Internal Audit Says New Jersey Symphony Misled Public on Deal for Rare String Instruments

Internal Audit Says New Jersey Symphony Misled Public
on Deal for Rare String Instruments
Associated Press - 20 December 2004

NEWARK, New Jersey — The New Jersey Symphony Orchestra misled the public about the value and authenticity of rare stringed instruments it bought from a now-discredited philanthropist last year for $17 million, according to an internal investigation report released Friday [December 17].

The three-member review panel concluded that the "Golden Age Collection" is a unique asset to the orchestra but found fault with the way the orchestra carried out and publicized the deal.

The report found that NJSO officials continued to insist publicly that the 30 instruments by Stradivari, Guarneri and others were worth nearly $50 million long after three independent experts retained by the orchestra found that they might be worth as little as $15.3 million. The panel concluded that the orchestra likely paid market value for the collection because five of the instruments were not made by the master craftsmen to whom they were attributed.

The instruments were sold to the orchestra by Herbert Axelrod, a Monmouth County millionaire and NJSO financial supporter. Axelrod, 77, has since pleaded guilty in an unrelated federal tax fraud case.

In approving the purchase in January 2003, the panel said, the board believed that the instruments would be lost to competing orchestras if it did not act quickly. In fact, there were no competing offers, the panel said.

Flaws in the process of acquiring the collection were blamed in part on "a lack of experience in handling a transaction of this size," the report said. A reliance on volunteers to conduct business and the motivating belief that the instruments had "the potential to transform the musical reputation and the financial future of the Orchestra" also led to problems, the panel said.

The NJSO formed the panel in response to an August 1 story by The Star-Ledger of Newark in which experts raised questions about the collection's overall value and the authenticity of several of the instruments.

The review panel's report confirms the newspaper's findings. But the report but concludes that "the true value of the instruments for the NJSO lies in the attitude of the Orchestra's musicians. The psychological boon to the NJSO's musicians of being able to play a great instrument cannot be underrated."

To pay for the collection, the orchestra secured $14 million in financing, with Axelrod agreeing to accept $4 million in personal notes. He eventually forgave $1 million of the debt, making the final cost $17 million.

Simon Woods, NJSO president and chief executive, said the orchestra has retained an independent consultant to review the board's actions and is consulting with an independent auditor to reassess the value of the collection.

"As it turned out, the process was fraught with more ambiguity and, ultimately, controversy than was ever imagined at the outset," Woods said in a statement Friday.

"Nevertheless, more than two years after this opportunity was first presented, the Orchestra has emerged the stronger, not only for the recommendations of our review panel as to improvements we can make within the organization, but with a spectacular and unique collection of instruments which will provide enormous inspiration to communities throughout our State."