Preet Bharara, the United States Attorney for the Southern District of New York, Toni Weirauch, the Special Agent-in-Charge of the New York Field Office of the Internal Revenue Service, Criminal Investigation (“IRS-CI”), and George Venizelos, the Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation (“FBI”), announced today the arrest of GLAFIRA ROSALES, an art dealer, for filing false tax returns and for failing to disclose a foreign bank account to the IRS. ROSALES allegedly failed to report the receipt of at least $12.5 million in income from the sale of works purported to be by celebrated abstract expressionist artists. Most of the income was received in a bank account in Spain that ROSALES hid from, and failed to disclose to, the IRS. She was arrested in Sands Point, New York this morning and will be presented in Manhattan federal court this afternoon before U.S. Magistrate Judge Sarah Netburn.
Manhattan U.S. Attorney Preet Bharara said: “As alleged, Glafira Rosales gave new meaning to the phrase ‘artful dodger’ by avoiding taxes on millions of dollars in income from dealing in fake artworks for fake clients. Her arrest shows that no matter how clever the scheme, attempts to hide income from the government to avoid paying taxes on that income will be discovered and prosecuted.”
IRS Special Agent-in-Charge Toni Weirauch said: “The sale of a piece of art for profit is a taxable event and the seller is responsible for paying his or her fair share of tax, even if the art is counterfeit. The allegations in this investigation illustrate a ‘double-barreled’ tax evasion scheme: disguising who was actually selling the art and profiting from the sales, through the creation of a fictitious seller and the use of the name of a collector not associated with the transactions, and further concealing the proceeds by depositing them in an unreported foreign bank account.”
FBI Assistant Director-in-Charge George Venizelos said: “As alleged, Glafira Rosales committed tax fraud in falsely reporting that she was selling art on behalf of clients. In truth, those clients were just part of the picture she painted to perpetrate her multi-million dollar scheme. There is consistency in the scheme, however: The artwork Rosales sold appears to be as fake as her story about the clients she claimed to represent.”
According to the allegations in the Complaint unsealed today in Manhattan federal court:
In the 1990’s, ROSALES, an art dealer, began selling previously unknown paintings that had never been exhibited before, and that she claimed were painted by some of the most famous artists of the 20th century, including Jackson Pollock, Mark Rothko, and Willem de Kooning. From 2006 through 2008, ROSALES sold approximately one dozen of these paintings to two prominent Manhattan galleries for over $14 million. In selling most of the paintings to the two galleries, she purported to represent a client with ties to Switzerland who had inherited the paintings and wanted to sell them, but who also wished to remain anonymous (the “Purported Swiss Client”). For the remainder of the paintings, she purported to represent a Spanish collector (the “Purported Spanish Collector”). ROSALES also claimed that a portion of the price paid by the Manhattan galleries would be her commission for selling the paintings, and that the remainder would be passed along to her clients.
In contrast to the claims made by ROSALES, the investigation has revealed that:
- experts in the fields of art, art history, and materials science have concluded that at least several of the paintings sold by her are counterfeit;
- the Purported Swiss Client on whose behalf she claimed to sell most of the paintings to the Manhattan galleries never existed;
- the Purported Spanish collector on whose behalf she claimed to sell the remainder of the paintings to the Manhattan galleries never owned the paintings; and
- instead of passing along a substantial portion of the proceeds of the sale of the various paintings, she kept all or almost all of the proceeds, and transferred substantial portions to an account maintained by her then-boyfriend.
ROSALES filed tax returns that falsely claimed she had not kept all, or almost all of the proceeds from the sale of the purported clients’ paintings, when, in fact, she had. Further, there was no Swiss client and no Spanish collector. In total, she failed to report the receipt of at least $12.5 million of income for the years 2006 through 2008.
In addition, ROSALES received most of the proceeds from the sale of the paintings in a foreign bank account that she hid from, and failed to report to, the IRS. U.S. taxpayers are required to report the existence of any foreign bank account that holds more than $10,000 at any time during a given year by the filing of a Report of Foreign Bank and Financial Accounts, Form TD F 90-22.1 (“FBAR”). ROSALES failed to file FBARs for the years 2007 through 2011.
ROSALES, 56, of Sands Point, New York, is charged with filing false tax returns for the years 2006 through 2008, and with willful failure to disclose an offshore bank account for the years 2007 through 2011. On each of the three false tax return charges, she faces a maximum sentence of three years in prison, a maximum term of three years of supervised release, and a maximum fine of $100,000. On each of the five willful failure to file FBAR charges, she faces a maximum sentence of five years in prison, a maximum term of five years of supervised release, and a maximum fine of $250,000.
Mr. Bharara praised the outstanding efforts of IRS-CI and FBI in the investigation, which he noted is ongoing. He also thanked the Department of Justice’s Tax Division for their significant assistance in the investigation.
This case is being handled by the Office’s Complex Frauds Unit. Assistant U.S. Attorneys Jason P. Hernandez and Daniel W. Levy are in charge of the prosecution.
The charge and allegations contained in the Complaint are merely accusations, and the defendant is presumed innocent unless and until proven guilty.
U.S. v. Glafira Rosales Complaint