Donor of violins is called a tax cheat

Orchestra's benefactor faces arraignment stemming from 1990s activities

By TED SHERMAN AND WILLA J. CONRAD
STAR-LEDGER STAFF

A year after letting the New Jersey Symphony Orchestra purchase his collection of rare Italian violins and other stringed instruments, Herbert Axelrod faces arraignment next week on federal tax fraud charges.

Axelrod, 76, who made a fortune through a pet-care publishing empire and has long been a major benefactor of the New Jersey Symphony Orchestra, was indicted earlier this week on charges he concealed hundreds of thousands of dollars in payments in the 1990s through Swiss bank accounts.

The U.S. Attorney's Office said the stringed instruments were not a factor in the investigation and the transaction was not part of the investigation.

In the two-count indictment that charges Axelrod with conspiracy and aiding and abetting the subscribing of a false tax return, federal authorities say the Deal resident funneled more than $1.4 million in payments to a vice president of his company, TFH Publications, into Swiss accounts between 1990 and 1997.

TFH Publications - named for its flagship magazine, Tropical Fish Hobbyist - was sold in 1997 for $70 million in cash and a $10 million loan.

Axelrod's wife, Evelyn, who was a shareholder of TFH Publications and responsible for accounts receivable at the company, was named but not charged in the indictment.

According to the indictment, the scheme involved payments from a pet-product company in England that were diverted into the Swiss accounts. The unnamed employee, who was later terminated, received bonus and severance payments through the Swiss account. The severance payment, $950,000, was concealed on the books of Axelrod's company as a marketing expense, says the indictment, which was handed up Tuesday.

The former vice president later withdrew $25,000 in traveler's checks from the account and filed a tax return that did not disclose the payments. No charges have been filed against the individual, and a spokesman for the U.S. Attorney's Office would not further discuss the matter.

Authorities also cited the involvement of a dental hygienist from New Jersey who attended law school with Axelrod's assistance. The woman, who is not named, went to Switzerland with Axelrod to open a bank account there. The indictment charges that Axelrod deposited money in the account and told her to maintain the account to conceal the money from the Internal Revenue Service.

If convicted on all counts, Axelrod faces a maximum of five years in prison and a $250,000 fine.

Axelrod could not be contacted at home. His secretary at his Allenhurst office said he was not available.

Axelrod's attorney, Michael Himmel of Woodbridge, said he could not address the charges other than to confirm next week's arraignment before U.S. District Court Judge Garrett E. Brown Jr.

"The investigation has been going on for a long time," he said. "At this point we really have no comment."

Asked whether possession of the rare instruments acquired by the New Jersey Symphony might now be in jeopardy, Himmel said, "I hope not."

Coincidentally, the deal that brought Axelrod's collection to the New Jersey Symphony Orchestra was based in part on tax considerations. In discussions before the transaction, Axelrod said the deal was conceived, in part, as a way to legally dispose of his extensive collection so that, after he died, his wife would not have to tangle with rare instrument dealers, international sales laws or tax implications from the instruments' sale.

The 17th- and 18th-century instruments he had acquired over the years - including a dozen Stradivarius violins; a Stradivarius cello; three Guarneri del Ges violins; a 1620 Amati viola; and violas, violins and cellos by such Golden Age makers as Giovanni Guadagnini and Matteo Goffriller - were valued at $50 million when Axelrod first offered to sell them to the New Jersey Symphony Orchestra for half that price.

After a long fund-raising drive by the orchestra, Axelrod dropped the price to $18 million. The transaction was completed 14 months ago, giving the New Jersey Symphony Orchestra a concentration of instruments like no other orchestra's in the world.

NJSO board Chairman Victor Parsonnet, who brokered the Stradivarius deal with Axelrod, said yesterday he was shocked by the federal charges.

"We had no prior knowledge of this at all," Parsonnet said. "We have no comment when it comes to the accusation, but we do have to say he and his wife have been wonderful philanthropists - not only to the New Jersey Symphony Orchestra, but with huge amounts given to the Curtis Institute, the Metropolitan Opera, the Smithsonian, the Jersey Shore Hospital.

"I feel badly for them, and we have to remember he's innocent until proven otherwise."

The Axelrods emerged in recent years as the New Jersey Symphony Orchestra's most important benefactor. The couple made a $1 million donation in December 1997 to underwrite an annual concert, and provided a challenge grant of $1 million to the orchestra's annual operating fund last season, generating $1,154,000 in matching donations.

Parsonnet said all of Axelrod's donations have been paid in full. In addition, the Axelrods recently forgave a $1 million note they held on the violins and reassigned to other charitable institutions the remaining $3 million in notes they hold on the instruments.

PHOTO CAPTION: 1. Herbert Axelrod's sale of rare instruments for about a third of their assessed value was not a part of the probe, the U.S. Attorney's Office says. 2. Members of the New Jersey Symphony Orchestra sounded out their new strings in Newark in February 2003 soon after acquiring them from Herbert Axelrod. CREDIT: 1. 2003 ASSOCIATED PRESS FILE PHOTO