Date: 2004/04/22 Thursday Page: 001 Section: NEWS Edition: FINAL Size: 1203 words
Series: THE FUGITIVE PHILANTHROPIST
By TED SHERMAN AND ROBERT RUDOLPH
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
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
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
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
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
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
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
"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
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
"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
Here's a look at some of the key events in the rise and fall of New Jersey philanthropist Herbert Axelrod: