Sotheby’s continues to discuss with the New York Attorney General’s office the documents and other evidence it needs to produce for an ongoing lawsuit in the New York State Supreme Court regarding the company’s alleged tax evasion.
Attorney General Letitia James’s office, which filed the lawsuit in late 2020 after a four-year investigation, is asking Sotheby’s for more documentation about high-profile clients and specifically the use of “resale” certificates, which help professional art dealers to avoid paying New York Sales Tax on artwork they acquire through commercial transactions.
Sotheby’s, which has already handed over the requested documents, is balking at the additional request and has frequently referred to the attorney general’s efforts as a “fishing expedition” in court records.
Sotheby’s made its own discovery requests focusing on audits conducted by the Department of Tax and Finance during the years in question, from 2008 to 2015, to demonstrate that these audits did not reveal any irregularities in practices. house accountants.
Neither Sotheby’s nor its attorneys responded to request for comment. A representative from the New York Attorney General’s Office said it does not comment on ongoing litigation.
The Attorney General first filed the complaint in late 2020. Sotheby’s then tried unsuccessfully to have the case dismissed.
According to court documents, on August 11, the attorney general asked Sotheby’s “for a list of 51 clients that the state includes being referred to as “Tier 1” customers and produce all New York resale certificates on file for identified clients from January 1, 2008 to December 31, 2015.
The initial complaint related to a single client whom Sotheby’s allegedly helped evade taxes by filing documents giving him benefits legally reserved for dealers, not private collectors. Although the collector was not identified in the lawsuit, the complaint says he maintains residences in and around New York, runs a shipping company and has at times operated through a US-based holding company. British Virgin Islands identified as Portal Equities.
The the wall street journal identified the collector as Isaac Sultan, president of Atlantic Feeder Services USA LLC in Miami. Sultan is known for collecting Latin American and contemporary art, according to the Log.
Artnet News was unable to independently confirm the collector’s identity and did not respond to repeated requests for comment.
In 2018, the attorney general’s office settled with the tax collector $10.8 million in taxes, penalties and damages under the New York False Claims Act, according to court documents.
In a more recent hearing in the state Supreme Court on August 24, Law360, reported that the Attorney General’s Office “discovered evidence that an alleged tax evasion scheme at Sotheby’s extended to a dozen clients of the international auction house.
In other cases, the attorney general said: “Sotheby’s issued certificates of resale to customers who have explicitly stated that the purchased artwork will hang on their own walls. »
The judge also cited other examples of alleged wrongdoing, Law360 reported, including that “a Sotheby’s employee’s spouse purchased a gift for her husband using a resale certificate.” He also noted that the court had received documents “indicating fraudulent use of resale certificates by at least 11 other clients.
Litigation over additional discoveries and additional customers and audits will likely continue in the months ahead.
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