A Billion-Dollar Scandal Turns the ‘King of Manuscripts’ Into the ‘Madoff of France’

Mr. Lhéritier brought along figures that he considered proof that manuscripts by Baudelaire appreciated at 15 percent a year, Victor Hugo at 12 percent and so on.

“I told him, ‘I can’t work with you,’” Mr. Castaing remembered. “And after that, I criticized him nonstop, as publicly as I could.”

To Mr. Castaing, the business model for Aristophil was preposterous. No Baudelaire letter is worth the same as any other, and none appreciate in the large, predictable steps that Mr. Lhéritier promised, he said.

Further, the market for rare books is about 2,500 people worldwide, by Mr. Castaing’s estimation. That’s because paintings and manuscripts are inherently different objects, with very different markets. A painting can be hung on a wall, where it can be viewed and appreciated by its owner, and signal discernment and wealth to everyone else. A letter from Mark Twain should be kept in a protective sheath somewhere dark. What’s more, artists can be rediscovered and their reputations can rise with exhibitions, enhancing the value of their work. Authors, especially long-deceased ones, rarely go in or out of vogue in ways that drastically affect the value of their letters and documents.

To Mr. Castaing, there was another flaw with Mr. Lhéritier’s plan. He could sell to investors, but who would later buy from them?

The ostensible answer was Aristophil. The contract signed by Mr. Leconte, the retiree who lost more than $250,000, and others included a seemingly straightforward line in the “Agreement to Sell” section. As he read it, the document stated that the company would buy back shares after five years, at a price that “may in no case be lower than the purchase price increased by 8.95 percent per year.”

Mr. Lhéritier said in the December interview that it was absurd to believe Aristophil would promise those kinds of returns. “If we did, we would have had 18 million clients, not 18,000,” he said. The contract stipulated that Aristophil might buy back shares at a premium, he said, but was not obliged to do so.

Article source: https://www.nytimes.com/2020/02/21/business/aristophil-lheritier-rare-books.html