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Orchestra trustees say errors made in rare strings purchase Published in the Asbury Park Press 12/18/04 By KATHY
MATHESON |
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In the end, according to the report released Friday, the orchestra paid a net price of $15.9 million last year for the Golden Age Collection -- 30 rare violins, violas and cellos that Axelrod touted as being worth $50 million. But the Trustee Review Panel found glaring flaws in the acquisition process, notably that the NJSO Instrument Committee negotiating the deal did not inform trustees who approved the purchase that other appraisers valued the collection at less than half of what Axelrod did. |
| This information was also
kept from symphony subscribers and the public, and the NJSO wrongly
continues to trumpet the strings as being worth $50 million, according to
review panel member Bill Baroni.
"At no point did anyone on the Instrument Committee really believe the $50 million number (but) they never dissuaded the Board of Trustees from thinking that," said Baroni, an NJSO trustee who is also an Assembly member from Mercer County. "In this season's brochure, they refer to the $50 million number. That is inappropriate and against all principles of nonprofit corporate governance." Three appraisers consulted by the NJSO had estimated the instruments' true worth to be between $15.3 million and $26.4 million. Axelrod, 77, ultimately agreed to a sale price of $18 million -- later reduced again, but still within the symphony's appraisal range -- and the committee stayed silent. |
| Committee members feared "it
would be inappropriate and embarrassing to the Axelrods to publicly
release the results from the NJSO's appraisers, and that it might even
threaten the eventual consummation of the transaction," the report says.
The decision to keep quiet was not based on bad intentions but instead on the committee's lack of experience in handling a transaction of this size, its desire to raise the prestige of the NJSO, and Axelrod's own savvy in rushing the deal through before it could be carefully examined, according to the report. "A financially challenged symphony based in Newark, N.J., trying to buy 30 rare instruments from a quirky but generous millionaire with an all-volunteer group represented a once-in-a-lifetime deal in all respects," the report says. "There was no handbook or template. The members of the Instrument Committee created the handbook as they proceeded." |
| NJSO President and Chief
Executive Officer Simon Woods acknowledged in a statement Friday that "the
process was fraught with more ambiguity and, ultimately, controversy than
was ever imagined at the outset."
"It is clear that there were aspects of the acquisition process that could have been improved," Woods said. Baroni said no disciplinary action is planned for any orchestra employee or trustee. Axelrod -- a former Deal resident, philanthropist, tropical fish expert and violin dealer -- is now in jail for tax fraud in an unrelated case. Deal's origin in 2002. |
| The tale of the Golden Age
Collection is a long and convoluted one. Baroni and two other NJSO
trustees also not involved in the acquisition -- Alan Danzis, president of
the information technology consulting firm Danzis Associates Inc., and
John Forrest, group vice president of finance and administration at
National Starch & Chemical Co. -- were asked to look into it in August
after The Star-Ledger of Newark questioned the authenticity and value of
the instruments.
The 66-page report gives this account of Axelrod's dealings with the NJSO, before his fall from philanthropist to felon: In February 2002, Axelrod offered 30 strings -- purportedly including ones by famous makers Stradivari, Guarneri del Gesu and Amati -- to the NJSO for $25 million. |
| Though he claimed the
instruments to be worth twice that, Axelrod said he was selling them as
part of his estate planning and wanted to keep them in New Jersey. He
provided the symphony with an appraisal from his dealer, Dietmar Machold,
totaling $48.9 million.
That spring the NJSO formed the Instrument Committee -- made up of musicians, senior administrative staff and trustees -- to negotiate the deal by June 30, 2002, the deadline given by Axelrod. Around the same time, Axelrod began retrieving the instruments from musicians who had borrowed them. He then loaned the instruments to NJSO for its musicians to play and evaluate. |
| The symphony had 12 of the
30 strings when the committee asked a violin expert from the Metropolitan
Museum of Art in
New York to take
photos of them for appraisal purposes. The pictures were hand-delivered to
world-renowned appraiser Charles Beare in London; for a number of reasons,
it was impractical for Beare to see the strings in person.
Beare gave an informal opinion on 11 of the strings, valuing them collectively between $9.6 million and $10.8 million. Meanwhile, Axelrod had ex-tended the deadline for consummating the deal but continued to pressure the NJSO, at one point suggesting that an orchestra in Vienna was willing to pay $55 million for the collection. That is now believed to have been a bluff. "He was constantly pressuring the orchestra to speed the process along," Baroni said. "The fear was that Dr. Axelrod would walk away." 2 more appraisals. |
| The NJSO then asked another
violin dealer to appraise the entire collection. That dealer is not named
in the report because of a confidentiality agreement with the NJSO, and is
referred to as "Expert X."
In August 2002, Expert X spent six hours looking at the collection, which amounts to about 10 minutes per instrument -- "an extraordinarily small amount of time," the report says. Expert X's verdict: between $16.9 million and $23.9 million. A third expert, Adam Crane, looked at 15 of the instruments in late August. He "gave verbal comments on those fifteen and a value for five of them. For the remaining ten, he felt he did not have enough information," according to the report. |
| The report does not specify
Crane's evaluation, giving only a range for the three appraisals: $15.3
million to $26.4 million.
Experts noted that some of the strings did not have all of their original components -- the scroll, or top, of a violin might have been replaced, for example -- and in extreme cases questioned whether an instrument was authentic at all. The committee, though, did not present these valuations to the entire board of trustees, who ultimately voted to make the purchase in October 2002 for $18 million -- $14 million plus $4 million in loans from Axelrod. Later, Axelrod forgave $1 million, bringing the price to $17 million. Then in June 2003, he challenged the orchestra and its patrons to raise money for the purchase, which was being financed through loans. When the NJSO raised $1.1 million, Axelrod matched that, effectively bringing the sale price to $15.9 million, according to the report. 'Impossible sweetness' |
| Despite the controversy, the
instruments have received great reviews from critics and musicians.
In the report, NJSO principal second violin Francine Storck described the sound of the 1683 Stradivari violin known as the "de Ahna" as "impossible sweetness." "I carry a sound in my head which I have spent my life striving to produce," she said in the report. "When I heard the de Ahna, I recognized the sound as a mother recognizes her child." |
| And the panel still supports
the purchase of the collection. The report recommends, in fact, that news
that the orchestra has the instruments be better marketed to give the NJSO
a higher profile.
In response to the report, Woods, the NJSO president and CEO, said in Friday's statement that the organization has retained an independent consultant to conduct a full review of the Board of Trustees and is discussing with independent auditors the valuation of the instruments on the symphony's books. Axelrod's attorney, Michael Himmel, said Friday that had the government brought charges related to the NJSO sale -- authorities will not, per Axelrod's plea agreement in the tax case -- he had experts lined up to support his client's appraisal of the collection. Kathy Matheson: (732) 643-4230 or kmatheson@app.com |