FBI probes symphony purchase of violins

Fugitive philanthropist got $17M for rare strings

By PEGGY McGLONE AND MARK MUELLER
STAR-LEDGER STAFF

The FBI is investigating the New Jersey Symphony Orchestra's high-profile purchase last year of Stradivarius violins and other rare instruments from Herbert Axelrod, the philanthropist who fled to Cuba last month after his indictment on federal tax fraud charges.

Simon Woods, the orchestra's president and chief executive officer, said FBI agents interviewed NJSO officials in the past two weeks. Woods termed the discussions "friendly" and said he was assured the orchestra is not a target of the investigation.

A federal law enforcement source confirmed investigators are focusing solely on Axelrod, calling the inquiry an extension of the probe that led to the multimillionaire's April 12 indictment.

At issue in the NJSO deal is whether Axelrod inflated the value of the stringed instruments - 30 violins, violas and cellos hand-fashioned by Antonio Stradivari, Giuseppe Guarneri del Gesu and other masters of the 17th and 18th centuries - to make himself eligible for a large tax write-off.

Axelrod, 76, claimed the strings were worth $50 million, a figure that has since been roundly questioned by violin dealers and appraisers.

Axelrod ultimately agreed to sell the collection to the New Jersey orchestra for $18 million, and he later agreed to forgive a $1 million note on the sale, making the final price tag $17 million.

Woods said the orchestra turned over to the FBI all documents related to the deal, which closed in February 2003 after a year of negotiations. The documents included the sales contract, materials outlining the instruments' history and the reports of experts hired by the orchestra to examine the strings, Woods said.

"We are fully cooperating and will continue to cooperate," he said.

Spokesmen for the FBI and the U.S. Attorney's Office declined to comment.

The NJSO purchase is one of two Axelrod transactions under federal scrutiny. The other is the former Deal resident's donation of four Stradivarius instruments to the Smithsonian Institution in 1998.

[unnamed Chicago violin dealer], a Chicago-based dealer regarded as one of the nation's top experts on rare violins, told The Star-Ledger two weeks ago that an investigator questioned him in late March about Axelrod's claim that the Smithsonian instruments, like the NJSO strings, were worth $50 million.

[unnamed Chicago violin dealer] said he told the investigator the valuation was "on Mars."

Both transactions have drawn the attention of the U.S. Senate Finance Committee, which has launched a broad investigation into charitable donations. The committee is seeking to determine whether the value of a wide range of donated items, from cars to fine art, is routinely inflated for the purpose of winning big tax breaks.

The committee's chairman, Sen. Charles Grassley (R-Iowa), called on the Smithsonian earlier this month to turn over all documents related to the Strads, known as the Axelrod Quartet. At the same time, he said he would seek to question NJSO officials about last year's sale. Grassley's committee has not yet contacted the orchestra, Woods said, but he said NJSO officials are "willing and eager to cooperate."

Axelrod, a Bayonne native who amassed a fortune selling pet-care books and products through his Neptune-based company, TFH Publications, faces up to five years in prison if convicted of the two counts against him: conspiracy to defraud the Internal Revenue Service and aiding and abetting the filing of a false tax return.

He is accused of helping a former TFH executive evade taxes by hiding money in Swiss bank accounts. Axelrod sold the company in 1997 for $70 million in cash and a $10 million loan.

Due to be arraigned April 21, Axelrod failed to show in court. He was later found in Cuba, a nation outside the reach of U.S. law enforcement.

Axelrod's lawyer, Michael Himmel, said yesterday that federal investigators previously examined his client's business dealings, including the NJSO and Smithsonian transactions, and did not bring charges.

"I had experts ready to go to attest to the value of the violins, and I suggest to you that had the government thought it could bring a case, it would have done so, and it chose not to," Himmel said.

He would not name the experts.

Orchestra officials maintain they are happy with their decision to buy from Axelrod, an amateur violinist who began collecting rare strings in the 1970s.

"We are extremely comfortable with the deal we got," Woods said. "People have to understand it's a great collection. We paid a good price for it."

The orchestra, which borrowed heavily to finance the purchase, reiterated that point in a letter that will be sent to donors this week. The letter also sought to assuage patrons' concerns about the deal, saying the orchestra has clear title to the instruments and that they were subjected to an "independent and objective due diligence process."

Orchestra officials have previously said they hired three outside experts to examine the strings, but Woods has refused to name them, citing confidentiality agreements and a desire to move beyond the controversy.

"It will just spur more speculation and debate," Woods said. "We do not see the value of an exhaustive and exhausting public debate."

Woods arrived at the NJSO from the Philadelphia Orchestra after the Axelrod deal was completed. His predecessor, Lawrence Tamburri, oversaw the purchase. Tamburri, now president and CEO of the Pittsburgh Symphony, has refused all comment on the deal.

_____________________________________________________________________________________________ Staff writer John P. Martin con tributed to this report.

URL: <a href="/texis/search/story.html?table=sl2004&id=40a3c23550">FBI probes symphony purchase of violins</a>

In absentia, Axelrod is told to list assets

Judge issues order in suit against fugitive

By MARYANN SPOTO AND MARK MUELLER
STAR-LEDGER STAFF

A Superior Court judge yesterday ordered disgraced philanthropist Herbert Axelrod to produce a list of his assets, and he placed strict limits on the multimillionaire's spending in connection with a long-running civil suit.

How the judge's order will be enforced remained far from clear. Axelrod, indicted on federal tax fraud charges April 12, has taken refuge in Cuba, his expensive properties in New Jersey and Florida long since sold and the where abouts of his prodigious nest egg unknown.

Judge William Gilroy, sitting in Freehold, did not address the possibility that Axelrod would ignore the ruling, much as he has dodged the criminal charges against him. A warrant can be issued for Axelrod's arrest if he fails to comply with the ruling, but the United States and Cuba do not have an extradition treaty.

The civil case, now in its fifth year, stems from Axelrod's 1997 sale of his pet-care product and book company, Neptune-based TFH Publications, to Central Garden and Pet Co. of California for $70 million in cash and a $10 million loan.

A provision of the sale called for Axelrod to receive additional payments if the company performed well. When those payments didn't materialize, he filed suit. Central Garden countersued, claiming Axelrod had fraudulently inflated the value of TFH.

Yesterday's hearing followed a series of motions filed earlier in the week by Central Garden's lawyers, who were seeking to determine the extent of Axelrod's assets, freeze those assets and compel him to place $17 million in an escrow account. That money would ensure payment if Axelrod were to lose a civil trial.

Similar motions were denied in the past, but Gilroy yesterday said Axelrod's status as a fugitive had altered the equation.

"The court now finds there is a substantial change in the facts and circumstances," the judge said.

Gilroy gave Axelrod a week to produce a list identifying his assets, their location and their value. Gilroy also placed restrictions on Axelrod's spending, ruling that the former Deal resident may not tap into his millions for anything but legal bills, daily living costs and business expenses, which include the salaries of his employees.

In addition, Axelrod is prohibited under the ruling from spending more than $25,000 at a time for any reason without giving lawyers in the civil case 30 days' notice.

The judge denied Central Garden's request that Axelrod place $17 million in escrow. Attorneys for both sides said they will need to review Gilroy's ruling before deciding whether to appeal.

"We thought the judge's decision was well-reasoned," said Robert Gilson, the lawyer representing Central Garden. "He entered most of the relief that we were seeking."

Axelrod's lawyer, Alan Lebensfeld, did not say whether Axelrod would comply with the order.

In a document filed with the court last week, Axelrod claimed he had $30 million in European investment bonds, but he did not say where the bonds were located.

Moreover, the legal papers did not state what has become of other Axelrod money, including $6.2 million gleaned from the sale of his Monmouth County home and $18 million from the deal for which he is best known: the sale of 30 rare stringed instruments to the New Jersey Symphony Orchestra in 2003.

Axelrod was hailed as a hero of the New Jersey arts community when he agreed to the sale, purportedly at a $32 million discount, of the violins, violas and cellos. Thirteen of the instruments were fashioned by master craftsman Antonio Stradivari.

In recent weeks, Axelrod's $50 million valuation of the instruments has been attacked by some of the nation's top violin dealers.

In addition, federal investigators are examining Axelrod's 1998 donation of four Stradivarius instruments to the Smithsonian Institution. The investigation is focusing on whether Axelrod wildly inflated the value of the strings - he claimed they, too, were worth $50 million - to take a massive tax write-off.

Lebensfeld has denied the value of the violins was inflated.

PHOTO CAPTION: AXELROD
 

URL: <a href="/texis/search/story.html?table=sl2004&id=409bc7ac11b">In absentia, Axelrod is told to list assets</a>

Wealthy fugitive's assets debated

Violin collector's holdings at stake

By MARYANN SPOTO
STAR-LEDGER STAFF

Herbert Axelrod, the New Jersey millionaire and violin collector who fled to Cuba after being indicted for conspiring to defraud the Internal Revenue Service, may have gone fishing yesterday. Perhaps he smoked one of his big Cuban cigars.

But his lawyer was in state Superior Court in Monmouth County, representing the 76-year-old fugitive's interests in a long-running legal battle that Axelrod has been waging there. The lawsuit stems from the Deal businessman's 1997 sale of his pet product and book empire, TFH Publications, to Central Garden and Pet. Co. of California.

Lawyers for Central Garden urged a judge yesterday to freeze whatever assets Axelrod has not already managed to liquidate and move offshore. Specifically, they were eyeing $30 million in European investment bonds whose existence has just come to light.

Axelrod's attorney, Alan Lebensfeld of Red Bank, said his client faxed him a certification attesting to their existence - from an unknown location - on April 29. He did not specify where they were or what other assets he may have.

Shortly before he was indicted last month, Axelrod quietly sold his oceanfront mansion in Deal as well as several homes in Florida, liquidating more than $10 million in property in New Jersey alone, according to court papers.

Lebensfeld said yesterday that the civil case can move forward without Axelrod. But, he said, he did not know how the court would enforce any penalties assessed against Axelrod if he remains in Cuba. The U.S. government has no jurisdiction there.

Axelrod sold his business to Central Garden in 1997 for $70 million in cash and a $10 million loan. Terms of the contract provided the prospect of additional money going to Axelrod, contingent upon the performance of the company under the new owners.

After the sale, Axelrod sued Central Garden for damages, alleging its poor management had deprived him of the prospect for additional earnings. Central Garden countersued, alleging fraud, misrepresentation and breach of fiduciary duty. The company claimed he reneged on a promise to repay a $10 million loan.

Eighteen months later, the company went to the U.S. attorney, alleging Axelrod had cooked his books, hidden millions in secret Swiss bank accounts and defrauded the government. The U.S. attorney returned a two- count indictment against Axelrod nearly three weeks ago.

Five times during the past six years, Central Garden has tried to have Axelrod's assets frozen or get him to place millions of dollars in escrow to cover possible damage awards. Each time, judges refused, saying Axelrod was free to invest his money as he pleased because there had been no ruling against him.

Since the civil case started, attorneys on both sides have filed - and several judges have heard - more than 90 motions, including six postponements of a trial date, related to the case.

Yesterday, with a probable fall trial date looming, Central Garden returned to court, fearful that all of Axelrod's assets would end up beyond the reach of the American judicial system.

Lebensfeld urged Judge William Gilroy to deny the request because Axelrod is still protected by the same rules.

But attorneys for his adversary said Axelrod changed the rules by fleeing to Cuba.

"Herbert Axelrod is a fugitive, and that changes everything," attorney Robert Gilson said.

Gilson also said Axelrod's certification on the bonds is meaningless.

"Now he wants to . . . selectively tell you what he wants," he said. "He is saying to you, 'Here are where my assets are and this is why you shouldn't be worried.' He's not telling you how much or where."

Lebensfeld argued that even though Axelrod is considered a fugitive, yesterday's request still boils down to whether Central Garden can show it will most likely win at trial. In the five previous requests, he said, no judge saw that likelihood.

"I wish he were here. He has made my life harder, but that's what I get paid to do," Lebensfeld told the judge. "It has to be decided on the merits, not on a knee-jerk reaction."

He proposed allowing Central Garden to renew its request 30 days before trial if Axelrod has not returned to the United States by then.

Attorneys for Central Garden flatly refused, saying they might ask the judge to decide the entire case in their favor if Axelrod remains a fugitive or if he does not adhere to any measures Gilroy might impose.

The judge said he would issue his ruling on Thursday.

_____________________________________________________________________________________________ Staff writer Mary Jo Patterson contributed to this report.

PHOTO CAPTION: AXELROD
 

URL: <a href="/texis/search/story.html?table=sl2004&id=4097cc1d11c">Wealthy fugitive's assets debated </a>

U.S. questions value of 1998 Axelrod gift

Violin dealer says agent consulted him

By PEGGY McGLONE AND MARK MUELLER
STAR-LEDGER STAFF

Federal investigators are examining whether fugitive philanthropist Herbert Axelrod committed tax fraud six years ago through his celebrated donation of four rare Stradivarius instruments to the Smithsonian Institution, according to a noted violin dealer questioned in the case.

[unnamed Chicago violin dealer], a Chicago-based dealer regarded as a top expert on Golden Age stringed instruments, said a federal agent contacted him six weeks ago, soliciting his opinion about Axelrod's claim that the Smithsonian collection was worth $50 million.

That valuation has come under sharp attack in the two weeks since Axelrod took refuge in Cuba to avoid federal prosecution on unrelated tax charges. Numerous violin dealers contacted by The Star-Ledger have called the $50 million figure wildly inflated, suggesting Axelrod used that appraisal to achieve a big tax write-off.

Those experts were equally critical of the $50 million valuation Axelrod placed on the 30 stringed instruments he sold to the New Jersey Symphony Orchestra last year. The orchestra ultimately paid $18 million, and it listed $32 million on its tax forms as a non-cash donation.

[unnamed Chicago violin dealer] said the U.S. Treasury agent who spoke with him was knowledgeable about the orchestra transaction but focused his questions on the 1998 Smithsonian donation, which consisted of two violins, a viola and a cello.

"He was interested in the museum, but at the same time he was quite familiar with the NJSO" transaction, [unnamed Chicago violin dealer] said. "I told them I thought the gift to the Smithsonian was on Mars and that the New Jersey Symphony made some sense but was not cheap."

Officials with both the Internal Revenue Service and the U.S. Attorney's Office in Newark have declined to say whether they are investigating the donation to the Smithsonian or the NJSO purchase, an acclaimed acquisition intended to catapult the orchestra to international prominence.

The deal included a dozen Stradivarius violins, a Stradivarius cello, an Amati viola and three violins by Guarneri del Ges.

Simon Woods, the orchestra's president and chief executive officer, would not say if authorities have examined the purchase.

"I'm not going to comment on anybody who has approached us formally or informally," he said.

In general, Woods has defended the deal and the $18 million price, saying the orchestra hired three independent experts to confirm Axelrod's assessment of the collection's value. He has refused to name the experts.

Like Woods, a spokeswoman for the Smithsonian's National Museum of American History, which possesses the Stradivarius quartet donated by Axelrod, declined to comment on any investigation.

It is the second inquiry into the Smithsonian donation. In 2001, investigators sought out opinions from some of the top experts in the field, including [unnamed Chicago violin dealer] and Charles Beare, a London-based dealer widely viewed as the world's foremost authority on 17th- and 18th-century strings.

At the time, [unnamed Chicago violin dealer] said, he told the IRS that the Smithsonian instruments were worth perhaps $12 million.

"The most expensive violin had sold for just shy of $6 million at the time," [unnamed Chicago violin dealer] said. "So the person who signed the $50 million appraisal, I just couldn't get there."

Beare could not be reached, but Simon Morris, a director at Beare's London firm, confirmed the IRS contact three years ago. Morris would not disclose what Beare told authorities, but he said: "There are dealers being quoted about the valuation being ludicrously high. I think the consensus was the value was extremely high, and I support that."

Axelrod's lawyer, Michael Himmel, said the fact that the federal government has not charged his client in connection with either the Smithsonian or NJSO cases shows Axelrod did nothing illegal.

"If the government believed it could have brought a case against him based on either the value or authenticity of the violins, they would have," Himmel said. "But they chose not to. This suggests there was no reason to bring such a case."

Axelrod, 76, who built a fortune publishing pet-care books and products, was indicted April 12 on charges of conspiring to defraud the IRS and of aiding and abetting the filing of a false tax return.

The counts dealt with payments he made to an employee of his company, Neptune-based TFH Publications, during the 1990s. Tracked down by The Star-Ledger at a Cuban resort April 23, Axelrod denied he did anything wrong.

"I am not a criminal," he said. "I don't feel like one."

Before the criminal case, Axelrod had earned a reputation as one of the more generous philanthropists in the world of classical music, lavishing money on institutions and lending expensive instruments to young artists.

Axelrod, a Bayonne native and amateur violinist who began amassing fine instruments in the 1970s, lent the Stradivarius quartet to the Smithsonian in 1986. Twelve years later, he converted the loan to a permanent donation.

By any measure, it is a rare quartet. The violins and the viola bear a matching inlay. To make the set appear complete, Axelrod had matching decals placed on the cello, sparking a brief furor among lovers of classical strings.

Valeska Hilbig, the spokeswoman for the National Museum of American History, said the museum did not request the alteration.

"That was not something we would have done, but we can't undo it because of conservation issues," she said. "By Smithsonian guidelines, we just don't alter things."

Hilbig said the museum also had nothing to do with the $50 million valuation.

That appraisal was performed by Axelrod's violin dealer, Dietmar Machold, who, like [unnamed Chicago violin dealer], is considered among world's top purveyors of prized strings. Machold has offices in New York and several other cities across the world but is primarily based in Austria.

In a phone interview, Machold, 54, defended the Smithsonian appraisal.

"Look, there's only one other quartet of inlaid instruments like this anywhere in the world," he said. "The Smithsonian one was the only one on the so-called market. The viola is the only decorated Stradivari viola. The two violins are the finest of the decorated instruments."

He said the IRS approached him, as well, in 2001, asking him to justify his appraisal, "and I happily did."

Machold also made the $50 million appraisal for the instruments sold to the New Jersey orchestra. He stood by that valuation as well.

"Look, we have an experience of 143 years in the trade," he said. "I'm the fifth generation. In the violin trade, our appraisals are based on that. I wouldn't quote anything different if you would ask me today."

_____________________________________________________________________________________________ Staff writers Mary Jo Patterson and Robert Rudolph contributed to this report.

PHOTO CAPTION: Herbert Axelrod stands outside his one-bedroom bungalow at the Hemingway Marina in Havana nine days ago. CREDIT: ANDREW MILLS/THE STAR-LEDGER
 

URL: <a href="/texis/search/story.html?table=sl2004&id=40953aa8e3">U.S. questions value of 1998 Axelrod gift</a>

A LIFE OF Money and myths

Fugitive Axelrod has been a master of deceit

By MARY JO PATTERSON, MARK MUELLER AND TED SHERMAN
STAR-LEDGER STAFF

A few years ago, before Herbert Axelrod became an international fugitive fleeing the grasp of the United States government, a group of fish aquarium hobbyists traveled to a nature center in Bucks County, Pa., to hear him speak.

In the universe of hard-core fish heads, as some fish hobbyists affectionately call each other, the somewhat disheveled man with the Hemingway look and the knack for storytelling was an irresistible draw.

An entrepreneurial genius who had amassed a fortune in the pet-publishing field as the owner of TFH Publications in Neptune City, he had tutored countless novice pet owners and fish hobbyists for a half-century through his books. He claimed to have discovered numerous species of exotic fish as a fearless globetrotter. But he was also known as a plagiarist and a ruthless businessman who operated through charm and intimidation, constantly suing or threatening lawsuits.

Ted Coletti, an aquarium fish hobbyist and historian from Denville who was present that day in Pennsylvania, remembers Axelrod as informative and kindly. But he also remembers Axelrod telling a fish tale of the whopper variety.

"During the question period, someone asked, 'What was your greatest accomplishment?' He said, 'Introducing African cichlids,'" Coletti said last week, referring to a species of tropical fish imported into the United States. "That statement was an exaggeration. Someone else did that.

"That was Axelrod, always adding to his own myth."

In the days since Axelrod's indictment in a tax evasion conspiracy and his flight to Cuba, it has become clear that myth and reality were always hard to separate in the life of Herbert Axelrod, whether the subject be tropical fish, charity or musical instruments.

When Axelrod sold his collection of rare Italian violins to the New Jersey Symphony Orchestra last year, saying he had parted with a $50 million value for only $18 million, he was hailed as the greatest arts benefactor in the state's history.

But he seemed to burst out of nowhere. No one in the arts world appeared to know much of anything about his background. With his flamboyant and hardy manner - he once grabbed multiple lamb chops off a tray at an NJSO gala while other guests nibbled daintily - he definitely was different. But he had money.

On April 12, 2004, Axelrod, 76 years old, was indicted on federal charges of conspiring to defraud the Internal Revenue Service and of aiding and abetting the filing of a false tax return. Accused of hiding huge sums of money in secret offshore accounts, he faces a sentence of up to five years in prison if convicted.

On Wednesday, when Axelrod failed to appear in Trenton for his arraignment, federal authorities issued a warrant for his arrest. Axelrod surfaced within hours at the Hemingway Marina outside Havana and proclaimed his innocence.

"I am not a criminal. I don't feel like one," he said Friday, raising his palms upward in a pleading gesture. He was seated in the kitchen of a $60-a-day bungalow by the ocean, working on yet another pet book.

Axelrod said that rather than fleeing, he was already living his retirement years overseas. After his indictment, he decided to stay. "I'm an old man," he said. "I'm not looking forward to spending any time in a jail or fighting this thing."

Many people, especially those who did not meet Axelrod until he showed up in Newark to sell his instruments, say they are shocked at the government's charges.

But a review of lawsuits, public documents and interviews with those who were once close to Axelrod suggest he was never quite what people thought.

Court papers filed in a pending lawsuit against him depict him as a liar and a womanizer who funneled cash in the form of author's payments to a woman with whom he had a years-long affair.

Today, the message boards of the nation's aquarium hobbyists are burning up with the news: The godfather of the tropical fish business has become a fugitive from justice.

The New Jersey music world is reeling, and the federal charges have raised questions about Axelrod's deal with the orchestra.

On the other hand, Paul Loiselle, curator of freshwater fishes at the famed New York Aquarium in Coney Island, is feeling vindicated. Like so many others in this world, he was remembering his own ugly encounter with Axelrod. A decade ago, Axelrod obtained and printed photographs taken by Loiselle without his authorization.

"I can't think of anybody I'd rather see in trouble with the IRS," Loiselle said Friday. "He successfully used the legal system to bully me. He had a history of using the legal system to bully opponents."

Axelrod has his defenders, too. Some say they found him remarkably generous, both in his personal life and as a philanthropist.

"I looked up to him," said Rene Morel, a New York-based violin dealer who worked many years in the shop of Jacques Francais, a violin dealer who once worked for Axelrod. "He knew I loved good wine, so he used to give me a bottle of the best French wine, which I could never have afforded myself, just out of his good heart. When he was in a good mood, he took you to the best restaurants, the best champagne."

But other acquaintances pointed to a darker side, marked by a pattern of betrayal and deceit.

"In my opinion, he is one of the most truly evil people I have ever met in my lifetime," said Albert J. Klee, a writer whom Axelrod sued over a magazine article critical of one of Axelrod's business lines. Klee said he did not mention Axelrod's name in the article.

Klee said Axelrod also sued his publisher, who - unable to defend a libel suit - settled by selling Axelrod his magazine.

"This is only one item in a long list" of transgressions committed by Axelrod, Klee said in an e-mail message.

Herbert Axelrod was born in Bayonne, the son of Russian immigrant parents, and grew up during the Depression. Though his parents were employed - his father as a math teacher, his mother by the Navy - he grew up respecting the twin virtues of thrift and hard work, he told interviewers. Young Herbert studied violin with his father, who gave music lessons on the side.

Also, Axelrod liked to emphasize, he was taught the value of charity.

"He taught his grandparents English in return for which they taught him Russian-Jewish philosophy. There is no man so poor that there isn't someone more poor was the slogan over the metal box, or 'pushkie,' into which Herbert split his weekly 5 cents allowance, starting a tradition of charity that still continues today," states a biographical sketch posted on the Web site of the University of Guelph in Ontario.

Axelrod is a benefactor of the Canadian university, having donated a valuable collection of fish fossils in 1989. The donation was arranged by a friend, Eugene Balon, then a professor in the university's department of ichthyology.

At the time, Axelrod appraised the fossils' value at $24 million. But, Balon says now, Axelrod inflated their value. "Nobody would have paid $24 million," he said last week.

Possibly because he lived close to the water, Axelrod became interested in marine life quite early.

In a 1992 interview published by Knight-Ridder Newspapers, he said he became an "environmental activist" at the age of 10 when oil from a ship fouled the waters near Bayonne. The interview was prompted by a new line of books, the "Save-Our-Planet" series, he was rolling out at TFH Publications.

"So I got mad. I went to see the mayor, the Coast Guard, anyone else who would listen. My friends and I began a protest movement," Axelrod said. "Then America entered World War II. The beaches were closed by the military. Our crusade ended. But I learned how terrible it is to see the earth, waters and animals destroyed."

Axelrod was educated at New York University, where he earned three degrees. While he has told interviewers he earned his Ph.D. in medicine, a spokesman for NYU said last week the doctorate came from the university's School of Education.

His thesis, published in 1960, was titled, "The Use of Statistical Techniques in Medical and Dental Papers: A Critique."

As for his interest in fish, that developed when he landed a job at the Museum of Natural History. He watched over fish in the museum's aquariums.

In the 1950s, he took his first steps into the publishing world and introduced a number of tiny specialty publications about aquarium fish.

Before long, however, he became involved in two hot disputes that earned him a reputation as a plagiarist and a cheat, says Alan Fletcher, a 76-year-old retired Cornell University professor in Ithaca, N.Y. The reputation stuck, Fletcher said.

"I have no reason to be vicious or nasty or anything else with him," Fletcher says. "He has been far more successful than I in his life, and I admire that. He hustled like mad and walked into the business at the right time."

Fletcher remembers Axelrod, on one occasion during that era, alighting from a powder-blue Cadillac, dressed to the nines. Peeking out of his breast pocket was a row of the finest Cuban cigars, lined up so everyone could read their labels.

Fletcher, a former aquatic biologist for the Pennsylvania Fish Commission, was editor of a Philadelphia-based journal called Aquarium Magazine. "It was the world's leading publication" at the time, Fletcher said last week.

The magazine's publisher was William T. Innes, a worldwide authority on exotic fish. In 1935, Innes had authored a text, "Exotic Aquarium Fishes," regarded as the bible of its field.

Fletcher said Axelrod proved to be a spectacularly successful competitor.

"Innes was very old and tired and couldn't compete. In the late 1950s and early '60s, Axelrod kind of took over" the field and trounced the competition, Fletcher said.

Axelrod then decided to compete with Innes' book by publishing his own. He eventually co-authored "The Handbook of Tropical Aquarium Fishes" in 1955 with a well-known scientist from the Smithsonian Institution.

But he illustrated it with plates stolen from the Innes book, for which he was promptly sued, according to Fletcher, who attended the trial.

"Innes' book was full of gorgeous color plates" of fish, Fletcher said. "He took black-and-white photos and had an artist paint the colors over them. They were works of art. (Axelrod) stole Innes' color plates and blacked over the backgrounds, leaving the individual fish."

A "very responsible" editor at Axelrod's publishing house studied the page proofs of the book before publication and figured out what he had done, Fletcher said.

Innes successfully sued in federal court. Because he could not establish that Axelrod's actions had cost him any money, Innes was not awarded any damages, Fletcher said. The court ordered Axelrod to pay Innes $1 and give Innes credits for the photographs in the upcoming book.

Around the same time, Axelrod became involved in another dispute. It became an international affair, investigated by an august body in London called the International Commission of Zoological Nomenclature.

This battle, fought between Axelrod and an academic, involved the naming of an aquarium fish, the cardinal tetra, that had just been introduced from Brazil into the United States. It was a gorgeous little fish that glowed, with a red belly and a neon stripe, and was immediately a huge commercial success.

According to Fletcher, who was again peripherally involved, Axelrod claimed to have discovered the fish in one of the wildest jungles of Brazil. Because the cardinal tetra was new to science, the discovery needed to be documented in professional fish literature. Axelrod did so in one of his own publications. In describing the tetra, he named the little fish after himself: Cheiro don axelrodi .

A competing claim was entered by George Meyers, a Stanford University professor who also documented the existence of the fish. In his paper, a professional journal, he called the fish Hyphessobrycon cardinalis.

The commission in London decided the dispute in Axelrod's favor, noting that his article had been published just ahead of Meyers'. Axelrod got to name the fish.

Rumors were rampant that Axelrod had backdated his publication, according to Fletcher. He said the commission members informed Meyers "they were well aware that something dishonest had happened" but could not figure it out.

What's more, Axelrod did not really discover the fish as he claimed, Fletcher said.

In reality - and this was something the commission documented - Axelrod found his cardinal tetras at a New Jersey fish store.

Meyers, meanwhile, had obtained his tetras from Fletcher. The same fish supplier, in Ardsley, N.Y., excited by the tiny fishes' beauty, had sent them to Aquarium Magazine.

From the 1960s forward, Axelrod's enterprise grew ever more profitable.

TFH Publications claimed it controlled the most comprehensive "animal reference database" in the world.

"Guppy to Great Dane, hamster to hedgehog, whatever your pet, TFH Publications has expert knowledge and guidance to help you and your pet enjoy a long and happy life together," the company's Web site states today.

TFH has been under new ownership since 1998. Axelrod sold the company to Central Garden & Pet Co., a California company, for at least $80 million in December 1997.

One year later, Central Garden and Axelrod were in court, suing and countersuing.

Lawyers for Central Garden went to federal investigators in 2000. The Central Garden lawsuit, which has yet to go to trial, spells out the federal fraud charged in the government's indictment.

Papers filed in the lawsuit fill six cardboard boxes in the Monmouth County Courthouse. They provide more detail than the two-count indictment brought by U.S. Attorney Christopher J. Christie .

They allege a far wider scheme of deceit by Axelrod over the years, including his siphoning of more than $3 million into bank accounts in Switzerland and the Cayman Islands; illicit business deals in Cuba; payments to support a longtime extramarital relationship that were recorded as author's fees; at least a quarter of a million dollars in charitable contributions falsely booked as advertising expenses; and the wide-scale concealing of books in warehouses to fraudulently boost sales figures.

Axelrod's longtime personal attorney, Douglas Calhoun, would not comment on the matter.

The claims filed in the civil case, however, allege years of financial jiggering of the books. Central Garden accuses Axelrod of using the company to support indulgences from cigars to women while committing tax fraud and diverting payments meant for TFH into his own bank accounts.

According to the court documents, Axelrod made a deal to sell his company for $70 million in cash and a $10 million loan. He told Central Garden he wanted the loan for cash to buy a quartet of Stradivarius violins.

The terms of the contract provided the prospect of additional money going to Axelrod, contingent on the performance of the company under Central Garden.

Those earnings, however, never materialized, the court papers allege. In fact, the revenues of TFH Publications were far lower than expected.

Axelrod and his wife, Evelyn, immediately filed suit against Central Garden for damages, alleging management failures that jeopardized the prospects of achieving those higher earnings.

As Central Garden's accountants started digging into the company it had just bought, though, they discovered that the revenue figures they had been given for TFH Publications were a fiction, the lawsuit alleges.

The reason, according to Central Garden, was that Axelrod had arrangements with customers allowing him to stock their warehouses with books they never ordered, a move designed to pad short-term sales figures.

It's a scheme called "channel stuffing," in which the market channels are literally stuffed with goods that are neither needed nor wanted, and recorded as sales.

"After we bought TFH from Herb Axelrod in 1997, we discovered that prior to our purchase, Herb Axelrod had committed tax and other frauds, including the knowing sale of defective products and channel stuffing, that inflated the apparent value of TFH," Central Garden spokeswoman Brandy Bergman said.

The company countersued the Axelrods, alleging fraud, misrepresentation and breach of fiduciary duty.

As the company dug deeper into the TFH books, meanwhile, it found evidence of a massive tax scam involving the payment by Axelrod of $1 million to a former vice president of marketing, Gary Hersch, according to papers filed in the case.

In depositions, Axelrod did not deny the payment.

"When I was going to sell TFH Publications, one or two of the people to whom I wanted to sell the company were upset at the contract I had with Gary Hersch. I wanted to get out of that contract, so I made a deal with Gary Hersch for a million-dollar payment," he said in sworn testimony. "I didn't have the cash to give him right away, the million, so I said that as money came in (from Nylabone England, a British customer of TFH Publications), that's the way the payments would be made."

Evelyn Axelrod was in charge of the company's accounts receivable, and according to the court records, Axelrod said he had his wifes assistant get the checks from Nylabone and have Hersch sign a receipt for the checks.

He would not confirm how the checks were transferred, but Central Garden said it found the checks had been passed to Hersch through Swiss bank accounts.

In depositions, Hersch said he was told to keep the diversions "totally hush."

Other papers filed with the court claim the Axelrods siphoned at least $3.8 million out of the business into their Swiss and Cayman Island accounts, a charge they denied in responses.

And Central Garden said there were other questionable expenses hidden within TFHs books.

One of the companys most prolific writers was a woman by the name of Anmarie Barrie. She wrote dozens of pet books, including such titles as "Guinea Pigs for Those Who Care," "Step-by-Step Book About Rabbits," and "Conures as a New Pet."

In a deposition filed in the case, Barrie was asked to define a conure.

"A bird," she replied.

"Do you know what type of a bird it is?" she was asked.

"No, I dont," she said. (It is a species of parrot.)

Before meeting Axelrod, Barrie was a receptionist who worked at the office of his dentist in Tinton Falls, according to her deposition. Axelrod later paid to put her through Seton Hall Law School, from which she graduated in 1989.

According to documents filed in Central Gardens lawsuit, Axelrod had an ongoing, intimate relationship with Barrie and helped support her by paying her as the author of rewritten TFH books.

Between 1990 and 1997, Barrie was credited with writing dozens of pet books, receiving at least $63,874 in payments for books she said she put together from her own research and old manuscripts in one weeks time.

Barrie is referred to in last weeks indictment as a dental hygienist but is not named. The indictment says the former hygienist traveled 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 cash from the Internal Revenue Service.

Now believed to be married and living in another state, Barrie could not be reached for comment.

A forensic accountant for Central Garden also reported finding evidence that Axelrod arranged with Nylabone Ltd. to pay his personal credit card expenses, deducting them from money owed TFH for goods sold. Much of those expenses were incurred in Cuba.

The investigator for the company said Axelrod told Nylabone he wanted the expenses covered "because it is basically illegal for an American to do business in Cuba, and I would prefer not to have the receipts and bills coming here."

Axelrod invoked his Fifth Amendment right not to incriminate himself when he was asked by Central Gardens lawyers about the trips.

Documents obtained by The Star-Ledger show that in December 2002, Hersch agreed to cooperate with federal investigators and plead guilty once the government filed a one-count charge of conspiracy to defraud the United States, for failing to report the payments from Axelrod on his tax returns. The charge has not yet been filed.

But even before Herschs plea deal, Axelrod had begun to sell off his assets. Earlier in 2002, Axelrod introduced himself to the New Jersey Symphony Orchestra with what everyone thought was a unique deal.

He wanted to sell some violins.

Axelrods April 2002 offer was mesmerizing. For $25 million - half of the collection's actual value, he claimed - he would part with 30 rare stringed instruments from Italys Golden Age.

They included 12 violins and a cello made by Antonio Stradivari, three Guarneri del Gesú violins, a 1620 Amati viola and other prized strings from the 17th and 18th centuries.

Never before, experts said, had such a collection been placed in the hands of a single orchestra. For the NJSO, a cash-strapped, second-tier orchestra forever dimmed by its counterpart in New York City, it seemed like an impossible dream.

"I want to put New Jersey on the map," Axelrod said at the time. "I want this to be the best-sounding orchestra in the world."

What unfolded over the following year was a mad scramble to raise money - no small feat for an operation that had run up a $1.1 million deficit the previous year.

In June of 2002, the orchestra missed a deadline arbitrarily imposed by Axelrod. He extended it. Later, when the $25 million price seemed out of reach, he knocked it down to $18 million.

Finally, by April 2003, the NJSO had cobbled together $14 million in loans. Axelrod held an additional $4 million note. The dream, it seemed, had been realized.

"No orchestra has ever gotten a gift such as this," Victor Parsonnet, chairman of the NJSOs board of directors, said at the time. "No one has ever had this kind of bonanza. What it will do for the orchestra, in terms of attracting attention worldwide, is worth it."

The deal's closure brought acclaim to the orchestra and Axelrod both. He was seen as having donated $32 million to the orchestra - the difference between the price tag and the instruments valuation.

That largess landed him a spot on the Chronicle of Philanthropy's annual list of the nations 60 top benefactors, alongside the founders of McDonalds and Dell, the computer manufacturer.

It is only since Axelrods indictment and flight to Cuba that his arrangement with the orchestra, and his motivation for it, have come under new scrutiny.

Last week, three independent experts in the exclusive rare-instruments field told The Star-Ledger that Axelrods initial $50 million valuation was wildly inflated. They questioned whether he used the high appraisals for tax write-offs.

The experts, at least one of whom has examined several of the instruments, said even the $18 million price seemed a little high.

Whether Axelrod did deduct some or all of the $32 million difference between his valuation and the purchase price could not be determined. Federal officials, while not offering specific information on their probe, said the investigation was ongoing and could extend beyond the tax charges already filed against Axelrod.

"We certainly haven't limited ourselves," said Michael Drewniak, a spokesman for the U.S. Attorneys Office in Newark.

NJSO officials said they had not been contacted by the FBI or the IRS, and they stood by the purchase as a good deal. They also stood by Axelrods initial valuation of the instruments. A review of the orchestras tax forms found the instruments value listed at $48.9 million. The strings were insured for that amount.

Simon Woods, the NJSOs president and chief executive officer, said the orchestra reached the figure after hiring "one of the top people in the business" to perform a painstaking appraisal.

That man, Woods said, was Dietmar Machold, a violin dealer based in New York and Vienna.

Machold also is Axelrods longtime business partner, handling the purchase and sale of instruments on the millionaires behalf since the early 1990s.

Machold did not respond to messages left at his New York office or to his e-mail address in Austria.

For additional confirmation of the collections value, the NJSO brought in several experts to examine a few pieces each. Woods would not identify those experts, saying the parties had signed confidentiality agreements, a standard practice in the field.

"It's a business where people make subjective opinions," Woods said. "(They) want to keep them confidential."

He said the experts were asked to make "their own separate opinions about the instruments" and not to comment on Macholds overall appraisal.

"They confirmed to us that the deal we were getting was a good deal, a very good deal," Woods said.

The orchestra did not contract for additional full appraisals because of the high cost, Woods said. Full appraisals are based on a percentage of the value of the instruments, meaning that the higher the appraisal, the more expensive the valuation.

Woods would not say how much Machold charged for his valuation.

Asked whether he believed the collection is worth nearly $50 million, Woods replied, "I'm going by the official valuation."

That opinion is at odds with comments made last year by Parsonnet, the chairman of the NJSO board.

In a New York Times Magazine article on the high-profile sale, Parsonnet said the orchestras independent appraisals had produced a figure "somewhere closer to $25 million."

In an interview Friday, Parsonnet said he doesn't recall how he arrived at the $25 million figure.

"I don't remember how it came out of my head," he said. "I'm a cardiac surgeon. I'm not a businessman. We had our business people going over this. I wasn't in on all the details of that, and I may have spoken out of turn."

Parsonnet added "We did our due diligence. We had a good deal. The instruments are a marvelous purchase, and we are happy with them."

The NJSO deal is not the only one now being questioned.

In 1998, Axelrod donated four inlaid Stradivarius instruments - two violins, a viola and cello - to the Smithsonian Institutions National Museum of American History. He placed the value of the strings at $50 million.

The independent experts contacted by The Star-Ledger last week by turns called the valuation "ludicrous," "preposterous" and "a joke." One, Chicago-based violin dealer [unnamed Chicago violin dealer], said the strings are likely worth under $15 million.

A spokeswoman for the Smithsonian said the instruments' value had been verified when the museum took possession of them.

In the interview Friday, Axelrod denied inflating the prices of the instruments he refers to simply as his fiddles. He also said he had always planned to retire to Cuba, where he loves the fishing, the weather and the cigars.

Over the past year, Axelrod has liquidated his many assets, from more than a dozen properties in Florida to his oceanside home in Deal, which was valued at $6.5 million.

The sale of the violins to the NJSO marked another big sale, one that, in rare-instrument circles, moved rather quickly. Experts have said that selling the strings piecemeal to various dealers would have taken far longer than the year it took to sew up the agreement with the New Jersey orchestra.

Throughout the process of selling off his empire, Axelrod knew federal investigators were mounting a case against him. According to filings in the Monmouth County lawsuit, he knew of the probe as far back as 2000, when his lawyers complained that Axelrods business enemies, by bringing information to the U.S. Attorneys Office, were using the threat of criminal action to seek an advantage in the case.

Today Axelrod says he is not sure what his future holds. Someday, he said, he would like to come back to New Jersey.

Of one thing, Axelrod said, he is certain.

"I am not a criminal. I don't feel like one," he said. "Nobody can ever say that I hurt anyone."

NOTES: Staff writers Peggy McGlone, Willa Conrad and Brian Donohue contributed to this report.

PHOTO CAPTION: 1. Herbert Axelrod outside his one-room, $60-a-night bungalow at the Hemingway Marina in Havana Friday. Axelrod's 52-foot yacht is moored there. 2. The illustrations such as the one at far left, from William T. Innes' ''Exotic Aquarium Fishes,'' were plagiarized by a book Herbert Axelrod co-authored 20 years later, Innes charged. A federal court agreed, and the illustrations in Axelrod's ''The Handbook of Tropical Fishes,'' second from left, added the credit line ''After Innes.'' At far right is the cover of the Axelrod book, next to a photograph of the cover of ''Exotic Aquarium Fishes.'' A photo of Axelrod circa 1962 appeared on the jacket of ''Encyclopedia of Tropical Fishes.'' 3. Alan Fletcher, who edited Aquarium Magazine for publisher William T. Innes, recalls from his home in Ithaca, N.Y., that Innes successfully sued Herbert Axelrod for stealing the images of fish from Innes' own work. 4. Herbert Axelrod at home on the Jersey Shore with one of his musical prizes in April 2002. The 1694 Stradivarius viola was not among the rare strings he sold to the New Jersey Symphony Orchestra last year. He recently sold the Shore house, in Deal, as well as his properties in Florida before heading to Cuba. 5. Violin dealer Dietmar Machold, a business partner of Herbert Axelrod, also performed an appraisal of Axelrod's strings for the New Jersey Symphony Orchestra. 6. A view of Herbert Axelrod's residence in Havana, one of a group of bungalows at the Hemingway Marina. Before he became a fugitive, Axelrod was a frequent visitor to Cuba. He is fond of the cigars. CREDIT: 1. ANDREW MILLS/THE STAR-LEDGER 2. PHOTO BY MIKE ROY 3. PHOTO BY MIKE ROY 4. STAR-LEDGER FILE PHOTO 5. ASSOCIATED PRESS FILE PHOTO 6. ANDREW MILLS/THE STAR-LEDGER
Etc. BOX: "We certainly haven't limited ourselves." -MICHAEL DREWNIAK, U.S. ATTORNEY'S OFFICE, ON AXELROD PROBE
 

TAG: sl2004-408bf21611c
 

URL: <a href="/texis/search/story.html?table=sl2004&id=408bf21611c">A LIFE OF Money and myths</a>

He's trying to put his cares behind him

Axelrod's chief worry is whether Castro will allow him to stay

By BRIAN DONOHUE
STAR-LEDGER STAFF - HAVANA

- Down a quiet, sun-baked road, past the yachts, hotels and Che Guevara billboards, Herbert Axelrod sits in an oceanfront bungalow at the Hemingway Marina, a fugitive from justice, poring over photographs of hamsters.

Back in Newark, federal prosecutors have built a case charging the 76-year-old pet-book magnate with concealing hundreds of thousands of dollars in Swiss bank accounts. Violin appraisers are questioning the value of the stringed instruments he bestowed on the New Jersey Symphony Orchestra. Former business associates are calling him a fraud.

Axelrod began this Friday, two days ago, fishing from his 52-foot boat, hooking five small marlin. Now, barefoot in a black and white summer kimono, he sits at a wooden kitchen table, working on the latest in a long line of pet-care books that have earned him what he calls "a special kind of life."

At the far end of the table lie stacks of notes for two books that will follow the guide on hamsters - one on geckos, the other on American rat snakes.

This life - a retirement split between Europe and Cuba, a place where he can fish every day, smoke Habana cigars and work on his pet books - has always been his plan.

And Axelrod is sticking with the plan.

At his age, he says, he's got no time or energy to waste fighting a federal prosecutor who has an arrest warrant for him, or spending his days in court - or maybe even prison.

"I'm an old man," he says, then adds, "I worked hard all my life and I want to relax."

Axelrod says he is dumbfounded as to why they are coming after him. Hundreds of thousands of people cheat on their taxes every year, he says - why would the government go after him? The charges against him stem from a misunderstanding, he says, or perhaps a bookkeeping error someone made.

Certainly it is something that could have been cleared up by the IRS coming to him and asking him to settle up. He says he can only conclude that the authorities want him for one reason:

"It's because I'm rich," he says. "I'm a tycoon. And they're coming after the tycoons now."

Bearded and almost cherubic, Axelrod looks not unlike the photos of Ernest Hemingway that seem to adorn nearly every corner of the marina.

If he were to write a book telling his own life story, Axelrod says, "you wouldn't believe it."

It is a life that has taken him, he says, from gathering eels in the shallows of Newark Bay as a boy to trekking naked through the Amazon in search of rare tropical fish. He says he gathered specimens with Emperor Hirohito and he even managed to outfit his beloved New Jersey Symphony Orchestra with the world's greatest set of classical instruments.

But now, it is Axelrod himself who cannot believe the turn the story has taken.

His $60-a-day bungalow sits in a section of the marina called Villa Paraiso, a group of about 15 bungalows surrounding a pool and a small restaurant. Villa Paraiso (paraiso means "paradise") lies a half-mile past the main marina. Visitors walk across a small bridge and pass by a second gatehouse manned by a pair of uniformed guards.

Axelrod says he has been coming here for 25 years. He loves the island's extraordinary fishing, its people, the cigars. Now Cuba may offer something else - protection from the law.

Cuba's lack of an extradition treaty with the United States - along with President Fidel Castro's propensity for thumbing his nose at the U.S. government - has made it somewhat of a haven for American fugitives.

Joanne Chesimard, the former Black Panther who escaped prison after killing a New Jersey State Police trooper, is living on the island nation.

Axelrod utters Chesimard's name in astonishment, as though he can't believe he is in her company. While Chesimard has been granted asylum by Castro, he is unsure what will happen to him.

He would like someday to come back to New Jersey, he said, but is not sure that's possible now.

His eyes grow glassy when he discusses his future:

"Here I am and I don't know if Cuba's going to want me here - turn me over or send me away."

News of the outside world is hard to get in Cuba, where the Communist government keeps a tight lid on information and newspapers and Internet access are hard to come by. Axelrod's wife, Evelyn, calls him with the news on a daily basis. He will not say where she is calling him from.

He says questions about his business practices and his claims to various discoveries and adventures are nothing more than the bitter complaints of people who failed to achieve hard-earned success equal to his own.

His adversaries scoffed at his tales of naked treks along Amazon tributaries with native tribesmen; they accused him of lying when he claimed years ago to have discovered a new species of fish.

"No matter what you do, you will have critics because they should have done what you did," he said. "So they criticize you."

He is sorry that his generosity is being questioned - philanthropy is something he learned as a boy in Bayonne and it's a source of huge pride.

In his childhood home, he says, his family kept a small metal box where they would put change to be given to orphanages.

He says his first business was selling eels and blue claw crabs he caught in Newark Bay to the Chinese owners of Bayonne dry cleaners. "I made more money than my father."

He is not angry about what's happened to him, he says, adding he does "not want to fill my life with hate."

Axelrod moves to a leather cushioned chair and props his feet upon a bamboo footrest.

On his coffee table sit two Tupperware-style canisters of long dark cigars. Alongside the cigars is a phone message from an American reporter and a doctor's report outlining his high blood pressure and chest pains.

"I'm an old man. I'm not looking forward to spending any time in a jail or fighting this thing."

Animated, full of stories about his exploits, he finally escorts his visitors to the door of his bungalow. The coconut trees sway in the breeze; boats bearing scuba divers and fishermen coast peacefully across an aquamarine inlet.

Axelrod invites his guests to come fishing with him the next day on his boat, docked just up the road. The interview has lasted two hours and he is still telling stories as the guests leave. And it's clear he could keep talking for two hours more.

PHOTO CAPTION: 1. Fugitive Herbert Axelrod wears a summer kimono outside his one-bedroom bungalow in the Villa Paraiso section of Hemingway Marina Friday. 2. As a security guard watches, a crew member boards the Lady Ev II, Axelrod's 52-foot sportfishing boat, Friday in the marina. 3. A family pedals past Axelrod's bungalow yesterday. A federal judge issued a warrant for the arrest of the philanthropist-turned-fugitive after Axelrod failed to appear in court Wednesday. CREDIT: PHOTOS BY ANDREW MILLS/THE STAR-LEDGER
 

TAG: sl2004-408bf2362
 

URL: <a href="/texis/search/story.html?table=sl2004&id=408bf2362">He's trying to put his cares behind him</a>

Orchestra restores focus

NJSO warms to new leader's challenging slate of 20th-century music

By BRADLEY BAMBARGER
STAR-LEDGER STAFF

REVIEW
New Jersey Symphony Orchestra
Where and when: 8 tonight at Count Basie Theatre, 99 Monmouth St., Red Bank; 3 p.m. tomorrow and 1:30 p.m. Tuesday at Prudential Hall, New Jersey Performing Arts Center, 1 Center St., Newark
How much: $21-$79. Call (800) ALLEGRO (255-3476) or go to www.njsymphony.org.

URL: <a href="/texis/search/story.html?table=sl2004&id=408a6be211c">Orchestra restores focus  </a>

Axelrod's valuation of violins questioned

Experts: Prizes, yes, but $50M is inflated

By PEGGY McGLONE AND MARK MUELLER
STAR-LEDGER STAFF

A day after philanthropist Herbert Axelrod was declared an international fugitive, appraisers and experts in the world of rare musical instruments said the alleged tax cheat grossly inflated the value of instruments involved in the two blockbuster deals for which he is most celebrated.

The transactions in question are Axelrod's 1998 donation of a matched quartet of stringed instruments by the Italian master Antonio Stradivari to the Smithsonian Institution and his 2003 sale of 30 instruments, including 13 Stradivarius violins, to the New Jersey Symphony Orchestra.

In each case, Axelrod claimed the items were collectively worth $50 million. He closed the sale with the NJSO for $18 million, winning him wide praise as a munificent benefactor who rejected higher bids from abroad to keep the instruments in New Jersey.

Yesterday three respected experts in the field called the $50 million valuations wildly inflated and questioned whether the 76-year-old publishing tycoon, now taking refuge in Cuba, used the lofty appraisals for massive tax write-offs, much as someone writes off the cost of a donated car.

Axelrod is charged with conspiracy to defraud the IRS and aiding and abetting the subscribing of a false tax return, in connection with his business dealings in the 1990s.

"I'm not surprised to see him indicted," said Stefan Hersh, a professor at Roosevelt University in Chicago and a longtime consultant to those who buy and sell rare stringed instruments. "If his ultimate plan had always been to achieve a maximized tax benefit, this would be the perfect way to go about it."

It could not be determined whether Axelrod did in fact write off his donation to the Smithsonian or if he took some tax benefit from last year's high-profile deal with the symphony orchestra.

Federal authorities have declined to say whether their investigation extends beyond the charges handed up in an indictment last week. In that case, Axelrod is accused of spiriting more than $1 million in undeclared cash into Swiss bank accounts.

Axelrod was due for arraignment in federal court in Trenton Wednesday afternoon. He didn't show.

Assistant U.S. Attorney Michael Guadagno subsequently said Axelrod is staying at a four-star resort, the Hemingway Marina, on the outskirts of Havana and that Axelrod had confided to an associate he had no intention of returning to face the charges. The United States does not have an extradition treaty with Cuba.

Axelrod, who transformed a love of tropical fish into the world's largest publisher of pet-care books, recently sold off more than a dozen properties in Florida and his $6.5 million oceanside home in Deal, Monmouth County, Guadagno said.

Axelrod sold his Neptune business, TFH Publications, in 1997 for $70 million in cash and a $10 million loan.

His indictment and flight to Cuba have sent shock waves through the ranks of the NJSO, for which Axelrod had been a major benefactor.

Orchestra officials, who previously had said they did not believe Axelrod's instruments were worth $50 million, yesterday defended the $18 million purchase, saying all items were carefully vetted.

"The orchestra subjected each of the instruments to several examinations by independent experts familiar with rare stringed instruments," the statement said. "These examinations were designed to verify their authenticity, provenance and chain of title, obtain an assessment of their condition and provide estimates of their value. We are confident in the findings of these experts."

In an interview yesterday, Victor Parsonnet, chairman of the board of the NJSO, said the orchestra had not been contacted by federal investigators about the arrangement.

The experts who spoke to The Star-Ledger yesterday said they believed the $18 million price tag for Axelrod's instruments, while perhaps slightly high, was not outlandish. Just one of the three - Christopher Reuning, a Boston-based violin dealer with Reuning & Son Violins - said definitively that the instruments should have come cheaper.

"I would say quite frankly that when I look at the list of instruments, I don't come up with $18 million worth of value," Reuning said. "I think it's excessive."

Added violin dealer [unnamed Chicago violin dealer], a co-founder of Chicago-based [a Chicago violin dealer]: "My impression of the New Jersey Symphony is that they paid dearly, probably high for what they got, but it may have some relationship to their normal value in the universe."

The experts were far more critical of Axelrod's initial $50 million valuation, advanced by both the elderly philanthropist and his longtime business associate, New York-based violin dealer Dietmar Machold.

Leading up to the NJSO sale, Axelrod and Machold said they had been offered more than $50 million for the collection of instruments by the Austrian government.

Hersh, the Roosevelt University professor, called the $50 million figure "preposterous." Reuning termed the valuation "ludicrous."

The two men, along with [unnamed Chicago violin dealer], were equally critical of the $50 million valuation that Axelrod placed on the Stradivari quartet he donated to the Smithsonian's National Museum of American History five years earlier.

"That was a joke. Totally," [unnamed Chicago violin dealer] said, estimating the quartet's value at less than $15 million. "That was another exaggeration, but he tried to create the value through marketing, making claims in the newspapers. In the real cold light of day, it couldn't be supported."

The experts said that opinion was widely shared in the small, exclusive field of rare stringed instruments, though it was not widely reported. In general, the experts said, those in the field are loath to speak out against one another, and Axelrod, they said, was known as a litigious man with deep pockets.

Valeska Hilbig, a spokeswoman for the Smithsonian museum, said officials are confident of the quartet's value and authenticity. "We've had these instruments for years, and we've had them verified," Hilbig said.

Offering a counterpoint to those critical of Axelrod was Rene Morel, a New York violin dealer who worked frequently with the multimillionaire until the early 1990s, when Axelrod began his association with Machold.

"I don't want to protect him, but because he is flamboyant, very much up to the ladies, he created enemies," Morel said. "I am convinced what he did with the NJSO, without seeing the instruments, was a very, very generous gift. In my book it was a gift, not a sale, because the price was so reasonable."

_____________________________________________________________________________________________ Staff writer Willa Conrad contrib uted to this report.

PHOTO CAPTION: 1. Herbert Axelrod's yacht, the Lady Ev II out of Key West, Fla., is seen yesterday at the Hemingway Marina in Havana. The people on the boat are unidentified. 2. Fugitive philanthropist Herbert Axelrod: Appraisers scoff at his $50 million claims. CREDIT: 1. JOSE GOITIA/ASSOCIATED PRESS 2. ASSOCIATED PRESS FILE PHOTO
GRAPHIC CAPTION: MAP: Marina Hemingway, Cuba CREDIT: THE STAR-LEDGER
 

TAG: sl2004-4089448b2
 

URL: <a href="/texis/search/story.html?table=sl2004&id=4089448b2">Axelrod's valuation of violins questioned</a>

We're no refuge, Cuban foreign minister says

ASSOCIATED PRESS - HAVANA

Cuba's foreign minister yesterday denied knowing anything about multimillionaire Herbert Axelrod, who fled here to avoid tax fraud charges.

"Cuba has never been a refuge for those fleeing justice," Foreign Minister Felipe Perez Roque told international journalists.

Axelrod reportedly traveled to Cuba to avoid arraignment this week on charges he hid income from the U.S. Internal Revenue Service.

A federal judge in Trenton issued a warrant for Axelrod's arrest when he failed to appear for his arraignment on Wednesday.

The United States has no extradition treaty with Cuba.

His former lawyer in a civil case speculated Axelrod, 76, has moved to Cuba to live out his life. He had traveled there frequently and had many friends there, attorney Alan Lebensfeld told The Star-Ledger Wednesday.

Axelrod has sold millions of dollars worth of musical instruments at a discount to the New Jersey Symphony Orchestra.

He was charged with using Swiss bank accounts to hide more than $700,000 in income from the IRS related to the publishing company he owned that specialized in books on animals and pets.

URL: <a href="/texis/search/story.html?table=sl2004&id=408944912">We're no refuge, Cuban foreign minister says</a>

Indicted violin donor flees to Cuba

After quietly selling homes, Axelrod eludes prosecution in tax-fraud case

By TED SHERMAN AND ROBERT RUDOLPH
STAR-LEDGER STAFF

Herbert Axelrod, the eccentric philanthropist who bestowed millions of dollars' worth of rare stringed instruments on the New Jersey Symphony Orchestra, has fled the country and taken refuge at a luxury marina in Cuba to avoid federal prosecution for tax fraud.

A federal judge issued an arrest warrant for Axelrod yesterday afternoon after the pet-care publishing tycoon failed to show up for his arraignment in Trenton. The United States has no extradition treaty with Cuba.

Assistant U.S. Attorney Michael Guadagno informed U.S. District Judge Garrett E. Brown Jr. that Axelrod was in Zurich, Switzerland, when the indictment was returned and was well aware of the pending criminal charges.

According to Guadagno, Axelrod confided to an associate that he had no intention of returning to the United States and planned to go to Cuba.

"We have confirmed with another individual that he is in Havana," said Guadagno, who disclosed Axelrod was staying at the Marina Hemingway, a four-star resort known for international marlin-fishing tournaments.

The combined charges against Axelrod carry a maximum punishment of five years in prison and a $250,000 fine.

The twist of events included the discovery by authorities this week that Axelrod had sold his home in Deal earlier in the month, as well as other properties around the country - including several homes in Key West, Fla. Authorities say Axelrod's 50-foot yacht, the Lady Ev II, was missing from its berth in Florida; they suspect it is docked in Havana.

It was unknown if Axelrod's wife, Evelyn, was with him.

Axelrod, 76, a multimillionaire who had turned his interest in tropical fish into a worldwide publishing empire, was a major benefactor to the New Jersey Symphony Orchestra. He suddenly became widely known for selling the orchestra a collection of rare Italian stringed instruments from the 17th and 18th centuries last year at a steeply discounted price.

An enthusiastic collector, he initially valued the instruments at $50 million, and offered the collection for half that price despite his claims that he was offered much more by others. When the orchestra failed to raise the money, he structured an $18 million deal that included $4 million in loans he later forgave or assigned to charities.

Axelrod also donated heavily to music schools and universities. Among his gifts were a matching quartet of inlaid Stradivari, valued at $50 million, now on permanent loan to the Smithsonian Institution.

While the deal with the New Jersey Symphony Orchestra was being struck, though, a criminal investigation against Axelrod was already well under way, and Axelrod was aware of the questions being raised into his finances as a result of a civil suit involving the 1997 sale of his company, TFH Publications.

In the two-count federal indictment returned last week, Axelrod was charged with conspiracy and aiding and abetting the subscribing of a false tax return. He was accused of funneling more than $1 million to a former employee by diverting payments from a European company into a Swiss bank account controlled by the employee. The money was concealed on the books of Axelrod's company as a marketing expense.

The employee was not named in the indictment, but court papers filed in the Monmouth County civil suit that initiated the federal investigation identified him as Gary Hersch of Colts Neck, who served as his vice president of marketing.

The Star-Ledger learned yesterday that Hersch quietly signed a plea agreement in December 2002, agreeing to enter a guilty plea to a single count of conspiracy and fraud - a charge that has yet to be filed - in exchange for his cooperation.

Hersch did not return several calls to his home for comment.

Attorney Michael Himmel of Woodbridge, who represented Axelrod during the grand jury investigation, said he believed the case against Axelrod is flawed and was very surprised to hear Axelrod had fled to Cuba.

The only indication the attorney had that something was amiss, he said, was his client's failure to appear at a scheduled meeting Monday regarding the arraignment. Himmel said that afterward he alerted representatives of the U.S. Attorney's Office that he would not be representing Axelrod at the arraignment.

In fact, no one appeared on Axelrod's behalf at the federal court proceeding yesterday.

Attorney Alan Lebensfeld of Red Bank, who is representing Axelrod in the civil case, said a flight to Cuba seems out of character for the multimillionaire.

"He has gotten to where he's gotten by fighting, not running," Lebensfeld said.

According to Lebensfeld, the criminal case was based almost entirely on information provided to the government by his opponents in the civil litigation and on accounts provided by Hersch, who testified extensively in the civil matter.

"Quite frankly, I don't believe his story," the attorney said of Hersch.

The 1998 lawsuit, which is still unresolved, involves Axelrod and the California-based company that bought his publishing business. Axelrod sold TFH Publications - named for its flagship magazine, Tropical Fish Hobbyist - for $70 million in cash and a $10 million loan from Central Garden & Pet Co., with the prospect of additional money contingent on the company's earnings.

A short time later, however, Axelrod filed suit against Central Garden for damages, accusing it of management failures that jeopardized prospects of achieving those higher earnings. Central Garden countersued, alleging fraud, misrepresentation and breach of fiduciary duty.

In its filings, Central Garden laid out the fraud charges, including the $1 million in payments to Hersch and $250,000 to the University of Guelph that were characterized in the financial statements of TFH as advertising expenses.

Brandy Bergman, a spokeswoman for Central Garden, said the company went to the U.S. Attorney's Office after discovering the diversions of money into Swiss accounts.

Central Garden also alleges Axelrod had extensive - and improper - dealings in Cuba, including a cigar business.

According to documents filed by Central Garden, Axelrod had a European customer pay his Cuban expenses using money owed to TFH. Axelrod allegedly disguised those payments by issuing false credits to the European company.

Lebensfeld acknowledged that despite U.S. prohibitions on travel to Cuba for most Americans, Axelrod routinely traveled there.

"He does research there on tropical fish, he has published a book about Cuban cigars," said the attorney. "He has many friends there."

Lebensfeld speculated there may be another motive behind Axelrod's decision to head to Cuba rather than deal with the criminal case: "I believe at age 76, he feels that he shouldn't have to face this at the end of his life."

_____________________________________________________________________________________________ Staff writers Christine V. Baird and John P. Martin contributed to this report.

PHOTO CAPTION: 1. Herbert Axelrod two years ago with one of his prized strings: a Stradivarius viola from 1694. The multimillionaire sold 30 similarly rare instruments to the New Jersey Symphony Orchestra in February 2003. CREDIT: 1. STAR-LEDGER FILE PHOTO
GRAPHIC CAPTION:
CHRONOLOGY:
Axelrod timeline
Here's a look at some of the key events in the rise and fall of New Jersey philanthropist Herbert Axelrod:

• June 7, 1927: Herbert R. Axelrod is born in Bayonne. His father, Aaron Axelrod, a Russian immigrant, violinist and teacher of machine-tool mathematics at Bayonne High School, places a 3-inch violin in the infant's crib.
• 1937: After years of violin lessons, 10-year-old Herbert plays his first Stradivarius during a visit to the family home by his uncle, Paul Cochansky, a prominent violinist.
• 1942: Axelrod grows accomplished enough on the violin to serve as a substitute for the New York Philharmonic and the Metropolitan Opera, short of musicians because of World War II.
• 1944: Axelrod graduates from high school and joins the Army Specialized Training Program to study medicine. After the war, he enrolls at New York University, where he ultimately earns a bachelor's degree in science, a master's in mathematics and a doctorate in medicine. He conducts research on cancer in fish and tends to the program's aquariums.
• 1949: Axelrod publishes his first book, "Tropical Fish as a Hobby."
• 1950: He serves in the Korean War, directing a MASH unit's blood bank.
• 1952: Returning from Korea, Axelrod begins teaching at NYU. At the same time, he founds TFH Publications, based in Neptune and named for the company's flagship magazine, Tropical Fish Hobbyist. TFH becomes the world's leading publisher of books on pet care.
• 1955: Axelrod marries his second wife, Evelyn. He has one son from a previous marriage.
• 1975: Axelrod buys his first Stradivarius violin. Over the next quarter-century, he buys dozens more rare instruments, lending them to orchestras and young musicians.
• 1989: Axelrod donates a collection of rare fish fossils, valued at $24 million, to the University of Guelph in Ontario.
• 1997: Axelrod sells TFH Publications for $70 million in cash and a $10 million loan.
• 1998: Axelrod donates a quartet of inlaid Stradivari instruments - two violins, a viola and a cello - to the Smithsonian Institution. The instruments' value is estimated at $50 million. He makes numerous cash donations to music schools across the country.
• 2002: A longtime patron of the New Jersey Symphony Orchestra, Axelrod offers to sell about 30 of his rare instruments to NJSO for $25 million, which he says is half their value. While some question whether the instruments would fetch $50 million on the open market, the offer is seen as a golden opportunity to transform NJSO into a world-renowned orchestra with one of the finest collections of stringed instruments.
• February 2003: After a furious fund-raising drive and further bargaining with Axelrod, NJSO buys his collection for $18 million.
• April 13, 2004: A federal indictment charges Axelrod with tax evasion, accusing him of funneling millions of dollars into Swiss bank accounts over 20 years.
• April 21, 2004: Axelrod fails to appear for his arraignment in federal court. Authorities say he is believed to be hiding in Cuba.

URL: <a href="/texis/search/story.html?table=sl2004&id=408835d53">Indicted violin donor flees to Cuba</a>

'Has he lost his marbles?'

Altered portrait of patron of the arts jolts longtime acquaintances

By MARY JO PATTERSON
STAR-LEDGER STAFF

THE PROFILE
One year ago, under twinkling lights at a lavish New Jersey Symphony Orchestra ball, three former governors and 250 members of New Jersey's power elite applauded Herbert Axelrod as the greatest arts benefactor in the history of the state.

The elderly Bayonne native, who had made a fortune through a pet care and pet publication empire, had sold the orchestra his prized collection of rare stringed instruments at a discounted price, $18 million. Bearded, loud, affable and slightly mussed-looking in his tuxedo, the portly 75-year-old had emerged from obscurity within his home state to become a hero of the New Jersey arts world.

Yesterday Axelrod was revealed to be an inhabitant of a vastly different and shadowy world - a fugitive on the lam from federal tax evasion charges and believed to be in Cuba.

Indicted last week on charges of concealing thousands of dollars in payments over the years in Swiss banks, Axelrod was due to appear in appear yesterday in federal court in Trenton.

Instead, he was nowhere to be seen, and neither was his yacht. His multimillion-dollar Jersey Shore mansion in Deal had been sold, as were his properties in Florida. His wife Evelyn's whereabouts were unknown.

People in the arts world were stunned. To tell the truth, they said, they had not seen him in months. And perhaps oddly, considering Axelrod said that he wanted to hear his instruments played in New Jersey, Axelrod and his wife were not current subscribers to the NJSO.

"I'm sorry this is happening to this man," Victor Parsonnet, chairman of the board of the New Jersey Symphony Orchestra, said upon hearing the news.

The Axelrods "are wonderful philanthropists. They've given to Curtis (Institute of Music), the Smithsonian, plus institutions in Europe. They supported all kind of artists."

Other acquaintances were just as shocked - and baffled.

Eugene Balon, an old friend and retired professor of ichthyology (the branch of zoology that deals with fish) at the University of Guelph in Ontario, said he could hardly believe the news.

In 1989, Axelrod donated a hugely valuable collection of fish fossils to the Canadian university. Today its department is called the Axelrod Institute of Ichthyology.

"Oh my God, is he in good mind or has he lost his marbles, or what?" Balon said. "He always gave rather than took. He had so much money. Why would he do something as stupid as tax evasion?"

In a biography posted on the New Jersey Symphony Web site, Herbert Axelrod almost seems too good to be true.

It begins: "As an author, university professor, lecturer, publisher, editor, explorer, adventurer and scientist, Herbert R. Axelrod is the world's best-known tropical fish expert."

Axelrod himself painted his life as rich, dramatic, exciting, unusual.

At various times, he has claimed to have studied mathematics under Einstein, discussed creatures of the sea with Emperor Hirohito, corresponded with Winston Churchill on the subject of goldfish, and hunted for jaguars in Brazil on behalf of the Walt Disney Co., according to an article published last year in the magazine New Jersey Monthly.

The University of Guelph added to the legend by publishing a tribute noting that the young Herbert - son of an immigrant father - "spoke four languages before he learned English at school at the age of five."

But not everything written about Axelrod was so glowing.

In a pending lawsuit that arose from the sale of his company, TFH Publications Inc., the new owner refers to him as a shrewd con artist who cooked the books of his company and maintained a long-term extramarital arrangement with a former dental receptionist whom he put through law school.

TFH took its name from Tropical Fish Hobbyist, one of Axelrod's publications.

He began the business that eventually became TFH in 1950, according to legal papers filed by Central Garden & Pet Co., which bought TFH in 1997. The selling price was at least $80 million.

Balon, his professor friend, said Axelrod is a complicated man who - while enormously generous - was also exceedingly cheap when it came to paying authors and photographers for the books he put out.

He was also careless about details, Balon said, making mistakes in his own and others' writing and mismatching photos with species.

"We constantly quarreled about that," he said. "I felt it was embarrassing to have so many mistakes, and I asked him to send me the manuscripts to fix them.

"He said to me, 'Listen, I am a millionaire, and a businessman cannot be straight. They don't make money like that.'"

Axelrod was born during the Great Depression in Bayonne, where his father taught math and the violin. The older Axelrod wished him to be a great violinist. By the time he was a teenager, Axelrod told The Star- Ledger in 2002, he was accomplished enough to sub for the New York Philharmonic and Metropolitan Opera. But he was not a huge talent.

In 1944, after high school, he joined the Army. Later he served in Korea. When he came home he settled in New York, enrolling at New York University on the GI Bill. Axelrod said he earned a bachelor's degree in science, a master's in math, and a doctorate in medicine.

"I couldn't stand the sight of blood, so I headed into research," he said.

Axelrod found his métier when he got a job caring for the aquariums at the American Museum of Natural History. It was there he developed his love for fish. He wrote a training manual for the aquarium, which turned into his first book, "Tropical Fish as a Hobby," published in 1949.

Axelrod's publications business was founded in Neptune a few years later.

There was an early marriage, which Axelrod did not discuss in interviews, and a son, Todd, a rare- manuscript dealer in Las Vegas. Herbert Axelrod married Evelyn in 1955.

In 1970, he acquired his first rare instrument, a Stradivarius violin. The purchase was financed with his wife's diamond ring. (She eventually got it back.)

The couple's philanthropy was well-known in cultural circles. They donated money and lent or gave instruments to several music schools, including Juilliard, Curtis and the Manhattan School of Music.

They also donated money closer to home. At the Jewish Community Center in Deal is a performing arts building named after Herbert Axelrod.

And Axelrod was determined to elevate New Jersey's second-tier reputation in the music world.

"I want to put New Jersey on the map," Axelrod said when he put his instruments offer on the table. "I want this to be the best-sounding orchestra in the world." _____________________________________________________________________________________________ Staff writers Mark Mueller and Peggy McGlone contributed to this report.

PHOTO CAPTION: 1. New Jersey Symphony Orchestra board chairman Victor Parsonnet, accompanied by Herbert Axelrod, left, in February 2003. 2. One of the prized violins, in the grasp of NJSO concertmaster Eric Wyrick. CREDIT: 1. PHOTOS BY ARISTIDE ECONOMOPOULOS/THE STAR-LEDGER 2.
 

URL: <a href="/texis/search/story.html?table=sl2004&id=408835f847">'Has he lost his marbles?'</a>

Not to worry, symphony didn't get phonies

By PEGGY McGLONE
STAR-LEDGER STAFF

THE STRINGS
Amid the latest revelations about philanthropist and music lover Herbert Axelrod's business dealings arises this nagging question: Are the much-heralded Golden Age instruments he sold to the New Jersey Symphony Orchestra the real thing?

No question about it, said symphony officials and supporters. "We did our due diligence," said attorney Scott Kobler, a partner at McCarter & English, the Newark law firm that represented the orchestra in the deal, which was completed in February 2003.

"We had them examined by sets of experts, who physically examined them. We have in our possession all of Dr. Axelrod's provenance papers. We were satisfied that their provenance was verified."

After a year of negotiations, the NJSO spent $18 million to purchase 30 Italian strings - including a dozen Stradivarius violins, a Stradivarius cello, three Guarneri del Ges violins and a 1620 Amati viola. Axelrod later forgave $1 million of the $4 million note he held in that transaction, bringing the final price to $17 million. The NJSO borrowed $14 million to complete the deal.

Axelrod valued the collection at $50 million.

Kobler said the orchestra hired independent experts to inspect the instruments and verify their origin, and were satisfied with their authenticity.

"And if you were to ask the musicians about the instruments . . . you would hear earfuls from them about how extraordinary they are," he said.

Axelrod also donated a quartet of Strads to the National Museum of American History, a part of the Smithsonian Institution in Washington, D.C.

"I can't comment on the situation he's in," said Valeska Hilbig, a spokeswoman for the museum. "But we are not questioning the authenticity of the instruments. We've had that verified."

Other supporters of the symphony said they stand behind the decision to purchase the instruments.

"We're a supporter of the symphony and we continue to believe the violin purchase was good not only for the New Jersey Symphony but for the people of New Jersey," said Gabriella Morris, president of the Prudential Foundation, a major donor. "As far as we know, this has nothing to do with the violins at all."

URL: <a href="/texis/search/story.html?table=sl2004&id=408835f8d4">Not to worry, symphony didn't get phonies</a>

Orchestra expects violin deal will stand

Agreement re-examined after seller indicted on unrelated charges

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

Officials at the New Jersey Symphony Orchestra do not believe Herbert Axelrod's indictment this week for tax evasion will affect the unique violin collection acquired from him last year.

While the U.S. Attorney's Office has already said the sale of Axelrod's rare Italian instruments was not jeopardized by the criminal charges, the orchestra has been re-examining the structure of the sales agreement since learning of the indictment.

Attorney Scott Kobler, a partner at McCarter & English, which represents the New Jersey Symphony Orchestra, yesterday said the situation is not unlike that of someone who purchases a house and then later discovers the seller has unrelated tax problems with the Internal Revenue Service.

"Would the IRS come and take your house back? No," Kobler said, describing the deal as a bona fide purchase carried out with no knowledge of Axelrod's interactions with the IRS.

The orchestra's collection of instruments from the 17th and 18th centuries acquired from Axelrod included a dozen Stradivarius violins; a Stradivarius cello; three Guarneri del Gesú violins; a 1620 Amati viola; and violas, violins and cellos by such makers as Giovanni Guadagnini and Matteo Goffriller.

Kobler said the orchestra purchased the instruments from Axelrod and his company outright, and that Axelrod retained no security interest in the instruments.

"In the sale agreement, we've done as much due diligence as we could do, including representations from the Axelrods about their knowledge of the provenance (previous claims of ownership) of the instruments, but that's unrelated to his tax controversy," said Kobler. "This is not a tax liability involving the symphony."

The orchestra's purchase was structured as three loans: $9 million from Commerce Bank, $5 million from the Prudential Foundation, and $4 million in unsecured notes to the Axelrods. The Axelrods have since forgiven $1 million and assigned the remaining $3 million to other charitable organizations.

Sheila Bridgeforth, director of global communications for the Prudential Foundation in Newark, declined to comment on the sale. James Vogel, a Commerce Bank vice president, said they were still examining the ramifications of the matter.

Axelrod, 76, who made a fortune through a pet-care publishing empire, was indicted earlier in the week on charges he concealed hundreds of thousands of dollars in payments to a former employee through secret Swiss bank accounts.

In the two-count indictment, Axelrod was charged with conspiracy and aiding and abetting the subscribing of a false tax return. The indictment said the wealthy Deal resident funneled bonus and severance payments to an unnamed company vice president into Swiss accounts between 1990 and 1997.

Reached by phone, Axelrod's personal attorney, Douglas Calhoun, would not discuss the pending criminal charges.

"Your reporting is inaccurate and it would be inappropriate for me to comment," he said, before hanging up on a reporter.

Axelrod is due to be arraigned on Wednesday afternoon before U.S. District Judge Garrett E. Brown Jr. in Trenton.

URL: <a href="/texis/search/story.html?table=sl2004&id=408126d356">Orchestra expects violin deal will stand</a>

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, Axe