Sotheby’s Sued For Defrauding New York Taxpayers Out Of Millions

Published on November 06, 2020, 2:34 pm
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New York Attorney General Letitia James today filed a lawsuit against the international auction house Sotheby’s, Inc. (“Sotheby’s”) for defrauding the state of New York and its taxpayers out of millions of dollars in unpaid sales tax. The complaint alleges that Sotheby’s violated the New York False Claims Act by facilitating the creation and use of false tax exemption certificates — known as resale certificates — for an art collector and major client, even though it knew the art collector was not eligible to claim the exemption.

“Millionaires and billionaires cannot be allowed to evade taxes while every day Americans pay their fair share,” said Attorney General James. “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.” 

In 2018, the collector’s company, Porsal Equities, entered into a $10.75 million settlement agreement with the Office of the Attorney General (OAG) in which Porsal admitted it had improperly used resale certificates in violation of the New York False Claims Act. The OAG investigation found that Porsal Equities admitted that it and its owner certified that they were purchasing artwork for resale when, in reality, they were purchasing the artwork for personal purposes — namely, for display and enjoyment at the collector’s private residence. 

Today’s lawsuit — filed in New York County State Supreme Court — alleges that Sotheby’s knew that the collector and his company were not purchasing art for resale as art dealers in the normal course of business, but accepted their resale certificates anyway, and, in fact, facilitated the creation and use of these resale certificates. In 2010, Sotheby’s advised the collector he could use a resale certificate and helped complete the certificate, including adding the false declaration that he was an art dealer even though, in reality, the collector had not told Sotheby’s he was an art dealer and Sotheby’s knew he was actually in the shipping business. Sotheby’s not only accepted this resale certificate, but, by 2015, had accepted three more equally false certificates from Porsal Equities facilitated by Sotheby’s employees, despite overwhelming evidence that the collector and Porsal Equities were not art dealers and were only buying art for personal use.

The case is being handled by Assistant Attorney General Sujata Tanikella of the Taxpayer Protection Bureau, with the support of senior legal support analyst Bianca LaVeglia. The Taxpayer Protection Bureau is led by Bureau Chief Thomas Teige Carroll and Deputy Bureau Chief Scott Spiegelman, and is a part of the Division for Economic Justice, which is overseen by Chief Deputy Attorney General Chris D’Angelo and First Deputy Attorney General Jennifer Levy.

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NYC DOF - Deed Fraud
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