Orchestra restores focus

NJSO warms to new leader's challenging slate of 20th-century music

By BRADLEY BAMBARGER
STAR-LEDGER STAFF

REVIEW
New Jersey Symphony Orchestra
Where and when: 8 tonight at Count Basie Theatre, 99 Monmouth St., Red Bank; 3 p.m. tomorrow and 1:30 p.m. Tuesday at Prudential Hall, New Jersey Performing Arts Center, 1 Center St., Newark
How much: $21-$79. Call (800) ALLEGRO (255-3476) or go to www.njsymphony.org.

URL: <a href="/texis/search/story.html?table=sl2004&id=408a6be211c">Orchestra restores focus  </a>

Axelrod's valuation of violins questioned

Experts: Prizes, yes, but $50M is inflated

By PEGGY McGLONE AND MARK MUELLER
STAR-LEDGER STAFF

A day after philanthropist Herbert Axelrod was declared an international fugitive, appraisers and experts in the world of rare musical instruments said the alleged tax cheat grossly inflated the value of instruments involved in the two blockbuster deals for which he is most celebrated.

The transactions in question are Axelrod's 1998 donation of a matched quartet of stringed instruments by the Italian master Antonio Stradivari to the Smithsonian Institution and his 2003 sale of 30 instruments, including 13 Stradivarius violins, to the New Jersey Symphony Orchestra.

In each case, Axelrod claimed the items were collectively worth $50 million. He closed the sale with the NJSO for $18 million, winning him wide praise as a munificent benefactor who rejected higher bids from abroad to keep the instruments in New Jersey.

Yesterday three respected experts in the field called the $50 million valuations wildly inflated and questioned whether the 76-year-old publishing tycoon, now taking refuge in Cuba, used the lofty appraisals for massive tax write-offs, much as someone writes off the cost of a donated car.

Axelrod is charged with conspiracy to defraud the IRS and aiding and abetting the subscribing of a false tax return, in connection with his business dealings in the 1990s.

"I'm not surprised to see him indicted," said Stefan Hersh, a professor at Roosevelt University in Chicago and a longtime consultant to those who buy and sell rare stringed instruments. "If his ultimate plan had always been to achieve a maximized tax benefit, this would be the perfect way to go about it."

It could not be determined whether Axelrod did in fact write off his donation to the Smithsonian or if he took some tax benefit from last year's high-profile deal with the symphony orchestra.

Federal authorities have declined to say whether their investigation extends beyond the charges handed up in an indictment last week. In that case, Axelrod is accused of spiriting more than $1 million in undeclared cash into Swiss bank accounts.

Axelrod was due for arraignment in federal court in Trenton Wednesday afternoon. He didn't show.

Assistant U.S. Attorney Michael Guadagno subsequently said Axelrod is staying at a four-star resort, the Hemingway Marina, on the outskirts of Havana and that Axelrod had confided to an associate he had no intention of returning to face the charges. The United States does not have an extradition treaty with Cuba.

Axelrod, who transformed a love of tropical fish into the world's largest publisher of pet-care books, recently sold off more than a dozen properties in Florida and his $6.5 million oceanside home in Deal, Monmouth County, Guadagno said.

Axelrod sold his Neptune business, TFH Publications, in 1997 for $70 million in cash and a $10 million loan.

His indictment and flight to Cuba have sent shock waves through the ranks of the NJSO, for which Axelrod had been a major benefactor.

Orchestra officials, who previously had said they did not believe Axelrod's instruments were worth $50 million, yesterday defended the $18 million purchase, saying all items were carefully vetted.

"The orchestra subjected each of the instruments to several examinations by independent experts familiar with rare stringed instruments," the statement said. "These examinations were designed to verify their authenticity, provenance and chain of title, obtain an assessment of their condition and provide estimates of their value. We are confident in the findings of these experts."

In an interview yesterday, Victor Parsonnet, chairman of the board of the NJSO, said the orchestra had not been contacted by federal investigators about the arrangement.

The experts who spoke to The Star-Ledger yesterday said they believed the $18 million price tag for Axelrod's instruments, while perhaps slightly high, was not outlandish. Just one of the three - Christopher Reuning, a Boston-based violin dealer with Reuning & Son Violins - said definitively that the instruments should have come cheaper.

"I would say quite frankly that when I look at the list of instruments, I don't come up with $18 million worth of value," Reuning said. "I think it's excessive."

Added violin dealer [a Chicago violin dealer], a co-founder of Chicago-based [a Chicago violin dealer]: "My impression of the New Jersey Symphony is that they paid dearly, probably high for what they got, but it may have some relationship to their normal value in the universe."

The experts were far more critical of Axelrod's initial $50 million valuation, advanced by both the elderly philanthropist and his longtime business associate, New York-based violin dealer Dietmar Machold.

Leading up to the NJSO sale, Axelrod and Machold said they had been offered more than $50 million for the collection of instruments by the Austrian government.

Hersh, the Roosevelt University professor, called the $50 million figure "preposterous." Reuning termed the valuation "ludicrous."

The two men, along with [unnamed Chicago violin dealer], were equally critical of the $50 million valuation that Axelrod placed on the Stradivari quartet he donated to the Smithsonian's National Museum of American History five years earlier.

"That was a joke. Totally," [unnamed Chicago violin dealer] said, estimating the quartet's value at less than $15 million. "That was another exaggeration, but he tried to create the value through marketing, making claims in the newspapers. In the real cold light of day, it couldn't be supported."

The experts said that opinion was widely shared in the small, exclusive field of rare stringed instruments, though it was not widely reported. In general, the experts said, those in the field are loath to speak out against one another, and Axelrod, they said, was known as a litigious man with deep pockets.

Valeska Hilbig, a spokeswoman for the Smithsonian museum, said officials are confident of the quartet's value and authenticity. "We've had these instruments for years, and we've had them verified," Hilbig said.

Offering a counterpoint to those critical of Axelrod was Rene Morel, a New York violin dealer who worked frequently with the multimillionaire until the early 1990s, when Axelrod began his association with Machold.

"I don't want to protect him, but because he is flamboyant, very much up to the ladies, he created enemies," Morel said. "I am convinced what he did with the NJSO, without seeing the instruments, was a very, very generous gift. In my book it was a gift, not a sale, because the price was so reasonable."

_____________________________________________________________________________________________ Staff writer Willa Conrad contrib uted to this report.

PHOTO CAPTION: 1. Herbert Axelrod's yacht, the Lady Ev II out of Key West, Fla., is seen yesterday at the Hemingway Marina in Havana. The people on the boat are unidentified. 2. Fugitive philanthropist Herbert Axelrod: Appraisers scoff at his $50 million claims. CREDIT: 1. JOSE GOITIA/ASSOCIATED PRESS 2. ASSOCIATED PRESS FILE PHOTO
GRAPHIC CAPTION: MAP: Marina Hemingway, Cuba CREDIT: THE STAR-LEDGER
 

TAG: sl2004-4089448b2
 

URL: <a href="/texis/search/story.html?table=sl2004&id=4089448b2">Axelrod's valuation of violins questioned</a>

We're no refuge, Cuban foreign minister says

ASSOCIATED PRESS - HAVANA

Cuba's foreign minister yesterday denied knowing anything about multimillionaire Herbert Axelrod, who fled here to avoid tax fraud charges.

"Cuba has never been a refuge for those fleeing justice," Foreign Minister Felipe Perez Roque told international journalists.

Axelrod reportedly traveled to Cuba to avoid arraignment this week on charges he hid income from the U.S. Internal Revenue Service.

A federal judge in Trenton issued a warrant for Axelrod's arrest when he failed to appear for his arraignment on Wednesday.

The United States has no extradition treaty with Cuba.

His former lawyer in a civil case speculated Axelrod, 76, has moved to Cuba to live out his life. He had traveled there frequently and had many friends there, attorney Alan Lebensfeld told The Star-Ledger Wednesday.

Axelrod has sold millions of dollars worth of musical instruments at a discount to the New Jersey Symphony Orchestra.

He was charged with using Swiss bank accounts to hide more than $700,000 in income from the IRS related to the publishing company he owned that specialized in books on animals and pets.

URL: <a href="/texis/search/story.html?table=sl2004&id=408944912">We're no refuge, Cuban foreign minister says</a>

Indicted violin donor flees to Cuba

After quietly selling homes, Axelrod eludes prosecution in tax-fraud case

By TED SHERMAN AND ROBERT RUDOLPH
STAR-LEDGER STAFF

Herbert Axelrod, the eccentric philanthropist who bestowed millions of dollars' worth of rare stringed instruments on the New Jersey Symphony Orchestra, has fled the country and taken refuge at a luxury marina in Cuba to avoid federal prosecution for tax fraud.

A federal judge issued an arrest warrant for Axelrod yesterday afternoon after the pet-care publishing tycoon failed to show up for his arraignment in Trenton. The United States has no extradition treaty with Cuba.

Assistant U.S. Attorney Michael Guadagno informed U.S. District Judge Garrett E. Brown Jr. that Axelrod was in Zurich, Switzerland, when the indictment was returned and was well aware of the pending criminal charges.

According to Guadagno, Axelrod confided to an associate that he had no intention of returning to the United States and planned to go to Cuba.

"We have confirmed with another individual that he is in Havana," said Guadagno, who disclosed Axelrod was staying at the Marina Hemingway, a four-star resort known for international marlin-fishing tournaments.

The combined charges against Axelrod carry a maximum punishment of five years in prison and a $250,000 fine.

The twist of events included the discovery by authorities this week that Axelrod had sold his home in Deal earlier in the month, as well as other properties around the country - including several homes in Key West, Fla. Authorities say Axelrod's 50-foot yacht, the Lady Ev II, was missing from its berth in Florida; they suspect it is docked in Havana.

It was unknown if Axelrod's wife, Evelyn, was with him.

Axelrod, 76, a multimillionaire who had turned his interest in tropical fish into a worldwide publishing empire, was a major benefactor to the New Jersey Symphony Orchestra. He suddenly became widely known for selling the orchestra a collection of rare Italian stringed instruments from the 17th and 18th centuries last year at a steeply discounted price.

An enthusiastic collector, he initially valued the instruments at $50 million, and offered the collection for half that price despite his claims that he was offered much more by others. When the orchestra failed to raise the money, he structured an $18 million deal that included $4 million in loans he later forgave or assigned to charities.

Axelrod also donated heavily to music schools and universities. Among his gifts were a matching quartet of inlaid Stradivari, valued at $50 million, now on permanent loan to the Smithsonian Institution.

While the deal with the New Jersey Symphony Orchestra was being struck, though, a criminal investigation against Axelrod was already well under way, and Axelrod was aware of the questions being raised into his finances as a result of a civil suit involving the 1997 sale of his company, TFH Publications.

In the two-count federal indictment returned last week, Axelrod was charged with conspiracy and aiding and abetting the subscribing of a false tax return. He was accused of funneling more than $1 million to a former employee by diverting payments from a European company into a Swiss bank account controlled by the employee. The money was concealed on the books of Axelrod's company as a marketing expense.

The employee was not named in the indictment, but court papers filed in the Monmouth County civil suit that initiated the federal investigation identified him as Gary Hersch of Colts Neck, who served as his vice president of marketing.

The Star-Ledger learned yesterday that Hersch quietly signed a plea agreement in December 2002, agreeing to enter a guilty plea to a single count of conspiracy and fraud - a charge that has yet to be filed - in exchange for his cooperation.

Hersch did not return several calls to his home for comment.

Attorney Michael Himmel of Woodbridge, who represented Axelrod during the grand jury investigation, said he believed the case against Axelrod is flawed and was very surprised to hear Axelrod had fled to Cuba.

The only indication the attorney had that something was amiss, he said, was his client's failure to appear at a scheduled meeting Monday regarding the arraignment. Himmel said that afterward he alerted representatives of the U.S. Attorney's Office that he would not be representing Axelrod at the arraignment.

In fact, no one appeared on Axelrod's behalf at the federal court proceeding yesterday.

Attorney Alan Lebensfeld of Red Bank, who is representing Axelrod in the civil case, said a flight to Cuba seems out of character for the multimillionaire.

"He has gotten to where he's gotten by fighting, not running," Lebensfeld said.

According to Lebensfeld, the criminal case was based almost entirely on information provided to the government by his opponents in the civil litigation and on accounts provided by Hersch, who testified extensively in the civil matter.

"Quite frankly, I don't believe his story," the attorney said of Hersch.

The 1998 lawsuit, which is still unresolved, involves Axelrod and the California-based company that bought his publishing business. Axelrod sold TFH Publications - named for its flagship magazine, Tropical Fish Hobbyist - for $70 million in cash and a $10 million loan from Central Garden & Pet Co., with the prospect of additional money contingent on the company's earnings.

A short time later, however, Axelrod filed suit against Central Garden for damages, accusing it of management failures that jeopardized prospects of achieving those higher earnings. Central Garden countersued, alleging fraud, misrepresentation and breach of fiduciary duty.

In its filings, Central Garden laid out the fraud charges, including the $1 million in payments to Hersch and $250,000 to the University of Guelph that were characterized in the financial statements of TFH as advertising expenses.

Brandy Bergman, a spokeswoman for Central Garden, said the company went to the U.S. Attorney's Office after discovering the diversions of money into Swiss accounts.

Central Garden also alleges Axelrod had extensive - and improper - dealings in Cuba, including a cigar business.

According to documents filed by Central Garden, Axelrod had a European customer pay his Cuban expenses using money owed to TFH. Axelrod allegedly disguised those payments by issuing false credits to the European company.

Lebensfeld acknowledged that despite U.S. prohibitions on travel to Cuba for most Americans, Axelrod routinely traveled there.

"He does research there on tropical fish, he has published a book about Cuban cigars," said the attorney. "He has many friends there."

Lebensfeld speculated there may be another motive behind Axelrod's decision to head to Cuba rather than deal with the criminal case: "I believe at age 76, he feels that he shouldn't have to face this at the end of his life."

_____________________________________________________________________________________________ Staff writers Christine V. Baird and John P. Martin contributed to this report.

PHOTO CAPTION: 1. Herbert Axelrod two years ago with one of his prized strings: a Stradivarius viola from 1694. The multimillionaire sold 30 similarly rare instruments to the New Jersey Symphony Orchestra in February 2003. CREDIT: 1. STAR-LEDGER FILE PHOTO
GRAPHIC CAPTION:
CHRONOLOGY:
Axelrod timeline
Here's a look at some of the key events in the rise and fall of New Jersey philanthropist Herbert Axelrod:

• June 7, 1927: Herbert R. Axelrod is born in Bayonne. His father, Aaron Axelrod, a Russian immigrant, violinist and teacher of machine-tool mathematics at Bayonne High School, places a 3-inch violin in the infant's crib.
• 1937: After years of violin lessons, 10-year-old Herbert plays his first Stradivarius during a visit to the family home by his uncle, Paul Cochansky, a prominent violinist.
• 1942: Axelrod grows accomplished enough on the violin to serve as a substitute for the New York Philharmonic and the Metropolitan Opera, short of musicians because of World War II.
• 1944: Axelrod graduates from high school and joins the Army Specialized Training Program to study medicine. After the war, he enrolls at New York University, where he ultimately earns a bachelor's degree in science, a master's in mathematics and a doctorate in medicine. He conducts research on cancer in fish and tends to the program's aquariums.
• 1949: Axelrod publishes his first book, "Tropical Fish as a Hobby."
• 1950: He serves in the Korean War, directing a MASH unit's blood bank.
• 1952: Returning from Korea, Axelrod begins teaching at NYU. At the same time, he founds TFH Publications, based in Neptune and named for the company's flagship magazine, Tropical Fish Hobbyist. TFH becomes the world's leading publisher of books on pet care.
• 1955: Axelrod marries his second wife, Evelyn. He has one son from a previous marriage.
• 1975: Axelrod buys his first Stradivarius violin. Over the next quarter-century, he buys dozens more rare instruments, lending them to orchestras and young musicians.
• 1989: Axelrod donates a collection of rare fish fossils, valued at $24 million, to the University of Guelph in Ontario.
• 1997: Axelrod sells TFH Publications for $70 million in cash and a $10 million loan.
• 1998: Axelrod donates a quartet of inlaid Stradivari instruments - two violins, a viola and a cello - to the Smithsonian Institution. The instruments' value is estimated at $50 million. He makes numerous cash donations to music schools across the country.
• 2002: A longtime patron of the New Jersey Symphony Orchestra, Axelrod offers to sell about 30 of his rare instruments to NJSO for $25 million, which he says is half their value. While some question whether the instruments would fetch $50 million on the open market, the offer is seen as a golden opportunity to transform NJSO into a world-renowned orchestra with one of the finest collections of stringed instruments.
• February 2003: After a furious fund-raising drive and further bargaining with Axelrod, NJSO buys his collection for $18 million.
• April 13, 2004: A federal indictment charges Axelrod with tax evasion, accusing him of funneling millions of dollars into Swiss bank accounts over 20 years.
• April 21, 2004: Axelrod fails to appear for his arraignment in federal court. Authorities say he is believed to be hiding in Cuba.

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'Has he lost his marbles?'

Altered portrait of patron of the arts jolts longtime acquaintances

By MARY JO PATTERSON
STAR-LEDGER STAFF

THE PROFILE
One year ago, under twinkling lights at a lavish New Jersey Symphony Orchestra ball, three former governors and 250 members of New Jersey's power elite applauded Herbert Axelrod as the greatest arts benefactor in the history of the state.

The elderly Bayonne native, who had made a fortune through a pet care and pet publication empire, had sold the orchestra his prized collection of rare stringed instruments at a discounted price, $18 million. Bearded, loud, affable and slightly mussed-looking in his tuxedo, the portly 75-year-old had emerged from obscurity within his home state to become a hero of the New Jersey arts world.

Yesterday Axelrod was revealed to be an inhabitant of a vastly different and shadowy world - a fugitive on the lam from federal tax evasion charges and believed to be in Cuba.

Indicted last week on charges of concealing thousands of dollars in payments over the years in Swiss banks, Axelrod was due to appear in appear yesterday in federal court in Trenton.

Instead, he was nowhere to be seen, and neither was his yacht. His multimillion-dollar Jersey Shore mansion in Deal had been sold, as were his properties in Florida. His wife Evelyn's whereabouts were unknown.

People in the arts world were stunned. To tell the truth, they said, they had not seen him in months. And perhaps oddly, considering Axelrod said that he wanted to hear his instruments played in New Jersey, Axelrod and his wife were not current subscribers to the NJSO.

"I'm sorry this is happening to this man," Victor Parsonnet, chairman of the board of the New Jersey Symphony Orchestra, said upon hearing the news.

The Axelrods "are wonderful philanthropists. They've given to Curtis (Institute of Music), the Smithsonian, plus institutions in Europe. They supported all kind of artists."

Other acquaintances were just as shocked - and baffled.

Eugene Balon, an old friend and retired professor of ichthyology (the branch of zoology that deals with fish) at the University of Guelph in Ontario, said he could hardly believe the news.

In 1989, Axelrod donated a hugely valuable collection of fish fossils to the Canadian university. Today its department is called the Axelrod Institute of Ichthyology.

"Oh my God, is he in good mind or has he lost his marbles, or what?" Balon said. "He always gave rather than took. He had so much money. Why would he do something as stupid as tax evasion?"

In a biography posted on the New Jersey Symphony Web site, Herbert Axelrod almost seems too good to be true.

It begins: "As an author, university professor, lecturer, publisher, editor, explorer, adventurer and scientist, Herbert R. Axelrod is the world's best-known tropical fish expert."

Axelrod himself painted his life as rich, dramatic, exciting, unusual.

At various times, he has claimed to have studied mathematics under Einstein, discussed creatures of the sea with Emperor Hirohito, corresponded with Winston Churchill on the subject of goldfish, and hunted for jaguars in Brazil on behalf of the Walt Disney Co., according to an article published last year in the magazine New Jersey Monthly.

The University of Guelph added to the legend by publishing a tribute noting that the young Herbert - son of an immigrant father - "spoke four languages before he learned English at school at the age of five."

But not everything written about Axelrod was so glowing.

In a pending lawsuit that arose from the sale of his company, TFH Publications Inc., the new owner refers to him as a shrewd con artist who cooked the books of his company and maintained a long-term extramarital arrangement with a former dental receptionist whom he put through law school.

TFH took its name from Tropical Fish Hobbyist, one of Axelrod's publications.

He began the business that eventually became TFH in 1950, according to legal papers filed by Central Garden & Pet Co., which bought TFH in 1997. The selling price was at least $80 million.

Balon, his professor friend, said Axelrod is a complicated man who - while enormously generous - was also exceedingly cheap when it came to paying authors and photographers for the books he put out.

He was also careless about details, Balon said, making mistakes in his own and others' writing and mismatching photos with species.

"We constantly quarreled about that," he said. "I felt it was embarrassing to have so many mistakes, and I asked him to send me the manuscripts to fix them.

"He said to me, 'Listen, I am a millionaire, and a businessman cannot be straight. They don't make money like that.'"

Axelrod was born during the Great Depression in Bayonne, where his father taught math and the violin. The older Axelrod wished him to be a great violinist. By the time he was a teenager, Axelrod told The Star- Ledger in 2002, he was accomplished enough to sub for the New York Philharmonic and Metropolitan Opera. But he was not a huge talent.

In 1944, after high school, he joined the Army. Later he served in Korea. When he came home he settled in New York, enrolling at New York University on the GI Bill. Axelrod said he earned a bachelor's degree in science, a master's in math, and a doctorate in medicine.

"I couldn't stand the sight of blood, so I headed into research," he said.

Axelrod found his métier when he got a job caring for the aquariums at the American Museum of Natural History. It was there he developed his love for fish. He wrote a training manual for the aquarium, which turned into his first book, "Tropical Fish as a Hobby," published in 1949.

Axelrod's publications business was founded in Neptune a few years later.

There was an early marriage, which Axelrod did not discuss in interviews, and a son, Todd, a rare- manuscript dealer in Las Vegas. Herbert Axelrod married Evelyn in 1955.

In 1970, he acquired his first rare instrument, a Stradivarius violin. The purchase was financed with his wife's diamond ring. (She eventually got it back.)

The couple's philanthropy was well-known in cultural circles. They donated money and lent or gave instruments to several music schools, including Juilliard, Curtis and the Manhattan School of Music.

They also donated money closer to home. At the Jewish Community Center in Deal is a performing arts building named after Herbert Axelrod.

And Axelrod was determined to elevate New Jersey's second-tier reputation in the music world.

"I want to put New Jersey on the map," Axelrod said when he put his instruments offer on the table. "I want this to be the best-sounding orchestra in the world." _____________________________________________________________________________________________ Staff writers Mark Mueller and Peggy McGlone contributed to this report.

PHOTO CAPTION: 1. New Jersey Symphony Orchestra board chairman Victor Parsonnet, accompanied by Herbert Axelrod, left, in February 2003. 2. One of the prized violins, in the grasp of NJSO concertmaster Eric Wyrick. CREDIT: 1. PHOTOS BY ARISTIDE ECONOMOPOULOS/THE STAR-LEDGER 2.
 

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Not to worry, symphony didn't get phonies

By PEGGY McGLONE
STAR-LEDGER STAFF

THE STRINGS
Amid the latest revelations about philanthropist and music lover Herbert Axelrod's business dealings arises this nagging question: Are the much-heralded Golden Age instruments he sold to the New Jersey Symphony Orchestra the real thing?

No question about it, said symphony officials and supporters. "We did our due diligence," said attorney Scott Kobler, a partner at McCarter & English, the Newark law firm that represented the orchestra in the deal, which was completed in February 2003.

"We had them examined by sets of experts, who physically examined them. We have in our possession all of Dr. Axelrod's provenance papers. We were satisfied that their provenance was verified."

After a year of negotiations, the NJSO spent $18 million to purchase 30 Italian strings - including a dozen Stradivarius violins, a Stradivarius cello, three Guarneri del Ges violins and a 1620 Amati viola. Axelrod later forgave $1 million of the $4 million note he held in that transaction, bringing the final price to $17 million. The NJSO borrowed $14 million to complete the deal.

Axelrod valued the collection at $50 million.

Kobler said the orchestra hired independent experts to inspect the instruments and verify their origin, and were satisfied with their authenticity.

"And if you were to ask the musicians about the instruments . . . you would hear earfuls from them about how extraordinary they are," he said.

Axelrod also donated a quartet of Strads to the National Museum of American History, a part of the Smithsonian Institution in Washington, D.C.

"I can't comment on the situation he's in," said Valeska Hilbig, a spokeswoman for the museum. "But we are not questioning the authenticity of the instruments. We've had that verified."

Other supporters of the symphony said they stand behind the decision to purchase the instruments.

"We're a supporter of the symphony and we continue to believe the violin purchase was good not only for the New Jersey Symphony but for the people of New Jersey," said Gabriella Morris, president of the Prudential Foundation, a major donor. "As far as we know, this has nothing to do with the violins at all."

URL: <a href="/texis/search/story.html?table=sl2004&id=408835f8d4">Not to worry, symphony didn't get phonies</a>

Orchestra expects violin deal will stand

Agreement re-examined after seller indicted on unrelated charges

By WILLA J. CONRAD AND TED SHERMAN
STAR-LEDGER STAFF

Officials at the New Jersey Symphony Orchestra do not believe Herbert Axelrod's indictment this week for tax evasion will affect the unique violin collection acquired from him last year.

While the U.S. Attorney's Office has already said the sale of Axelrod's rare Italian instruments was not jeopardized by the criminal charges, the orchestra has been re-examining the structure of the sales agreement since learning of the indictment.

Attorney Scott Kobler, a partner at McCarter & English, which represents the New Jersey Symphony Orchestra, yesterday said the situation is not unlike that of someone who purchases a house and then later discovers the seller has unrelated tax problems with the Internal Revenue Service.

"Would the IRS come and take your house back? No," Kobler said, describing the deal as a bona fide purchase carried out with no knowledge of Axelrod's interactions with the IRS.

The orchestra's collection of instruments from the 17th and 18th centuries acquired from Axelrod included a dozen Stradivarius violins; a Stradivarius cello; three Guarneri del Gesú violins; a 1620 Amati viola; and violas, violins and cellos by such makers as Giovanni Guadagnini and Matteo Goffriller.

Kobler said the orchestra purchased the instruments from Axelrod and his company outright, and that Axelrod retained no security interest in the instruments.

"In the sale agreement, we've done as much due diligence as we could do, including representations from the Axelrods about their knowledge of the provenance (previous claims of ownership) of the instruments, but that's unrelated to his tax controversy," said Kobler. "This is not a tax liability involving the symphony."

The orchestra's purchase was structured as three loans: $9 million from Commerce Bank, $5 million from the Prudential Foundation, and $4 million in unsecured notes to the Axelrods. The Axelrods have since forgiven $1 million and assigned the remaining $3 million to other charitable organizations.

Sheila Bridgeforth, director of global communications for the Prudential Foundation in Newark, declined to comment on the sale. James Vogel, a Commerce Bank vice president, said they were still examining the ramifications of the matter.

Axelrod, 76, who made a fortune through a pet-care publishing empire, was indicted earlier in the week on charges he concealed hundreds of thousands of dollars in payments to a former employee through secret Swiss bank accounts.

In the two-count indictment, Axelrod was charged with conspiracy and aiding and abetting the subscribing of a false tax return. The indictment said the wealthy Deal resident funneled bonus and severance payments to an unnamed company vice president into Swiss accounts between 1990 and 1997.

Reached by phone, Axelrod's personal attorney, Douglas Calhoun, would not discuss the pending criminal charges.

"Your reporting is inaccurate and it would be inappropriate for me to comment," he said, before hanging up on a reporter.

Axelrod is due to be arraigned on Wednesday afternoon before U.S. District Judge Garrett E. Brown Jr. in Trenton.

URL: <a href="/texis/search/story.html?table=sl2004&id=408126d356">Orchestra expects violin deal will stand</a>

Donor of violins is called a tax cheat

Orchestra's benefactor faces arraignment stemming from 1990s activities

By TED SHERMAN AND WILLA J. CONRAD
STAR-LEDGER STAFF

A year after letting the New Jersey Symphony Orchestra purchase his collection of rare Italian violins and other stringed instruments, Herbert Axelrod faces arraignment next week on federal tax fraud charges.

Axelrod, 76, who made a fortune through a pet-care publishing empire and has long been a major benefactor of the New Jersey Symphony Orchestra, was indicted earlier this week on charges he concealed hundreds of thousands of dollars in payments in the 1990s through Swiss bank accounts.

The U.S. Attorney's Office said the stringed instruments were not a factor in the investigation and the transaction was not part of the investigation.

In the two-count indictment that charges Axelrod with conspiracy and aiding and abetting the subscribing of a false tax return, federal authorities say the Deal resident funneled more than $1.4 million in payments to a vice president of his company, TFH Publications, into Swiss accounts between 1990 and 1997.

TFH Publications - named for its flagship magazine, Tropical Fish Hobbyist - was sold in 1997 for $70 million in cash and a $10 million loan.

Axelrod's wife, Evelyn, who was a shareholder of TFH Publications and responsible for accounts receivable at the company, was named but not charged in the indictment.

According to the indictment, the scheme involved payments from a pet-product company in England that were diverted into the Swiss accounts. The unnamed employee, who was later terminated, received bonus and severance payments through the Swiss account. The severance payment, $950,000, was concealed on the books of Axelrod's company as a marketing expense, says the indictment, which was handed up Tuesday.

The former vice president later withdrew $25,000 in traveler's checks from the account and filed a tax return that did not disclose the payments. No charges have been filed against the individual, and a spokesman for the U.S. Attorney's Office would not further discuss the matter.

Authorities also cited the involvement of a dental hygienist from New Jersey who attended law school with Axelrod's assistance. The woman, who is not named, went to Switzerland with Axelrod to open a bank account there. The indictment charges that Axelrod deposited money in the account and told her to maintain the account to conceal the money from the Internal Revenue Service.

If convicted on all counts, Axelrod faces a maximum of five years in prison and a $250,000 fine.

Axelrod could not be contacted at home. His secretary at his Allenhurst office said he was not available.

Axelrod's attorney, Michael Himmel of Woodbridge, said he could not address the charges other than to confirm next week's arraignment before U.S. District Court Judge Garrett E. Brown Jr.

"The investigation has been going on for a long time," he said. "At this point we really have no comment."

Asked whether possession of the rare instruments acquired by the New Jersey Symphony might now be in jeopardy, Himmel said, "I hope not."

Coincidentally, the deal that brought Axelrod's collection to the New Jersey Symphony Orchestra was based in part on tax considerations. In discussions before the transaction, Axelrod said the deal was conceived, in part, as a way to legally dispose of his extensive collection so that, after he died, his wife would not have to tangle with rare instrument dealers, international sales laws or tax implications from the instruments' sale.

The 17th- and 18th-century instruments he had acquired over the years - including a dozen Stradivarius violins; a Stradivarius cello; three Guarneri del Ges violins; a 1620 Amati viola; and violas, violins and cellos by such Golden Age makers as Giovanni Guadagnini and Matteo Goffriller - were valued at $50 million when Axelrod first offered to sell them to the New Jersey Symphony Orchestra for half that price.

After a long fund-raising drive by the orchestra, Axelrod dropped the price to $18 million. The transaction was completed 14 months ago, giving the New Jersey Symphony Orchestra a concentration of instruments like no other orchestra's in the world.

NJSO board Chairman Victor Parsonnet, who brokered the Stradivarius deal with Axelrod, said yesterday he was shocked by the federal charges.

"We had no prior knowledge of this at all," Parsonnet said. "We have no comment when it comes to the accusation, but we do have to say he and his wife have been wonderful philanthropists - not only to the New Jersey Symphony Orchestra, but with huge amounts given to the Curtis Institute, the Metropolitan Opera, the Smithsonian, the Jersey Shore Hospital.

"I feel badly for them, and we have to remember he's innocent until proven otherwise."

The Axelrods emerged in recent years as the New Jersey Symphony Orchestra's most important benefactor. The couple made a $1 million donation in December 1997 to underwrite an annual concert, and provided a challenge grant of $1 million to the orchestra's annual operating fund last season, generating $1,154,000 in matching donations.

Parsonnet said all of Axelrod's donations have been paid in full. In addition, the Axelrods recently forgave a $1 million note they held on the violins and reassigned to other charitable institutions the remaining $3 million in notes they hold on the instruments.

PHOTO CAPTION: 1. Herbert Axelrod's sale of rare instruments for about a third of their assessed value was not a part of the probe, the U.S. Attorney's Office says. 2. Members of the New Jersey Symphony Orchestra sounded out their new strings in Newark in February 2003 soon after acquiring them from Herbert Axelrod. CREDIT: 1. 2003 ASSOCIATED PRESS FILE PHOTO
 

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A creditable debut for a musical heir

By WILLA CONRAD
STAR-LEDGER STAFF

Kristjan Järvi, the youngest of the conducting Järvi clan, led his debut performances with the New Jersey Symphony Orchestra this weekend with an imaginative program that was both familiar and new.

Not every musical idea came across convincingly, but here was a conductor with a bracing and different view and an infectious, laid-back podium style that wore well on this orchestra.

Of course, one would expect at least as much from the founder of the genre-bending Absolute Ensemble, which has walked the gray area between classical, jazz and other music forms for a decade now. Järvi - his father is Neeme, the music director designate of the NJSO who has yet to make his own subscription series debut - strolled on stage Friday at the New Jersey Performing Arts Center with a relaxed gait. The musicians responded to him with bright energy.

It's unclear whether his programming, which included Rachmaninoff's "Rhapsody on a Theme of Paganini," Debussy's Prelude to "The Afternoon of a Faun" and Järvi's own rearranged order of both "Peer Gynt" Suites by Grieg, was pure luck or planned to match the NJSO's sweeter, more translucent sound. In either case, the conductor showed good instincts in exploiting the NJSO's string blend and overall peppiness to complement his own ideas.

The virtually unknown Overture to "Donna Diana" by the Austrian Emil Nikolaus von Reznicek was cleanly delivered. Rachmaninoff's familiar, robust piano concerto likewise felt neatened up and rhythmically alive, lean in orchestral texture yet driven in spirit. Chinese pianist Di Wu was this year's featured Curtis Institute young star for this annual Herbert & Evelyn Axelrod Concert, and she shared Järvi's fascination with rhythmic propulsion and Rachmaninoff's symmetry of phrasing. Still, this was a performance more about speed and accuracy than romantic largesse and generous melodies.

It's lovely to be impressed by a young pianist's acumen, but Wu's tonal palette here was narrow and bland. For this listener, there's more to Rachmaninoff than correct notes, and neither conductor nor pianist seemed inclined to probe richer emotional veins. Wu returned to the stage for one solo encore, the short seventh section from Kinderszenen, "Traumerei," which offered the tender introspection one might have hoped for in the Rachmaninoff.

Järvi's combining of "Peer Gynt" Suites to follow the narrative of the original Ibsen play was brilliant. By presenting the musical vignettes in chronological order (with Grieg's unrelated "Homage March" from "Sigurd Jorsalfar" tacked on as a summarizing finale), one at last had a musical sense of what a scoundrel the Norwegian villain is, and the web of heartbreak he produces.

Here Järvi pulled the best from the orchestra: mournful laments, ephemeral swirls of exotic dance, and, finally, a sense of the weary traveler returning home.

Debussy's prelude is wickedly difficult, requiring immaculately clean playing by woodwinds, yet a feeling of relaxed insouciance throughout. Assistant principal flutist Kathleen Nester gave an admirable rendering of the famous opening flute solo, and Järvi's minimalist direction on the podium showed good musical instincts. Still, this was more a serviceable than transporting performance.

Kristjan Järvi was booked as a guest conductor before dad Neeme was approached for the job; one reading might be that father and son therefore competed for the empty NJSO conductor's post. Not so, say NJSO administrators, who say they were attracted to Järvi the younger for his imaginative work with Absolute.

Whatever the reality, both of Kristjan's parents were present Friday in a private box, delicately trying not to overshadow the son's debut, yet deeply ensconced in saying hello to a group of visiting VIPs including Estonian Consul General Peeter Restsinski, celebrating the new Newark base of Estonia's most famous musical family.

PHOTO CAPTION: JÄRVI
 

TAG: sl2004-4044c85216b
 

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Changes for symphony are exciting and scary

By WILLA CONRAD
STAR-LEDGER STAFF

SWIFT CHANGES elicit excitement, as this past year at the New Jersey Symphony Orchestra has shown. There have been purchases and cutbacks, deficits and donations, jiltings and magnificent hirings. When all the dust has settled, though, has the orchestra, the state's largest and most visible performing arts group, actually made progress?

The answer is: yes and no. Sometimes, two steps forward also mean one step back, and this is the crab-like dance the orchestra is engaged in, no matter what positive spin its staff and musicians put on things.

Some moves have unequivocally pushed the ensemble forward. Landing Estonian conductor Neema Järvi as its new music director is unquestionably a hit, a very palpable hit. Judging by the mostly B-level or inexperienced candidates the orchestra looked at over a three-year search, the orchestra had its sights set much lower. Järvi's temperament and podium authority are an excellent match for this organization; he will brook no substandard playing or players, has imagination in programming and a wider grasp of repertoire than his predecessor, Zdenek Macal.

By the way, obtaining Järvi's services was the orchestra's perfect answer to Macal's cold, impersonal withdrawal from last month's three-week Dvoràk festival, which had been planned as a glorious farewell to the Czech conductor. Last September, Macal sent a message through his agent that unspecified "family concerns" prevented him from participating. After a decade-long relationship, couldn't the man have picked up a phone? The orchestra scrambled for replacements, with some success, though undoubtedly the change was partially responsible for a disappointing attendance of 60 to 75 percent of capacity for the festival.

Enter Järvi, and now, swiftly, Simon Woods, vice president of the Philadelphia Orchestra, as NJSO's president and CEO. Woods seems to have everything this orchestra needs: youth, an engaging personality, deep knowledge of music, excellent connections in the recording field and a pre-existing relationship with Järvi, who had final approval of his appointment.

Their arrival will undoubtedly also raise the bar for the currently vacant associate conductor's job, which the orchestra has said it will not fill immediately. Traditionally, the post has been held by a young conductor with little national reputation; Macal protégé Donato Cabrera is currently performing most duties on an interim basis. What's to stop Järvi, or the orchestra's powerful musicians' committee, for that matter, from insisting on a higher profile No. 2 conductor?

Add this final bit of good news: longtime board chairman Victor Parsonnet, widely credited with rescuing the orchestra from death in the early

'90s and building its current momentum, has no plans to leave. "I'm in for at least another year, maybe more," Parsonnet says. "I promised Järvi I'd hang around."

The securing of Järvi and Woods is more important than last year's purchase of 30 Stradivarius and similar caliber string instruments for $18 million from New Jersey philanthropists Evelyn and Herbert Axelrod. True, the purchase has given the NJSO a footnote in history. But the instruments are only as good as the musicians who play them, and, in turn, the imagination of the conductor who leads them. It will be up to Woods to parlay that synergy into ticket sales and donations.

Now for the dark side: the NJSO has $5.7 million in accumulated operating debt - $1.7 million chalked up in 2003 alone. That's an astronomical amount, considering an annual budget of just $15.8 million a year. The seriousness of this development can't be waved away by staff explanations of a larger capital base and ongoing endowment drive. The orchestra is in trouble - nearly twice as much trouble as when the state gave it a onetime, $3 million bailout in 1995. The state, mired in its own financial woes, won't help this time. The orchestra must look for new donors beyond state borders by raising the NJSO's profile. Jarvi's and Woods' experience in touring and recording orchestras will certainly come in handy.

It's a good sign that, in the midst of such financial distress, the orchestra has been able to keep up its payments on the Axelrod Strads. Last June, the NJSO successfully converted part of the $18 million in loans it took out for the purchase to low-interest, tax-exempt bonds through the state's Economic Development Authority. About $9 million was refinanced on a 30-year loan with a 4.37 percent fixed rate for five years through Commerce Bank.

In spite of the orchestra's dire situation, which already includes up to 10 percent pay cuts and additional payments on millions in loans taken out for operating expenses, the orchestra's development staff has been able to raise the approximately $100,000 monthly payments on the Strads without asking its underwriting guarantors for money. It has also kept up payments on a $5 million loan from the Prudential Foundation and eight $500,000 notes held by Axelrod. This is no small juggling feat.

Still, this orchestra's future is hanging over a gaping abyss of debt. The NJSO is unintentionally creating a new paradigm for nonprofits, which usually cringe if debt load reaches 5 percent of budget; the NJSO owes more than $20 million to lenders, a third more than its annual budget. The only place to look for information on how businesses successfully leverage themselves to this extent is corporate America. In the age of Enron, this is no comfort.

To pretend the NJSO is not risking all for a brighter artistic future is to be in denial about the financial realities the orchestra faces.

Two steps forward, one step back. That's the new rhythm to the music the orchestra is playing. And whether the finale is Haydn's "The Creation" or Wagner's "Twilight of the Gods," we can rest assured the entire orchestra industry is watching.

PHOTO CAPTION: 1. Neeme Järvi's temperament is a perfect match for the NJSO. CREDIT: 1. JOHN O'BOYLE/THE STAR-LEDGER
 

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