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