hired as a new C.E.O.] would have done is try to make a decision. They would have second-guessed it, and the C.E.O. would have quit.” (Luxembourg points out that she and de Pury “have a long and successful career working with people on the financial side at many institutions.”) At the time of this writing, new investors are poised to come on board, but the fate of the business has been hanging in the balance.

It is also no secret that MacBain and Luxembourg grew to detest each other and that MacBain’s reign as C.E.O. quickly became a nasty behind-the-scenes battle between the two for control of the company and for de Pury’s favor. The victor, ultimately, was Luxembourg, but MacBain is not one to admit defeat.
The Sunday night after the Watermill benefit, MacBain threw a dinner party for Robert Wilson at her beachfront home (which she had rechristened La Dune; the house’s previous owners had called it Bonny Dune). The 48 guests included Bianca Jagger; the Duke of Lugo and his wife, Infanta Elena of Spain; former Sotheby’s chairman Alfred Taubman and his wife, Judy; the architect-designer Peter Marino and his wife, Jane Trapnell Marino; and the artist Ross Bleckner. That same evening de Pury, Duong, and friends attended a screening of the film American Splendor in East Hampton.

The role reversal could not have been more obvious to many observers. “This was Simon’s weekend, and now Louise has taken it over,” one socialite was overheard saying at the Watermill party.

Yet the triumph seemed hardly a joyful one for MacBain. “Most love affairs reach a natural conclusion, but mine did not,” she told a friend wistfully. “The business situation forced it to end.”

The wife of a friend of MacBain’s looked over at her recently at a dinner and was struck by how vulnerable she seemed, standing without a date in the crowd. “She’s like a little girl with nowhere to go,” the woman whispered to her husband.

MacBain wonders what de Pury is saying about her, if he minds that she bought Art & Auction. She seems surprised to hear that he does.

“She is palpably still in love with him,” says a good friend of hers.

“Why don’t you go away and see if he misses you,” advised Joy Henderiks, the president of Phillips France, late last fall, when MacBain realized that it was all over and that she’d have to leave both the man and the job she’d once had such high hopes for. MacBain, who had followed Henderiks into her New York office, replied in tears, “He’s not going to miss me.”

“I’m so sad,” she added. “You know his business is what is the most important for him now.”

Until 1999, Phillips had existed for more than 200 years as a respectable, if somewhat sleepy, second-tier British auction house that picked up much of the work in which Sotheby’s and Christie’s were not interested. But in 1999, LVMH Moet Hennessey Louis Vuitton chairman Bernard Arnault decided it was time to change all that. Spurred by his rival, Francois Pinault, who owned Christie’s, Arnault thought that a top-tier auction house might be the ultimate complement to his luxury-goods business.

So, in November 1999, he bought Phillips for $97 million and went about remaking it with the same vigor he’d so successfully applied to such brands as Christian Lacroix, Givenchy, and Guerlain.

But this proved to be not enough. After a disappointing May 2000 sale at New York’s American Craft Museum, during which the actress Sharon Stone, brought in to liven things up, sat on collectors’ knees, Arnault looked in the art world for some star power to front his business.

He found it in Simon de Pury, widely considered to be one of the industry’s most impressive successes, and certainly one of its best connected. “He’s generally blendend-someone who blinds others with all kinds of things that are not there,” says one of his competitors.
De Pury’s idea was to jettison the low-end parts of the business and to create an auction house that focused on the big moneymaking areas: paintings and jewelry. Margins, he felt, could be made by keeping the business lean, since it had long been a complaint in the auction industry that Sotheby’s and Christie’s were hampered by dense and costly bureaucracies.

The youngest son of a Swiss pharmaceutical executive, de Pury worked at Sotheby’s early in his career, but made his reputation in the 1980s as the curator of Baron Hans Heinrich “Heini” Thyssen-Bornemisza’s world-famous collection of Impressionist and modern paintings in Lugano, Switzerland. Good as he is at evaluating paintings, however, de Pury’s greatest skill, it’s generally agreed, lies in winning over collectors with an old-world charm and fastidiousness that borders on caricature; when he greets a woman, for example, he clicks his heels and kisses her hand-a routine that has won him many female admirers over the years. He rarely goes anywhere without a red leather Smythson diary with his initials embossed on the cover, and few people have seen him out of a well-cut suit. His friend the Swiss collector Monique Barbier-Mueller once teased him, in vain, during an African safari, to undo the second button on his shirt.

In 1986 de Pury left Baron Thyssen-Bornemisza and returned to Sotheby’s, and in 1994 he became chairman of its European operation. Thanks to his wit and energy, he carved out a reputation as one of the world’s leading auctioneers. On the rostrum, it’s said, he throws himself into an evening with abandon, sometimes breaking into five languages to pep up the atmosphere.

In 1997, caught up in the entrepreneurial spirit of the time, de Pury left Sotheby’s to start his own, Switzerland-based private dealership with an attractive dark-haired Sotheby’s colleague, Daniella Luxembourg. In June 2001 the two also founded a contemporary-art gallery in Zurich. “Between the two of them,” says a competitor, “they must pretty much know where all the major art in the world is.”

Luxembourg has lustrous, thick dark hair which waves about her shoulders, a big smile, and thin legs which she usually conceals in her trademark black knee-length Prada suits. Her beauty is not of the kind that necessarily stands out in a crowd, but she has a warmth that envelops you the more you get to know her.

“Daniella has this amazing gift of making you think you’re the most important person in her life when she talks to you,” says a Sotheby’s colleague. Joy Henderiks says, “Daniella is like a mother to us all at Phillips.”

Luxembourg grew up in Israel, the daughter of parents who had met in a camp during World War II. After a mandatory stint in the Israeli Army, which she describes as “very boring,” she worked at the Israel Museum while studying art history at the Hebrew University of Jerusalem. After curating several museum collections in Israel, she went on to co-found Sotheby’s Israel and later became deputy chairman of Sotheby’s Switzerland, jobs that have made her an expert in restitution art-art confiscated by the Nazis that has been returned to the rightful owners. In 1991 she was named founding director of the Jewish Museum in Vienna, and you can tell from her animated expression, even before she tells you explicitly, that she considers this the high point of her career.

Both de Pury and Luxembourg hesitated in 2000 when Arnault approached them about a possible merger. “It would mean loss of control of our business,” says de Pury over lunch at Manhattan’s Harry Cipriani in August. “At that point we had an ideal situation: no overhead, no infrastructure, and a highly profitable company.” But his love of auctioneering played a large part in swaying him to do the deal. Luxembourg says she was fully behind him. “I could see that there was a part of Simon’s nature that was not being fulfilled by the private-treaty business [i.e., doing private deals among art collectors],” she says in a separate interview.

Arnault reportedly offered them cash for their business-reputedly around $50 million-and the new company would be called Phillips, de Pury & Luxembourg. LVMH would own 75 percent; they would own 25 percent. Their private-treaty business and the gallery would remain as separate entities within the larger group. They were offered a nine-year contract, with no obligation to turn a profit until the end of the fourth year.

“The key,” says Luxembourg, “was to buy up market share. We had to spend a great deal to do that.”

That they did. In 2001, Phillips received much criticism for guaranteeing nearly $300 million on two collections that were disappointments at auction: In May, the Impressionist and modern collection of the German collector Heinz Berggruen was guaranteed for an estimated $100 million, but brought in only $71 million. In November, the collection of a deceased Los Angeles couple, Marion and Nathan Smooke, fetched $86 million; it had been guaranteed for at least $150 million. Expenditures were not limited to guarantees. In two years, operating costs reportedly were exorbitant. Lavish new premises were rented on Grosvenor Street in London, and in New York, where the company moved offices from a building it owned on East 79th Street to a former bank’s premises at 3 West 57th Street. When it emerged that the 57th Street premises, which cost $6 million per year to rent, would not be ready for permanent occupancy in time for the Berggruen sale, roughly $2 million was spent on fitting them out temporarily.

One of the departments that spent the most was the marketing division, overseen by Katell le Bourhis, a former director of Paris’s Musee de la Mode et du Textile and a personal appointment of Bernard Arnault’s. Petite, with Louise Brooks-style bangs and what she calls “raccoon eyes” from a lack of sleep, le Bourhis did not rest until the catalogues, offices, and staff looked precisely to her satisfaction. For auctions, women were told to wear black dresses and were forbidden to wear mules, because le Bourhis did not like the “flapping” sound they made on the floors. De Pury’s glass-and-wood rostrum alone cost $100,000. The budget for just flowers was said to have been astronomical.
In 2001, Anne Sutherland Fuchs, a senior magazine executive and a former publisher of Vogue, was brought in by LVMH as global C.E.O. to exercise some fiscal restraint. But department heads would often go directly to de Pury and Luxembourg for a proposed expenditure. Sometimes, says a source, private-treaty transactions were done that Fuchs and LVMH did not even know about. (“There is always a tension in auction houses between the experts and the administration,” says Luxembourg. “There was no decision made that was not done through the board.”)

“When LVMH had bought them, the general idea was that Simon and Daniella would go after art to sell at auction, and that the C.E.O., who’d be appointed by LVMH, would run the business,” says someone close to the initial agreement. “In practice this is not what happened. Simon and Daniella tried to run the business in an ad hoc way from their various destinations around the world as they went after art. The C.E.O. was second-guessed and marginalized.” (Simon and Daniella say they were working day and night finding works of art and experts in order to build the business. “The C.E.O. was there to support us,” says Luxembourg.)

When Fuchs turned up for LVMH board meetings, her peers in the other divisions of the company voiced exasperation at the cost of it all, but, outwardly at least, Arnault remained steadfast in his loyalty to de Pury and Luxembourg-until September 11, 2001.

Luxembourg and de Pury watched New York’s Twin Towers collapse on television in Arnault’s Paris office. As LVMH’s share price subsequently started to fall, the luxury-goods conglomerate decided it did not want to keep the hemorrhaging, non-core auction business on its balance sheet. In October, Arnault said he wanted to start pulling out of Phillips, and by February he was ready to make public the separation. The terms were that LVMH would reduce its stake from 75 percent to 271-2 percent, and it would leave Phillips a balance sheet of $50 million in working capital, according to a source. Upon the completion of paperwork to sort out a “laundry list” of things for both LVMH and Phillips to do, Phillips would receive a credit line of around $100 million, guaranteed by LVMH.

“It was a generous deal,” says someone on the Phillips side, but it never happened. “The trouble is the paperwork was never completed, and Phillips never got its line of credit.”

After Arnault diminished his stake, de Pury and Luxembourg realized that they, as the majority shareholders, could now appoint a C.E.O. of their choosing. Against the advice of Luxembourg, who wanted to interview other candidates, de Pury turned to Louise MacBain, at that point his girlfriend of two years.
It didn’t seem illogical to him then. After all, for over a decade MacBain had successfully worked with her husband as co-founder and co-C.E.O. of an advertising business, Trader Classified Media. They had started it with $3.9 million, and today it has a market capitalization of roughly $922 million (which includes Class A and Class B shares). It had made MacBain rich. After she split from her husband and left the company, her net worth was estimated in the hundreds of millions of dollars. De Pury hoped-though he insists it was not a requirement to get the job-that MacBain would invest in Phillips. According to MacBain, she said that she would like to, subject to an audit of the company.
On MacBain’s first day, de Pury summoned the Phillips staff to the first floor of the West 57th Street premises and, with both MacBain and Luxembourg behind him, announced that they were lucky to have a “turnaround expert” come on board as C.E.O. At the end of his speech he made a reference to the fact that she also had another role in his life-there were snickers-but said that this would have no impact on their professionalism.

“Basically, the way I saw it, I was going to help a friend-just for a while,” MacBain recalls, sitting in white exercise clothes on the poolside veranda of her Southampton home during a sunny day in August. She is drinking espresso out of fine bone china and helps herself to a single chocolate bonbon from a silver dish, served after a three-course poolside lunch by her French butler, Jean.

“I do not want to do anything inelegant,” she says firmly, but a friend of hers says that MacBain feels she is owed an apology for the rumors that have been put out about how she wrecked the business. She has a list of items to discuss written in pencil on a piece of paper, and she rigidly goes through them.

None of these refers to Phillips. Rather, they are about her experiences at Trader Classified Media (formerly known as Hebdo Mag Companies) and now at Art & Auction magazine. “I don’t really feel that a profile of me merits much discussion of Phillips,” she says warily, “given that I was there for such a short time.” It is several hours before she begins to relax and a smile reaches her eyes.

Almost 20 years ago Louise met and fell in love with John MacBain, the son of a minor politician from Ontario. At the time she was Louise Blouin, a driven, fiery redhead, the youngest of six children in a large upper-middle-class Catholic family in Montreal. Louise’s dark-haired older sister, Helene, married Paul Desmarais Jr.-the Canadian equivalent of marrying a Rockefeller or Vanderbilt. The Desmarais family owns Power Corporation of Canada, a management holding company, and John MacBain was one of Power Corp.’s vice presidents.

John had dreams, say business associates, that went beyond working for someone else. A Rhodes scholar who went to Oxford, he is a small man with a big smile and an obvious competitive streak. He likes to run marathons and play tennis. Louise, say friends of the couple, spurred on his ambition.
In 1987, Louise and John started buying up classified-ad publications to form Hebdo Mag. In 1989, Torstar, the company that owns the Toronto Star newspaper, took a 50 percent equity stake. Over the next 14 years Hebdo Mag bought more than 300 publications and expanded into France, Russia, and 19 other countries. John was in charge of strategy and acquisitions; Louise oversaw daily operations and was personally responsible for restructuring many of those companies.

“We put $25 million into the business to buy 50 percent,” says David Galloway, former C.E.O. of Torstar. “Cendant came along and later we sold our half for close to $300 million. So I look pretty positively on the MacBains…. John was flying around the world doing deals. He was amazing at being able to use leverage. Louise ran the day-to-day business. She worked really hard. If someone asks me who was responsible [for the company’s success], we could argue, was it 55-45 one or the other? But it wasn’t 90-10.”

In 1997, Torstar decided to unload its investment, and Hebdo, then worth $445 million, was sold to a company named CUC International, which in turn became Cendant Corporation, a conglomerate that owns Avis Rent-a-Car. Cendant’s C.E.O. and president was Manhattan businessman Henry Silverman, and its chairman was a man named Walter Forbes.

The MacBains were given $250 million worth of Cendant stock, but in 1998, after the emergence of allegations of securities fraud involving Forbes, the company’s stock came crashing down. John MacBain and Cendant worked out an arrangement whereby the MacBains could buy back their company for just over $500 million. A source close to Cendant said that management was relieved when Louise left the company; she had not been the easiest of employees or the thriftiest. When asked to attend a meeting in New York, she would take a helicopter from the Hamptons.

By this time the MacBains had three children and were starting to enter the New York social whirl. “John was never very interested in all of that,” says someone who knew them then, “but she clearly was.”

During the 1990s the couple had lived in Paris and then in Geneva. People in both places remember that Louise liked to throw grand parties and to dress up. At the house in the Hamptons a harpist and string quartet would play for dinner parties. The couple’s Christmas cards featured 8-by-12-inch photographs of the family attired in black tie.

“You could see that on one level they were two very different people,” says someone who knows both well. “She wanted to be social; he couldn’t have cared less. He’d rather go skiing with his buddies.” When asked today why the marriage ended in 2000, Louise concurs gently, citing “different interests. He is a good man.”

Still, something else drove the couple apart, say sources: they began to encroach on each other’s territory professionally. Louise had become fascinated by the Internet and its possibilities. Her husband was more skeptical, but eventually had acquiesced to her desire to remodel the company into an Internet-centric one, renaming it Louise developed 60 Web sites and was keen to expand the content into spheres other than classified advertising. One project became eDeluxe, an online auction business. Louise met de Pury when he came to lunch at her house in Southampton, and he was hired as a consultant for eDeluxe. She says she was already separated from her husband when she started to see de Pury romantically.
The year 2000 was a stressful one for the MacBains. spent as much as $150 million on business-development strategies, the majority of which was for Internet projects, and to pay for it the MacBains floated the business on the French stock exchange and the nasdaq in March. Investors were brought in at $28.56 a share. “At the time of the I.P.O. [John and Louise] were fighting over who sees who,” remembers someone involved in the transactions.
One analyst who listened to grumblings of the investors says that at the meetings to drum up money Louise was considered arrogant. “She went to road shows looking lavish. She had designer clothes, huge diamonds. So the feedback was ‘Wow, where did she get those jewels?'” he remembers.
When the Internet bubble burst, Trader .com’s share price plummeted to $4.58. After the market turned, it was decided to scale back the Internet commitments and retreat to the core business of trade publications, and a C.O.O., Didier Breton, was appointed. He soon slashed Internet spending, and the company was renamed Trader Classified Media. Breton also got rid of four buildings in Paris, one of which included Louise’s sumptuous office. The board was in discussions with both John and Louise as to who should stay on in an executive role. Eventually, it was decided that Louise would resign from the management of the company.
Cynics say of de Pury and MacBain’s romance that she was in love with him and he was in love with her money. De Pury has heard the whispers and denies their veracity: “It’s just not true,” he says. “I’ve been in love with wealthy women and poor women. It was genuine love.”
Whatever the case, MacBain’s wealth enabled her to keep up with de Pury, and to provide him with companionship in a profession requiring a great deal of solitary travel. According to Joy Henderiks, Daniella Luxembourg once said to her, “It’s so nice for Simon because at least with Louise he’s got a sort of real life. He takes a bit of time for himself.”
“Louise and Simon were always together,” says a competitor, remembering a dinner party given by Francesca von Habsburg, Archduchess of Austria, in a castle in Dubrovnik. “They almost looked like brother and sister. They never left one another’s side.”
“They looked smashing together,” says Swiss art dealer Thaddeus Ropac. “You could really feel their passion.”

Friends thought they might take their relationship to the next level. “Everyone knew this was a big love affair with a capital L,” says an observer.

De Pury taught MacBain about contemporary art and introduced her to the rarefied social sphere made up of the wealthy people who collected it.
“Basically he toned her down,” says someone at Phillips. “Before she met him, she was all about 18th-century furniture, big hair, big jewelry, Chanel suits. Now she’s in Calvin Klein.”

Still, the relationship was not without its problems from the start. Chief among them, according to a source close to MacBain, was the omnipresence of Daniella Luxembourg, who would be on the phone all the time.

When MacBain took over as C.E.O. of Phillips, the stage was set for an explosive confrontation between the two women.

MacBain felt she had two main objectives in her new position as C.E.O. of Phillips: the first was to clean up the balance sheet; the second was to cut costs according to a new, leaner business model. She also began an audit of the company in order to determine whether she herself should invest.
“You had to restructure first because no one would have invested otherwise-the losses were too great…. We needed to get out of the 57th Street premises because the costs were impractical, and we needed to sell the 79th Street offices,” she says. The company also needed to relocate from the costly Grosvenor Street offices in London. She instituted a policy of reducing the guarantees on art to 80 percent of the low estimate as well.

She hired a British C.F.O., chartered accountant Tim Jones, who upon arrival was concerned that the line of credit with LVMH had not materialized. “You had here non-businesspeople [Simon and Daniella] without a financial team negotiating through their lawyer [Louis Begley of Debevoise & Plimpton], whose bill became quite large,” someone close to MacBain recalls.

Begley was the one, certainly in the view of Tim Jones, who should have nailed down the details with LVMH and secured the line of credit. “There were a lot of things that didn’t have the i’s dotted and the t’s crossed that should’ve been completed the day the deal was truly done,” says Jones.
Begley, however, was a personal friend of both de Pury’s and Luxembourg’s-in particular of the latter. In December 2001, he had negotiated the purchase of Luxembourg’s New York town house, the former home of art dealer Pierre Matisse. Ultimately, the friendship between Begley and Luxembourg ended acrimoniously. (Someone close to Begley disputes this entire version of events.)

In order to achieve her other priority-cleaning the Phillips balance sheet-MacBain felt she needed to get rid of the biggest liability on it: three paintings by the Vienna Secessionist painter Gustav Klimt-Dame mit Hut und Federboa, Landhaus am Attersee, and Apfelbaum II. The paintings were restitution art. Most recently they had hung in Vienna’s Belvedere Palace while the owner’s heirs were working on a plan to cash out-a process that took many years in the courts. De Pury and Luxembourg had watched this process closely and beat out the competition, buying the paintings the day they came on the market. Though she would not go into the details of the transaction, Luxembourg will say, “They were major, major art, rather than merely good.”
In order to get the paintings, Luxembourg had asked Arnault to borrow $62 million. He was, says a source, “as excited as she.” In late 2001, LVMH lent the money, with the proviso that she pay it back when she resold the paintings. A prospective buyer didn’t work out, and the art market fell a little, but Luxembourg was not worried.

“The strength of major art dealers is their inventory and their art, so to look at these as a liability because somebody advanced or loaned you the money is beside the point,” she says.

MacBain utterly disagrees. “We needed to clean up the balance sheet to get investors in,” she says. The falling art market meant that, though Phillips had the Klimts on its balance sheet as a debt of $62 million, their value as an asset had dropped significantly and could fall further.

Ultimately, in late summer, MacBain gave the Klimts to LVMH in exchange for forgiving the loan. (Arnault was prepared to take the write-down.) Luxembourg claims she was “astonished” when she discovered, too late, what had happened. She says that MacBain went behind her back and handed over the paintings before showing her the paperwork. (MacBain says, “Absolutely not.” She insists she showed Luxembourg the paperwork beforehand.)

One source disputes Luxembourg’s assertion regarding the paperwork. This person says she became alarmed only after someone told her days later that the paintings could have been used to secure the line of credit from LVMH or a lending institution. For her part, Luxembourg says this is not true.

According to a source, the issue of the Klimts came back to haunt almost every discussion Luxembourg and MacBain had from then on. The tension between them grew more and more public-although Luxembourg was careful not to complain to de Pury. “I could see it was difficult for him too,” she says over lunch at Soho House, a private club and hotel in Manhattan. “I didn’t know how it would be solved.”

When the executive offices moved to the ninth floor in the West 57th Street building, Luxembourg’s office was left on eight, while MacBain’s was put next to de Pury’s on nine. Joy Henderiks sent MacBain an e-mail saying that it was important that Luxembourg and de Pury be seen as united while the business underwent re-structuring. But nothing changed.

MacBain also organized it so that she and de Pury shared an assistant, whereas in the past Luxembourg had shared one with him. “We had the same schedules, so it made sense,” MacBain explains now with a shrug.

Some staff members thought it a little tasteless when MacBain conducted a media interview wearing one of de Pury’s dress shirts-his monogram clearly visible. (MacBain says the shirt was a gift from de Pury.)

Though MacBain was well regarded by some employees for the promptness with which she returned telephone calls and the efforts she made to sort out certain staffing issues, she drew criticism for her business expenses, which remained high in spite of the general retrenchment.

“At a time when people were being fired and the business had a cash crunch, she and Simon took rooms in the St. Regis hotel and flew the Concorde,” says a staff member.

In the summer of 2002, Phillips spent more than $60,000 sponsoring a benefit in London for the Hellenic College of London, attended by the Prince of Wales. It was followed by dinner at Nether Lyppiat, the Gloucestershire home of Prince Michael of Kent. The occasion laid MacBain open to accusations of using Phillips money for her personal social ambitions. “It was a grotesque waste at a time when they were looking to cut costs. We already had the clients that that event would have given us,” says an employee, although another defends the parties, stating they did generate business.

The tension between MacBain and Luxembourg continued to grow more obvious. MacBain began to complain about Luxembourg to de Pury, but he claims he would not listen to her. “I told her that each time she complained about Daniella she was hurting me,” he says. “This is our business; we run it together.” (MacBain says the discussions were not personal; rather they were about the business.)

By this time de Pury had begun to have his own concerns about MacBain. It had not escaped him that she had not invested in Phillips.

The two also quarreled about the purchase of a rare nine-foot-tall 17th-century armoire by the French cabinetmaker Andre-Charles Boulle, which was the centerpiece of the December 2001 Phillips French-and-Continental-furniture sale. He thought she’d bought it; she thought they were buying it together and splitting the $5 million cost.

Though the actual sale pre-dated Louise’s tenure as C.E.O., the armoire languished in the Phillips warehouse, not paid for. Eventually he loaned her the money to pay the tab. But MacBain had debts to other departments at Phillips as well. Unsurprisingly, the state of MacBain’s personal finances was fast becoming a topic of office gossip.

“Though she would often support the sales very generously”-a source says that she ultimately purchased more than $10 million worth of goods at Phillips-“it was often months and months before payment was received,” recalls one ex-employee.

When you ask MacBain about why there were so many late payments, she shrugs and says, “Anyone who has money knows you can’t just get your hands on it. It takes a while to come through. I always paid when my money came through.”

In fact, Securities and Exchange Commission documents show that MacBain does not have ready access to her Trader stock-worth roughly $200 million-thanks to an arrangement put in place in September 2002 that effectively handcuffs her financially to her ex-husband for more than two years. She has 22 percent of Trader Classified Media shares; he has slightly more. He has an option to buy her out by mid-2005; if he does not, she is free to sell.

This may be the reason she never put her own money in Phillips. “If Louise’s personal circumstances had been different at the outset … she might have invested in the beginning,” says one colleague, “but she was still going through a divorce, and she was not necessarily as liquid as she could be.” (MacBain says now that she did not want to invest in a company in which she could not “control the balance sheet.”)

People who know both Louise and John MacBain say he relishes the power their financial arrangement gives him over her. “He never, ever mentions her now,” says one business associate of his. “He was upset when she left.” A spokesperson for John responds, “The arrangement clarifies the ownership and control of Trader Classified Media, and as such, it is in the interest of all shareholders.”

About the only thing Daniella Luxembourg and Louise MacBain have in common is that, for utterly different reasons, both know how to shoot-Luxembourg from her service in the Israeli Army, MacBain from hunting.

Luxembourg is a maniacally hard worker. Even MacBain’s New York support staff say MacBain was in the New York office for only six weeks of her tenure as Phillips C.E.O., spent usually in three-day stints. “When she was there, though, she’d be in at eight in the morning,” says one person.

Part of the reason for MacBain’s extended absences was that the Phillips headquarters was in London, where the accounting department and part of the marketing department were based.

By August of 2002, Luxembourg had had enough. Upon the advice of Ronald Lauder, chairman of Estee Lauder International, she hired Stanley Arkin, a tough-talking attorney, to sort out the unfinished business concerning LVMH. “We needed a strong negotiator who would get it done,” Luxembourg says.
One of the first things that Arkin did was to call in MacBain. Sensing perhaps that she was in for an unpleasant experience, she took Tim Jones and legal counsel John Cahill with her to the meeting. She had barely sat down when, according to a source, Arkin attacked her so brutally it was beyond belief.

“It was so awful, just totally derogatory about her, her personality, her approach to negotiations with LVMH, everything that she saw in herself, and the way she presents herself, and that Louise would say that she thinks she’s good at doing,” says a source. (Arkin says, “I did not attack her. I had a direct conversation with her in which I suggested there was a better way to deal with LVMH.”)

MacBain, according to the witness, stayed calm and then said, “I think this meeting is adjourned.” She also made a reference to the fact that she was sure Luxembourg was behind Arkin’s clearly premeditated words. (Luxembourg denies this.) Arkin told Cahill to stay where he was, but he followed MacBain and Jones out of the room.

According to MacBain and another source, Arkin apologized to MacBain the same day (Arkin denies doing so), but she knew that war had been declared. “It was clear he’d been brought in to get her out,” says a source.

Meanwhile, the attempt to find new money was not succeeding for a variety of reasons. Prospective investors wanted to know why the top three executives had not put in their own money. Many of these wanted to invest only if they gained some managerial control-something de Pury and Luxembourg would not consent to. Another set, found by de Pury, got cold feet at the last minute. In September, MacBain introduced de Pury to Christopher Shaw, an English investment banker whom she and John MacBain had used for several years and who is currently advising her on potential acquisitions. After a meeting with de Pury, Shaw told him that there was no way anyone would invest in Phillips as long as the disharmony at the top of the company continued to exist.

At this point, says a source, MacBain and Luxembourg were barely speaking to each other. “There were raised voices and people stomping out of the room.”
Eventually Tim Jones, head of human resources Lynn Short, and John Cahill spoke to de Pury about the situation. “We cannot do our jobs unless you sort this out,” they told him, first by phone and then in person.

De Pury agreed that things had gotten out of control, but he didn’t know what to do about it.

“We can’t make up your mind for you,” they told him and ran through the pros and cons of each woman. One source says that none of them thought he’d be prepared to give up MacBain. Neither did she. In September she told Joy Henderiks over lunch that Luxembourg would have to leave, according to Henderiks. She added that de Pury had agreed that this would be best for the company. (MacBain says she didn’t tell this to Henderiks.)

Many months later de Pury indignantly denied this to Henderiks. “Jamais. Jamais,” he said. “It never, never happened.”

When I ask him if it was difficult for him to choose between the two women, he does not hesitate. “My professional loyalty is to Daniella,” he says. “This is our company. Our names are on the door.”

Inevitably, it did not end cleanly. MacBain maintains that, after deciding not to invest in the company, she resolved to leave in order to concentrate on other business interests. Others say it was de Pury who told her she had to go. In October he wanted to put out a press release stating that she had left the company and that, contrary to press reports, she had never invested in it-something he still obviously feels very sore about. MacBain did not want to go into such detail in the press release.

In November, the two attended a small dinner at Cipriani, with, among others, Guggenheim director Tom Krens and socialite Anne Bass. “They did not speak to one another all night, and they looked incredibly sad,” says Henderiks.
Later, MacBain co-chaired the New York City Ballet gala, an event underwritten by Phillips, with interior designer Charlotte Moss. “Louise’s table was filled with Simon’s friends … and he was not there,” remembers someone who attended. Rumors of a split flew when MacBain was spotted at the Art Miami fair on her own.

The November sales were a disaster. The Impressionist-and-modern-art sale, meant to be the big earner for the year, brought in only $7 million, against estimates totaling $49 million, causing the almost immediate decision to close the auction side of the Impressionist-and-modern-art department-a move which overnight reduced Phillips to a second-tier, niche auction house.
At Stanley Arkin’s recommendation, de Pury and Luxembourg hired an attorney, Perry Lerner, to re-structure the business, which now consists of just 75 employees and four departments: contemporary, design, photography, and jewelry. At the time of this writing, it seems that American painting will continue in a diminished form, holding auctions only occasionally.

In January, LVMH withdrew completely from Phillips, and while the uptown premises were sold the auction house relocated to Chelsea, where its premises are considerably larger than the space on West 57th Street and in many ways more suitable, since there are loading and unloading facilities on-site.
The space for showing art is vast-and as he shows a reporter around, de Pury is enthusiastic about his new environs. “It’s hip and young and downtown-completely suitable for our brand,” he explains. He takes obvious pleasure in wryly pointing out the car wash outside the windows. It’s a very different feel from West 57th Street, but it’s the right feel for the young, casually attired staff all working away on the fifth floor in an open-plan office.
Remarkably, given the behind-the-scenes turmoil, Phillips has over the last three years established itself as a leader in the fields of contemporary art, design, and photography-thanks in no small measure to the efforts of the heads of those departments: Michael McGinnis (contemporary), Joshua Holderman (photography), and James Zemaitis (design). Zemaitis caused a commotion by defecting to Sotheby’s in June, but de Pury says he leaves behind worthy successors in department head Alexander Payne and consultant Philippe Garner.

“The trouble with creating stars,” says de Pury, “is that it’s a double-edged sword. [Former Sotheby’s president and C.E.O.] Dede Brooks always used to warn me of that. I didn’t agree then, but I do now.”

A few nights later I run into de Pury having dinner at Soho House. He is with Anh Duong and his 25-year-old son, Alban. He and Duong look very happy together. They became friends when she painted his portrait last year and realized as they listened to music from old French films that culturally they had much in common. “You get the feeling it’s a more natural relationship,” says someone who knows them.

Luxembourg was not in the office when we took our tour. She was doing what she does best: drumming up art to sell. One Manhattan dealer noticed an urgency to Luxembourg’s recent negotiations. Luxembourg herself later admits during the lunch at Soho House that had it not been for quiet private-treaty transactions in the past few months the business would have gone under. The word is that by late October there will be a new investment deal, whereby de Pury will remain majority shareholder; Luxembourg’s role will be confined to the private-treaty business.

When I next catch up with Luxembourg she is about to leave for Russia and then Italy. She has dark circles under her eyes. She has been working late. She’s cheerful, though, even as she flips through a book and shows me pictures of the beloved Klimts that were sold to LVMH. “They are fabulous, no?” she asks gently before snapping the book shut and getting ready to pack.
In January, at a Paris dinner party given by the collector Paula Cussi, Joy Henderiks says, she was cornered by MacBain in the room where the guests’ coats were kept. She wanted to talk about de Pury and what had happened. Henderiks told her it was too soon to get into a discussion about it all. “If you want to get over Simon, don’t talk about him and stay out of his world,” she advised MacBain, who was poignantly emotional.

But in March, MacBain surprised everyone by buying Art & Auction-considered, according to her own resume, the “bible” of the art world-from Bernard Arnault.

One person recalls that when de Pury heard the news he was furious. “He was shaking and there were tears in his eyes.” The magazine’s editor in chief, Bruce Wolmer, called de Pury and Luxembourg to say that Art & Auction would treat Phillips objectively. An acquaintance suggests the two are still wary.
The publication unquestionably looks better, thanks in no small part to the fact that MacBain hired Stephen Wolstenholme, who had designed the Phillips catalogues. The pages are bigger, the layouts and design are cleaner. MacBain takes me through the September issue, pointing out the changes, page by page. She is particularly proud of the revamped calendar at the back, which is now more user-friendly. “The junior editors were kind of pulling their hair with all her corrections for the calendar,” remembers Wolmer. “But it was right.” She has also appointed an advisory board of art-world luminaries, and has put her new contacts to good use.

Meanwhile, in the Geneva office of a Swiss lawyer is a document stating that by December 31 of this year MacBain must pay de Pury approximately $2.5 million. The document outlines a difference of opinion between MacBain and de Pury as to why this transaction will take place. MacBain considers this money a gift, made “out of friendship” to de Pury, buying him out of what she considers to be his share of the Boulle armoire. But de Pury views the money as a debt, and supporting this, according to the document, he will take full possession of the armoire if she does not pay. The armoire is the final contentious matter in a tortured history of fiscal dealings between the two. At the end of last year MacBain had paid de Pury approximately $5 million; a source close to him says this was for money he’d lent her to pay for goods at Phillips that she had bid on but did not have the funds to pay for at that time; a source close to her claims it was all a pre-arranged transaction, done to help Phillips in the full knowledge that she could pay only when her divorce was finalized. Friends of his have said he will not speak to her until he receives his money. Friends of hers say he will get it by Christmas.

In late August, MacBain spent a week with Thaddeus Ropac in Austria, where the two attended the Salzburg Music Festival; then it was off to London briefly, to sort out her next acquisition.

“I am looking at other publications centered around the arts,” she says.

The message could not be clearer: she’s not going to get out of de Pury’s world anytime soon.V

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