U.S. Senate checking NJSO violin deal

Panel, as part of tax abuse probe, wants all documents related to sale by Axelrod

By MARK MUELLER
STAR-LEDGER STAFF

A congressional committee probing taxpayer abuse of charitable donations has asked the New Jersey Symphony Orchestra to turn over all documents related to last year's high-profile purchase of rare musical instruments from philanthropist Herbert Axelrod.

In a letter to the symphony's Newark office yesterday afternoon, Sen. Charles E. Grassley (R-Iowa), chairman of the Senate Finance Committee, said the February 2003 sale "raises serious questions about what tax benefits have been claimed."

The 77-year-old Axelrod, arrested in Germany last week after two months on the run from federal tax fraud charges unrelated to the NJSO deal, sold 30 stringed instruments to the orchestra for $17 million. But he claimed the prized violins, violas and cellos were worth $50 million, making him eligible for a sizable tax deduction.

That's a deduction Axelrod never took, one of his lawyers said yesterday. In an impassioned defense of his client, attorney Alan Lebensfeld said the former Monmouth County millionaire received no tax benefits whatsoever from the NJSO sale.

"There's been a clear suggestion, if not accusation, that Herb Axelrod grossly inflated the value of the instruments to the New Jersey Symphony Orchestra and that he took an inflated charitable deduction," Lebensfeld said. "It's simply not true.

"Herb Axelrod didn't cheat anybody. The fact is, he hasn't taken a dime in charitable deductions with respect to the New Jersey Symphony Orchestra. All the good he has done with respect to these violins has been denigrated unfairly."

Lebensfeld - a civil lawyer who represents Axelrod in a long-running lawsuit involving his former publishing empire, Neptune-based TFH Publications - is the first person to state that the philanthropist claimed no tax benefit from the NJSO deal.

Lebensfeld said he spoke out only after receiving "permission" from a party he would not identify. He denied that person was Axelrod, who remains jailed in Germany pending his extradition to the United States.

The lawyer said Axelrod filed for an extension on his 2003 tax return ahead of the April 15 deadline and that he didn't know whether his client planned to take a deduction in his completed tax form, due later this year.

The IRS and the FBI have launched criminal inquiries into the sale, which included a cello and a dozen violins by famed craftsman Antonio Stradivari.

Simon Woods, the orchestra's president and chief executive officer, has said the NJSO is fully cooperating with the joint probe. Yesterday, he said the symphony also would comply with the request of Grassley's committee, which is examining whether taxpayers routinely inflate the value of charitable donations as a tax dodge.

"We are going to fully cooperate," Woods said. "We think the Finance Committee is doing very legitimate and interesting work."

Also under scrutiny by criminal investigators and Grassley's committee is Axelrod's donation of four Stradivari instruments to the Smithsonian Institution. Axelrod loaned the strings to the museum in 1986, valuing them at the time at $5 million.

By 1997, when he began converting the loan into a donation, he had raised their value to $55 million, according to Smithsonian documents turned over to the Finance Committee. That appraisal has been widely questioned by some of the world's top violin dealers.

The donation took place over three years, with the Smithsonian receiving a 35 percent ownership stake in the Stradivari quartet in 1997. The remaining 65 percent was donated by Axelrod in 1999, the Smithsonian documents show.

Axelrod's tax deductions on the donation were spread out over that three-year period, Lebensfeld said. But the lawyer claimed that violin dealers, the media and investigators were wrong to suggest Axelrod took a $50 million tax deduction.

Over the three years, Lebensfeld said, Axelrod claimed $18 million in charitable deductions related to the four instruments.

During the same period, the lawyer said, Axelrod claimed an additional $22 million in charitable deductions, based mostly on cash donations to various institutions. He would not name the recipients, nor would he provide copies of Axelrod's tax returns.

Lebensfeld said he did not know how Axelrod arrived at the $18 million figure or whether the philanthropist had "maxed out," or reached the limit he could legally deduct.

"That's what he chose to take," Lebensfeld said, referring to the total of $40 million in charitable deductions over three years. "That's all he needed to take. You don't take more in charitable deductions than you need to."

Charged with cheating the IRS by funneling payments to a former employee through Swiss bank accounts, Axelrod was declared a fugitive when he failed to show for his arraignment April 21. He was arrested at a Berlin airport June 15 as he arrived on a flight from Switzerland, where he owns a home.

_____________________________________________________________________________________________ Staff writer Peggy McGlone con tributed to this report.