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Catch of the Week: New York Sues Sotheby’s for Helping Art Collector Evade Millions in Taxes

Posted  November 13, 2020

This week’s Catch of the Week spotlights another tax dodge by the rich and powerful, but with a twist, implicating international auction house Sotheby’s, one of the world’s largest brokers of fine arts, jewelry, and collectibles. Sotheby’s stands accused of enabling a wealthy art collector client to fraudulently evade taxes on $27 million worth of art.

Under New York tax law, art resellers who meet certain requirements can qualify for an exemption on taxes generally owed on art purchases. According to a suit filed by New York Attorney General Letitia James under the state’s False Claims Act, Sotheby’s personnel assisted and allowed a wealthy client to pose as an art dealer to obtain tax exemption certificates and avoid state taxes on 35 pieces over a five year period.

Sotheby’s allegedly knew the client, a contemporary art collector in the shipping business, was purchasing the art for his own collection, and even personally went to the collector’s New York apartment to help him display it and “admire his artwork on the walls of his apartment when installation was complete.”

The complaint does not name the millionaire client but refers to his holding company Porsal Equities Ltd., incorporated in the British Virgin Islands. In 2018, Porsal Equities agreed to pay $10.75 million to resolve claims it falsified resale certificates to avoid New York taxes.

The new suit spotlights the auction house’s role in permitting its client to sidestep taxes on $27 million in art. The AG says Sotheby’s told the collector he could use a resale certificate and helped him complete the initial falsified certificate declaring he was an art dealer, despite knowing he was actually in the shipping business. Sotheby’s later accepted three more false certificates from Porsal Equities, according to the complaint.

“Millionaires and billionaires cannot be allowed to evade taxes while every day Americans pay their fair share,” said Attorney General James in a press release. “Sotheby’s violated the law and fleeced New York taxpayers out of millions just to boost its own sales. This lawsuit should send a clear message that no matter how well-connected or wealthy you are, no one is above the law.”

Whistleblowers play a crucial role in allowing the government to uncover tax fraud. If you are aware of a similar scheme, contact our whistleblower lawyer team to learn more.


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