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Man sentenced in tax fraud centered on donated art

September 06, 2007|Stuart Silverstein | Times Staff Writer

The head of a Los Angeles-area cultural organization was sentenced Wednesday to a year and one day in federal prison for orchestrating a tax fraud involving inflated tax deductions on donated art.

Jerome Berman, the executive director and sole employee of the California Museum of Ancient Art, also was ordered to pay restitution of nearly $263,200 to the Internal Revenue Service, as well as a fine of $4,000.

Berman pleaded guilty earlier this year to tax fraud and aiding and abetting others in preparing false federal income tax returns. Neither he nor his attorney could be reached for comment .

Federal officials said Berman and 11 others took hundreds of thousands of dollars in inflated charitable deductions on donated works of art. Authorities said Berman engineered the scam with a two-part maneuver. First he would sell the art, enticing buyers with the promise of hefty tax benefits if they turned around and donated the items back to his organization.

Then he would backdate the purchase dates of the art. Authorities said the false dates made it appear as though buyers acquired the items more than a year before they were donated. That change, authorities said, was intended to provide the appearance of legal cover for the buyers to claim inflated deductions based on appraisals that valued the art works at three times more than the actual purchase prices.

All told, according to federal officials, Berman personally evaded $82,664 in taxes from 1997 to 2001. His restitution of nearly $263,200 reflected those taxes, plus penalties and interest.

The 11 others involved in the scam dodged about $157,000 in taxes, based on bogus deductions totaling at least $565,000, officials said.

Sandra Brown, the assistant U.S. attorney who prosecuted Berman, said he and the others involved evaded more money in taxes than they paid for the donated art. In effect, she said, "They not only got paid for the item they were donating, they got a tax break on top of it."

Brown said Berman was the only one prosecuted because "it was his idea and his scheme." She said the others probably would face a civil action by the IRS. Michael Moriarty, an IRS spokesman, declined to comment on the agency's plans.

According to Brown, Berman's California Museum of Ancient Art apparently organized lectures and exhibits, but it did not have a building. The organization was run out of Berman's North Hollywood apartment.

U.S. District Judge Florence-Marie Cooper ordered Berman to begin serving his prison term on Dec. 5.

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