Wednesday 29 May 2013

The art of dodging

It appears that the law has finally caught up with a New York art dealer after a lengthy period of dodgy behaviour.

Glafira Rosales was charged this month with evading payment of millions of dollars in tax on income she earned from the sale of fake artworks.

A press release from the US Attorney's office for the Southern District of New York explains that:
[Rosales was arrested] for filing false tax returns and for failing to disclose a foreign bank account to the IRS. Rosales allegedly failed to report the receipt of at least $12.5 million in income from the sale of works purported to be by celebrated abstract expressionist artists. Most of the income was received in a bank account in Spain that Rosales hid from, and failed to disclose to, the IRS.
So not only did she manage to pull the wool over the IRS' eyes, but she managed to fool the art world with her forged artworks - and for a significant period of time. Indeed, Manhattan U.S. Attorney Preet Bharara said:
As alleged, Glafira Rosales gave new meaning to the phrase ‘artful dodger’ by avoiding taxes on millions of dollars in income from dealing in fake artworks for fake clients...”
A painting sold by Rosales as an original Pollack
According to the Complaint:
Rosales began selling several never before exhibited and previously unknown paintings in the 1990s, which she claimed to be by some of the most famous artists of the twentieth century, such as Jackson Pollock, Mark Rothko, and Willem de Kooning. From 2006 through 2008, the proceeds of her sales of such paintings to two prominent Manhattan galleries were over $14 million. In selling most of the paintings to the two galleries, Rosales purported to represent a client who had inherited the paintings and wanted to sell them, but who also wished to remain anonymous. For the remainder of the paintings, she purported to represent a Spanish collector. Rosales further claimed that a portion of the price paid by the Manhattan galleries was a commission to her for selling the paintings, and that the remainder would be passed along to her clients. 
However, the investigation revealed that:
  • experts in the fields of art, art history, and materials science concluded that at least several of the paintings sold by her are counterfeit;
  • the client on whose behalf she purported to sell most of the paintings to the Manhattan galleries never existed;
  • the Spanish collector on whose behalf she purported to sell the remainder of the paintings to the Manhattan galleries never owned the paintings;
  • instead of passing along a substantial portion of the proceeds of the sale of the various paintings, she kept all or substantially all of the proceeds, and transferred substantial portions of the proceeds to an account maintained by her then-boyfriend; and
  • Rosales then filed tax returns claiming that she had not kept all, or substantially all of the proceeds from the sale of the paintings. She also kept most of the proceeds in a foreign bank account that she hid from, and failed to report to, the IRS.
Unfortunately for Rosales, it seems the scheme was not fool proof after all. As IRS Special Agent-in-Charge Toni Weirauch explained: “The sale of a piece of art for profit is a taxable event and the seller is responsible for paying his or her fair share of tax, even if the art is counterfeit."

Rosales now faces some lengthy prison time if convicted on all counts.

See the full complaint here.

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