Playing the New Jersey Symphony Like A Fiddle
How Herbert Axelrod’s high brow con will cause long lasting damage to American orchestras.
by Drew McManus
May 10, 2004
When pet care publisher Herbert Axelrod approached the New Jersey Symphony in 2002 to see about selling his personal collection of string instruments from the “Golden Age” of Italian string makers, the orchestra considered it a momentous event. Unfortunately, it wasn’t bound to be momentous for the reasons they had hoped.
If all of this is new to you, here’s what has happened so far:
So why did Axelrod sell off his collection for such a low price even though there were “European orchestras” interested in the collection? As it turns out, the whole thing was a scam, brought about by Axelrod’s trouble with his business and the IRS. His problems began in 2000 when the company which purchased his pet care publishing business, Central Garden, filed a federal lawsuit against him on grounds of fraud. Central Garden claims to have discovered a mountain of evidence that incriminates Axelrod on a host of charges centered on deceiving the Federal government. That lawsuit garnered the attention of Federal prosecutors as then IRS became involved.
At that point, Axelrod must have started to see the writing on the wall because he began liquidating all of his assets and moving those to offshore and Swiss bank accounts. Included in those assets was his collection of rare string instruments. Assuming that Axelrod figured he had nothing to loose, he took the $32 million difference between what the NJSO paid for the instruments ($18 million) and what he claimed they were worth ($50 million) as a tax deduction.
The Senate Finance Committee is using the Axelrod donation as the centerpiece for their larger investigation into what they assert is a widespread abuse of the U.S. tax code. Senator Grassley claims many wealthy donors find appraisers to inflate the value of gifts - such as land, buildings, pieces of art, and violins – then sell those gifts to non profit organizations and then use the difference between the apprised value and the selling price as a charitable donation. A donation which they then use as a deduction on their taxes; so what happens once the dust settles is the wealthy donors typically make back their money they initially spent on the gift and get a massive tax write off to boot. It’s a classic case of “the rich getting richer” at its worst.
This is where Axelrod’s con game will begin to have a number of long ranging negative effects on orchestras in particular and non profit organizations in general:
This situation also shines some light on an old problem in the non profit industry: many orchestral organizations are incapable or unwilling to insure the legitimacy of large donations. The phrase “if it’s too good to be true…it is” doesn’t seem to apply to orchestras, but they are going to have to learn to tactfully apply the old Russian proverb: "Doveryai no Proveryai." which when translated means “trust but verify”. If they don’t, it will only perpetuate the negative stereotype that orchestras are financially irresponsible and administrative amateurs.
Another negative consequence top the orchestra industry is how this deal will shake the foundations of what is considered good management. The NJSO executive director throughout the Axelrod deal was Lawrence Tamburri, who has since moved on to become the executive leader of the Pittsburgh Symphony Orchestra, a big step up from New Jersey. When the PSO board announced they offered the job to Tamburri a few months ago, the attributes they stated were mainly his fund raising skills and the string collection purchase from Axelrod. But now that the details of the deal have come out, it shows that what was perceived as an undisputed executive triumph in the industry is now only the result of a scam.
Tamburri hasn’t offered any comment on the situation since the story began a few weeks ago and my calls to his office went unanswered. Unfortunately, that only leaves more questions than answers. But those answers are sure to be forthcoming as Senator Grassley and the IRS revenue collectors start asking the questions.
[Editor's Note: The author has written a follow-up article on this topic - "You Read it Here First", published on August 2, 2004.]
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