Sotheby's Balks at Handing Over Client Sales Records, New York Says
(Bloomberg) -- Sotheby’s is balking at the New York attorney general’s effort to see sales records for some of the auction house’s biggest clients, court records show.
New York Attorney General Letitia James, who accused Sotheby’s in a 2020 lawsuit of helping a wealthy shipping executive avoid paying taxes on artwork he purchased, said in a court filing on Monday that the auction house has “resisted any discovery of its resale certificate practices” that go beyond that one client.
The lawsuit accuses Sotheby’s of defrauding the state by allowing $27 million of art to be purchased tax-free by Porsal Equities, which is controlled by the shipping executive, even though the auction house knew the client wasn’t an art dealer but was instead a collector buying for his personal use. Only dealers planning to resell art qualify for exemptions to city and state sales tax.
“In view of the broad failures of Sotheby’s that are alleged in the state’s complaint, the state is entitled to discovery on the full breadth of those failures, including as they relate to Sotheby’s clients other than the shipping executive,” James said in the Monday filing.
Sotheby’s didn’t respond to a phone call seeking comment. The company has previously denied wrongdoing and moved to dismiss the suit, though a judge last year allowed the case to go forward.
James argues that reviewing a subset of resale certificates of other important clients “may lead to the discovery of admissible evidence” about Sotheby’s procedures.
In addition to resale certificates, New York is seeking documents and information concerning any other law enforcement investigations into Sotheby’s practices “with respect to resale certificates and/or sales tax.”
“For example, if Sotheby’s accepted fraudulent resale certificates from multiple clients, such evidence would bolster the state’s claim that Sotheby’s had systemically inadequate practices concerning resale certificates,” James said.
Read More: Sotheby’s to Fight New York Suit Alleging Tax Fraud in Art Sales
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