The claim was brought by New York Attorney General Letitia James in New York State Supreme Court in Manhattan. Attorney General James argues Sotheby’s helped a client avoid millions of dollars of sales tax on more than US$27 million (£21 million) worth of art purchased between 2010 and 2015.
Sotheby’s is accused of defrauding New York State by allowing the client to pose as an art dealer who intended to resell the art rather than as an art collector. This enabled him to illegally obtain false tax exemption certificates called resale certificates via a British Virgin Islands entity called Porsal Equities.
The identity of the client remains unconfirmed but he is believed to be Isaac Sultan, president of Atlantic Feeder Services USA LLC in Miami and a collector of Latin American and contemporary art.
According to the complaint, Sotheby’s knowingly aided the creation and use of four false resale certificates. The auction house is alleged to have accepted these from the client despite ‘overwhelming evidence’ that he purchased the artworks for personal use. A senior member of Sotheby’s staff is even said to have visited the client’s Manhattan apartment to ‘admire his artwork on the walls’.
Attorney General James is seeking civil penalties for violations of the New York False Claims Act. In a statement, she said ‘Sotheby’s violated the law and fleeced New York taxpayers out of millions just to boost its own sales’.
‘Millionaires and billionaires cannot be allowed to evade taxes while every day Americans pay their fair share’, Attorney General James added, ‘This lawsuit should send a clear message that no matter how well-connected or wealthy you are, no one is above the law’.
In response, a Sotheby’s representative asserted that the auction house ‘vigorously refutes the unfounded allegations made by the Attorney General, which are unsupported by both fact and law’.