In April of this year luxury real-estate developer and fine arts collector Michael Shvo, based in New York City with offices in New York, London, and Dubai blessed the pages of the Wall Street Journal as one of New York's savvy young developers with more than $4bn (£2.84bn) worth of luxury projects in development. But in September Manhattan DA Cyrus Vance Jr. indicted the business mogul for allegedly evading more than $1.4 million in taxes related to the purchase of fine art, furniture, jewelry and a Ferrari 458 Spider. 

With hefty charges that include criminal tax fraud in the second, third and fourth degrees, repeated failure to file taxes and offering a false instrument for filing in the first degree, The New York indictment alleges that between 2010 and 2016, Shvo told auction houses his art purchases were to be shipped to the Cayman Islands and thus would not be subject to sales tax.

Prior to his indictment, Blouin Art & Auction had listed Shvo on their Power 100 list of movers and shakers with significant influence in the art world.  The charges he now faces, come at a time when dealers and collectors in the New York art market have started to come under increased scrutiny for offenses from fraud to tax evasion. 

The article printed below, republished with permission from the October 2016 issue of the Maine Antique Digest, shows how disconcerting simple it is to move art around like chess pieces outside the established rules of the game. 

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Collector, His Companies, and Two Shippers Indicted for Tax Fraud

Real estate developer and collector Michael Shvo, 43, his companies, Shvo Art Ltd. and Seren LLC, and two shipping companies and their principals were indicted on September 8 in New York City for participating in a scheme to evade the payment of more than $1 million in state and local sales and use taxes associated with the purchase of fine art, furniture, jewelry, and a luxury sports vehicle.

The defendants are charged with criminal tax fraud in the second, third, and fourth degrees, falsifying business records in the first degree, and offering a false instrument for filing in the first degree, among other charges.

“As alleged in the indictment, Michael Shvo went to great lengths to defraud New Yorkers out of more than a million dollars in tax revenue,” said New York County District Attorney Cyrus Vance Jr. in a press release. “This indictment puts other purchasers of fine art on notice: the purposeful evasion of New York State and City taxes is a tax crime, and those who scheme to avoid their obligations will be held criminally and civilly accountable.”

According to court documents, between 2010 and 2016, Shvo engaged in a long-term scheme to evade payment of state and local sales and use taxes on purchases of fine art, furniture, and jewelry. In communications with auction houses and art galleries, Shvo allegedly falsely represented that purchases he made would be shipped to an out-of-state address in the Cayman Islands or other overseas destinations, and therefore no sales tax was collected. Shvo’s purchases were allegedly shipped instead to his office or homes in New York, including an apartment on Columbus Circle and a house in the Hamptons.

Sheridan C.T.S. Hedley (a.k.a. “Tully Hedley”), 33, Guy Drori, 49, and their respective shipping companies, Hedley’s Inc. and Bestguy Moving LLC, are charged with participating in the scheme by providing auction houses and galleries with shipping documentation that deliberately misrepresented the destination of Shvo’s purchases.

It is also alleged that Shvo fraudulently used New York resale certificates, which allow dealers to purchase items solely for the purpose of resale without paying sales tax, in connection with a number of personal purchases, including jewelry valued at more than $65,000 for his wife and furniture for his office in New York.

Shvo evaded payment of New York state and local use taxes on a new Ferrari 458 Spider that he purchased from an out-of-state dealer by establishing a limited liability company in Montana called Seren LLC—named after his wife—and registering the luxury vehicle to the company. According to court documents, no business was ever conducted in Montana and the vehicle was used in New York.

Shvo is accused of evading payments totaling more than $1,000,000 in New York state and local sales and use taxes.

Shvo is alleged to have engaged in a scheme to hide the assets of his company, Shvo Art Ltd., from taxation and evade paying both New York state and New York City corporate taxes on the profits made from the company’s sales of fine art and furniture. Between 2010 and 2016, Shvo Art Ltd. allegedly made efforts to falsely portray the company and its assets as being located offshore, when in fact Shvo operated the company out of his office and homes in Manhattan and the Hamptons. Shvo and his company are charged with failing to file appropriate tax returns and evading the payment of more than $275,000 in corporate tax.

The New York County District Attorney’s Office’s asset forfeiture unit has filed civil papers against Shvo and two of his companies seeking the forfeiture of funds gained through the alleged crimes. In connection with its civil action, the district attorney’s office has secured a temporary restraining order restraining approximately $1.5 million of Shvo’s assets.

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