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Noted Art Dealer Cited in Tax Fraud

Federal prosecutors say gallery owner Larry Gagosian and three associates schemed to save $26.5 million.

March 20, 2003|Thomas S. Mulligan | Times Staff Writer

NEW YORK — Federal prosecutors Wednesday sued prominent art dealer Larry Gagosian and three of his associates, accusing them of evading $26.5 million in taxes, interest and penalties on a 1990 sale of contemporary art.

Though based in Manhattan, Gagosian is well-known in L.A. art circles. His gallery locations include Beverly Hills and his list of clients includes comic Steve Martin, Southland business tycoon Eli Broad and record mogul David Geffen.

The art dealer denies any wrongdoing, his lawyer said Wednesday.

James B. Comey, U.S. attorney for the Southern District of New York, said Gagosian and his co-defendants engaged in "a complicated scheme with a simple goal -- to prevent the United States from collecting millions of dollars in taxes owed."

The government's civil suit contends that Gagosian and New York magazine publisher Peter M. Brant, assisted by tax attorney Jay I. Gordon, formed a shell company called Contemporary Art Holding Corp. in 1990 in order to purchase 62 paintings from prominent Los Angeles collector Richard L. Weisman.

CAHC almost immediately resold 58 of the paintings for a $17-million profit, on which the company should have paid taxes, according to the suit. But to avoid the taxes, the complaint states, Gagosian and Brant engaged in a complex transaction with Geoffrey J.W. Kent, a British socialite and owner of the luxury travel company Abercrombie & Kent. Under the deal, Kent acquired CAHC but gave its four remaining paintings back to Gagosian and Brant, leaving the shell company without any assets to pay its tax bill.

The IRS filed liens to try to enforce payment. Gagosian's lawyer, Steven Storch, said the Justice Department's lawsuit appears to be a direct response to Gagosian's own suit, filed Tuesday, which sought to have the IRS liens dissolved.

After Gagosian sued to dissolve the liens, the government filed its suit, naming Gagosian, Brant, Gordon, Kent and three related companies.

Storch said the dealer "absolutely denies" any tax fraud or cheating.

Gagosian also reportedly is under criminal investigation for his role in art sales to ImClone Systems Inc. founder Samuel D. Waksal, who pleaded guilty March 3 to dodging $1.2 million in sales taxes.

Wednesday's civil suit is not related to the Waksal matter.

Storch declined to comment on the criminal probe related to Waksal, first reported by the Wall Street Journal.

Neither Brant nor Gordon could be reached for comment Wednesday. Kent, based in London, did not return a call left with his firm's U.S. office in Illinois.

Gagosian got his start in Los Angeles 30 years ago selling $2 posters in Westwood Village. Now perhaps the nation's leading contemporary art dealer, he runs the tony Gagosian Gallery on New York's Madison Avenue, with branches in Beverly Hills, London and Manhattan's Chelsea district.

At his West Hollywood gallery in the 1970s and 1980s, Gagosian's stable of young painters included David Salle, Eric Fischl and Jean-Michel Basquiat. Later, after moving to New York, he presented the work of such major artists as Andy Warhol, Damien Hirst, Frank Stella, Richard Serra and Ed Ruscha.

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Times staff writers Suzanne Muchnic and Christopher Knight contributed to this report.

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