Real estate developer and high-profile art collector Michael Shvo, and related shipping companies, were indicted by the New York district attorney Cyrus Vance yesterday, September 8, on charges of evading more than $1 million in sales and use tax on fine art, jewelry, and luxury sports cars. The indictment does not name specific artworks.

Shvo pleaded not guilty, and was released on a $500,000 bail.

The Getty Station in 2013 with Lalanne sheep conceived of by Michael Shvo. Courtesy of GettyStation.com,

Shvo is perhaps best known in art world circles as the collector who turned a Getty gas station on West 24th street in Chelsea into a temporary Francoix-Xavier and Claude Lalanne “grass station” complete with signature Lalanne sheep placed on “rolling” faux grass hills, back in 2013, before demolishing the station in order to build—yet another—high end, Highline Park condo development.

Forfeiture Of More Than $15M Worth Of Artwork Sought By U.S. Attorney’s Office

NEWARK, N.J. – The United States has filed a civil asset forfeiture Complaint seeking a collection of artwork containing more than 2,200 pieces and valued at more than $15 million, U.S. Attorney Paul J. Fishman announced today.

The Complaint alleges that the artwork – bought with money from the sale of fraudulent credits for renewable fuel – was transported in interstate commerce knowing that it was the proceeds of fraud and was utilized in laundering the proceeds of fraud.

According to the Complaint:

Federal law requires gasoline and diesel refiners and importers to introduce renewable, non-fossil fuel into the national fuel mix. To ensure this, the Environmental Protection Agency created a system of credits known as “Renewable Identification Numbers” – or “RINs” – to track and boost renewable fuel production. The RINs can be obtained by:

· producing renewable fuel;
· importing renewable fuel produced by approved foreign producers;
· purchasing renewable fuel, with associated RINs, from approved domestic producers; and
· purchasing RINs without the underlying renewable fuel.

A market for RINs has developed, and thousands of RIN transactions are electronically recorded with EPA every week. Hundreds of millions of dollars’ worth of RINs are exchanged every year.

A company known as Green Diesel held itself out as operating a facility in Houston, Texas, that generated biomass-based diesel fuel. It did not, however, actually generate any such biodiesel. From November 2007 through at October 2011, Green Diesel sold RINs to companies such as Shell Oil, BP, CITGO, and Exxon that were invalid because they did not, in fact, represent the production of any biodiesel at all. Purchasers of invalid RINs from Green Diesel have reported losses exceeding $78 million.

The owner of Green Diesel, Philip J. Rivkin, used part of the proceeds of the fraud to purchase at least $18 million worth of artwork, chiefly photographs. On Jan. 30, 2012, Rivkin caused 396 packages of artwork to be transported to a warehouse on Frelinghuysen Avenue in Newark. The artwork was stored there until late June 2012, when it was moved to a warehouse in New York on its way to Spain. On July 12, 2012, it was seized for forfeiture pursuant to a warrant issued by a U.S. Magistrate Judge Mark Falk in Newark.

The seized artwork has been appraised by New York Fine Art Appraisers, which concluded that it has a total fair market value of $15,773,128. Among the works sought by the Complaint are:

a. Gelatin silver print titled “Distortion no. 6, Paris” by artist Andre Kertesz. The photograph was purchased by Rivkin from Philips De Prury & Company as part of a group of photographs. Rivkin paid $42,500 for the piece and wired $60,000 as payment for the group of photographs on Nov. 9, 2010.

b. Gelatin silver print titled “Dunes, Oceano” by artist Edward Weston. The photograph was purchased by Rivkin from Sotheby’s as part of a group of photographs. Rivkin paid $134,500 for the piece and wired $424,750 as payment for the group of photographs on Nov. 11, 2010.

“As alleged in the indictment, Michael Shvo went to great lengths to defraud New Yorkers out of more than a million dollars in tax revenue, said Vance in a statement. “This indictment puts other purchasers of fine art on notice: the purposeful evasion of New York State and City taxes is a tax crime, and those who scheme to avoid their obligations will be held criminally and civilly accountable.”

In addition to the criminal tax evasion charges, Vance also filed a related civil action to forfeit funds accumulated during the alleged scheme. Bloomberg reports that a temporary freeze has been placed on at least $1.5 million of Shvo’s assets.

As artnet News reported in early 2015, the Manhattan DA launched an investigation into art sales taxes and several Chelsea dealers told us they had received letters seeking information about their business records.

Jerry Boone, the New York state commissioner of taxation and finance, said the arrest of Shvo is “part of a continuous and concentrated effort involving our department,” along with the DA, and other local law enforcement agencies.