Orchestra's benefactor is arrested in Berlin

Germans detain Axelrod, fugitive in tax fraud case

By MARK MUELLER AND JOHN P. MARTIN
STAR-LEDGER STAFF

Herbert Axelrod, the disgraced New Jersey philanthropist who fled the country ahead of a federal tax fraud indictment two months ago, has been arrested in Germany on a U.S. fugitive warrant, authorities said yesterday.

German police took Axelrod into custody at a Berlin airport Tuesday evening as he arrived on a flight from Zurich, Switzerland, according to a brief statement issued by the U.S. Attorney's Office in Newark. Axelrod and his wife, Evelyn, own homes in Zurich and several other European cities.

The 77-year-old Monmouth County man, an internationally recognized violin collector best known for his sale of 30 rare stringed instruments to the New Jersey Symphony Orchestra last year, had been wanted since April 21, when he failed to appear for his arraignment in Trenton.

The charges stem from Axelrod's business dealings during the 1990s, when he headed Neptune- based TFH Publications, one of the world's largest suppliers of pet-care books and products.

Days later, Axelrod was discovered in an oceanfront bungalow in Cuba, where he told a Star-Ledger reporter he had no intention of returning to the United States to face the charges. It was not clear when the mercurial multimillionaire left the island nation, but a lawyer representing him in a long-running civil suit in Monmouth County said Axelrod had been traveling through Europe since at least last month.

"I do know he has been traveling in Europe for the past several weeks," said the lawyer, Alan Lebensfeld. "He lives in Europe. He's got multiple residences there. What he was doing in Germany I have no idea. I don't believe he has a house there. I'm shocked by the fact he was in Germany as much as by the fact that he was arrested."

The arrest took place inside Berlin's Tegel Airport at 7:05 p.m. local time, or 1:05 p.m. EST, after German authorities spotted Axelrod's name on an Interpol list of known fugitives, said Michael Drewniak, a spokesman for the U.S. Attorney's Office.

Yesterday morning, U.S. officials notified German authorities they plan to seek Axelrod's extradition, a process that could take months even if Axelrod chooses not to fight his return to the United States.

Axelrod's criminal lawyer, Michael Himmel, said he did not know whether Axelrod was passing through the Berlin airport en route to some other destination or whether his client intended to remain in Germany. He said he learned of his client's arrest Tuesday, but had not yet been able to reach Axelrod by phone.

"I do hope to communicate with him soon, and until I do, I really can't say anything," Himmel said.

Axelrod's principal violin dealer, Dietmar Machold, has an office in Bremen, some 200 miles west of Berlin, but said in a phone interview yesterday that he had not heard from Axelrod in months and had no plans to meet with him.

"I thought he was still in Cuba," Machold said. "I don't have a clue what he's doing in Germany. I've never heard of him being involved in anything in Berlin. He has no friends there that I know of."

Axelrod's arrest marks another milestone in what has been a stunning descent for a man once widely praised for his generosity and devotion to the arts.

The positive press reached its height last year, when Axelrod agreed to sell 30 rare musical instruments to the New Jersey Symphony Orchestra for the purportedly cut-rate price of $18 million. The price was later reduced to $17 million when Axelrod agreed to forgive a $1 million note on the deal.

Dubbed the Golden Age Collection, the strings include a dozen violins made in the 17th and 18th centuries by famed craftsman Antonio Stradivari, a Stradivari cello and three violins fashioned by Giuseppe Guarneri del Ges, widely considered history's second-greatest violin-maker after Stradivari.

Axelrod, who began amassing violins in the 1970s, claimed the NJSO instruments were worth nearly $50 million, a figure few people questioned at the time.

That changed with his April 12 indictment, which accused him of helping a former TFH employee avoid paying income taxes by washing cash through Swiss bank accounts. Charged with conspiracy to defraud the Internal Revenue Service and aiding and abetting the filing of a false tax return, Axelrod faces up to five years in prison if convicted.

Almost immediately after the indictment, some of the world's top violin dealers and experts called Axelrod's instrument valuations a fraud, suggesting he used them as a means to take inflated tax breaks.

The dealers pointed to both the NJSO valuation and to another $50 million appraisal Axelrod placed on four Stradivari instruments he donated to the Smithsonian Institution in December 1997.

The FBI and the IRS are now investigating both transactions to determine whether Axelrod artificially boosted the instruments' value. In addition, the Senate Finance Committee is looking into the Smithsonian deal as part of a broad examination into charitable donations.

Machold, Axelrod's violin dealer, performed the two appraisals and maintains that they accurately reflect today's market for high-end strings.

The NJSO, which borrowed heavily to finance the Axelrod purchase, has likewise stood by the $50 million valuation.

Simon Woods, the orchestra's president and chief executive officer, yesterday declined to address Axelrod's arrest. "We do not have any comment with respect to Herbert Axelrod's personal matters," Woods said.

It remains to be seen how long it will take U.S. authorities to bring Axelrod back to the United States. Some European countries, among them Switzerland, are notoriously slow to agree to extradition in cases that involve relatively minor crimes.

But Drewniak, the spokesman for the U.S. Attorney's Office, said authorities expect Axelrod will be returned from Germany.

That process generally takes months but has been stretched to more than a year when defendants fight extradition. In one case, in 1995, it took New Jersey authorities 20 months to secure the return from Italy of a New Jersey businessman, Roger C. Day Jr., who had been charged with bribery.

Lebensfeld, Axelrod's civil lawyer, said he is heartsick that his client has come to be charged at all, contending the case could have been handled by the IRS in civil court.

"To call Axelrod a criminal is a stretch, in my view," Lebensfeld said. "The man is 77 years old. He's done an awful lot of good for people who need it, and he's paid a ton of taxes. I think there will be a lot of people who line up and vouch for him." _____________________________________________________________________________________________ Staff writers Peggy McGlone and Ted Sherman contributed to this re port.

PHOTO CAPTION: 1. AXELROD 2. One of the violins sold to the N.J. Symphony Orchestra
GRAPHIC CAPTION: CHRONOLOGY:
Axelrod's highs and lows
 

• 1997 to 2000: Herbert Axelrod makes several donations to the Smithsonian Institution. Most notable is a quartet of decorated Stradivari instruments previously on loan to the museum. The controversial gift includes a plain Strad cello dressed up with decals to match the inlay on the other instruments. Later gifts, totaling 17, include an Amati quartet and a Jacob Stainer violin. Also in '97 Axelrod sells his business, TFH Publications, for $70 million in cash and a $10 million loan.
• March 2002: Axelrod proposes to sell a number of rare Italian strings to the New Jersey Symphony Orchestra for $25 million. He claims the collection is worth $50 million.
• Feb. 19, 2003: After a year of negotiations, Axelrod drops the price to $18 million and the NJSO secures loans to purchase the newly named Golden Age Collection of 30 stringed instruments - including a dozen Stradivari violins. The deal is sweetened later when Axelrod forgives a $1 million note.
• March 2004: Federal officials investigate the valuations placed on several of Axelrod's high-profile gifts, including the decorated Stradivarius given to the Smithsonian.
• April 2004: Axelrod is indicted on two counts of tax fraud for allegedly funneling more than $1.4 million to a Swiss bank account. The money, channeled to a vice president of TFH, was transferred between 1990 and 1997.
• April 21, 2004: A federal judge issues an arrest warrant when Axelrod fails to appear at his arraignment in Trenton. Officials say he has fled to Havana, Cuba.
• April 23, 2004: Now staying in a $60-a-day bungalow in Havana, Axelrod professes his innocence. "I am not a criminal," he says, adding that his wealth made him the target of federal investigators.
• 28, 2004: U.S. Sen. Chuck Grassley (R-Iowa), chairman of the Senate Tax Committee, opens an inquiry into the Smithsonian donations and says the probe may widen to include the NJSO purchase.
• May 2004: Federal investigators interview New Jersey Symphony Orchestra officials about the deal, take the orchestra's voluminous files about the instruments and the contract of sale.
• June 15, 2004: Axelrod is arrested in Berlin after getting off a flight from Zurich. Federal authorities say they will seek his extradition.

CREDIT:
THE STAR-LEDGER