Mary Boone Tax Fraud Case: A Whistleblower Could Receive $300,000 in Reward for Tip-Off

'It is more likely than not that a disgruntled employee said something to the IRS,' tax attorney Richard Champion told Observer.

Mary Boone at the premiere of Mapplethorpe: Look At The Pictures in 2016. Nicholas Hunt/Getty Images

Gallerist Mary Boone is going to need a miracle if she wants to stay out of jail. This, at least, is the assessment of Richard Champion, a tax attorney with more than 40 years experience who spoke to Observer about the dealer’s latest legal quagmire. Last Friday, prosecutors announced they were recommending Boone spend as much as three years in prison for deliberately defrauding the government of more than 3 million dollars in tax revenue. “If she were my client, I would tell her [jail] is almost a certainty,” he said. “I wouldn’t be surprised at 24 to 30 months at all, and at that, she’s fortunate.”

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News of the dealer’s various illegal activities has been dripping out over the course of the last couple of years. In 2017, Boone paid seven figures to resolve an ongoing fraud case in which actor Alec Baldwin accused her of selling him a Ross Bleckner painting she falsely claimed was another. In 2018, Boone pleaded guilty to filing false tax returns in 2009, 2010 and 2011. Now, the consequences of those actions are being determined—she will be sentenced on January 18. And Champion speculates that with the closing of the legal proceedings, any potential tipster could be set for a financial gain.

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The details of Boone’s alleged false filings reveal the seriousness of the case. According to the government’s sentencing memorandum, between 2009 and 2011 she falsely characterized transactions in order to claim personal expenses as business deductions. Those deductions included over $900,000 to remodel her Manhattan apartment and on expenses related to her second apartment; and approximately $300,000 in personal credit card charges. Those charges include beauty salon purchases totaling $24,380, purchases at luxury designer companies such as Hermes and Louis Vuitton adding up to nearly $20,000 and close to $15,000 at a jewelry company.

The tax scheme described by prosecutors included misrepresenting purchases and falsifying transactions. For example, in 2011, she described payments to her apartment remodeling contractor as a “commission” and “fee/design” so she could write off the cost as a business expense. Additionally, she also engaged in dummy financial transactions by writing checks from her gallery’s account and depositing them into the same account. She then falsely described the debits as different tax-deductible business expenses in the check registers.

The second aspect of the tax fraud described by prosecutors involved artificially inflating the galleries stated expenses to fraudulently generate loses when the Gallery was generating profits. For example, in 2011, Boone transferred $9.5 million from one business bank account to another and reported the account transfers as tax-deductible business expenses by providing falsified check registers to the accountant while withholding the bank records.

When asked about the impact that falsifying documents would have on her returns, artist and accountant Hannah Cole told Observer that there wasn’t enough information in the document to know the exact effect on the return. “But the report does say that she used fraudulent expenses to create a loss,” she said. “That loss would create an abusive tax shelter.”

According to Champion, Boone was lucky not to have been charged with tax evasion, a crime that carries a penalty of up to five years, two years more than the three-year maximum sentence she’s currently facing. Other cases, such as the famed 1989 conviction of Harry and Leona Helmsley for tax evasion, were based on the same crimes (in their case, falsely describing the painting of their personal home as a business expense of their hotel).

As Champion sees it, Boone evaded this fate through some combination of luck. For one, her assigned prosecutors did not aggressively pursue a higher penalty as others might, and exercised a measure of compassion. For another, the skill of her defense lawyers, Robert S. Fink and Michael Sardar, painted a compelling picture. That defense included more than 100 testimonials from her colleagues in the art world and a forensic psychological evaluation that described the handicaps suffered by Ms. Boone. (Prosecutors contend childhood trauma, not greed, was the root cause of the crime.) Added to this, is a third, still untested element of luck—Judge Alvin Hellerstein, the randomly assigned judge to this case, is known to be a moderate.

The testimonials paint a compelling picture and include letters from the likes of Pulitzer Prize-winning critic Jerry Saltz, globally acclaimed artist and activist Ai Weiwei (the art world equivalent of the Pope) and long-time Mary Boone gallery director Ron Warren. All testified to her immense generosity, citing specific examples of her kind and giving character. Prosecutors did not rebut these testimonials, writing only that it was “appropriate for the court to take these letters into account in connection with sentencing”. That leaves Boone’s portrait somewhat unfinished. While the gallerist is considered a wildly charismatic pioneer in the field and model for female entrepreneurs, she’s known to be difficult to work for and with, something many in the industry are aware of.

That may even include the prosecutors. “It is more likely than not that a disgruntled employee said something to the internal revenue service,” Champion told Observer, couching the statement with the disclaimer that it was speculation with some basis in fact. “Most criminal cases now come from tips rather than examinations of tax returns.” Champion said the tip theory was made even more likely due to what’s called the “Whistleblower Law,” which entitles the whistleblower to a percentage of the money the government recovers if the tip was correct. According to the tax attorney, if Boone was reported, the person who provided that information is entitled to 15 to 30 percent of the money the government recovers, though those numbers are rarely honored. He speculated that the whistleblower might get more like 10 percent—approximately $300,000.

Still, there are many who remain charitable to Boone’s cause, and see more than just run-of-the-mill tax investigation at play. Over the course of the weekend, artists Wendy White and Sheila Pepe speculated over Twitter that Boone was the victim of misogyny and that prosecutors had chosen to make an example of her as they did with Martha Stewart. “Like all the boys aren’t cooking the books.” Pepe wrote in a tweet. “Mary’s been a target forEVER.” Champion wasn’t having that, though. “Given that there’s over $9 million involved, agreeing that it is only a false statement, rather than evasion of $3 million in tax, in my mind argues against the idea that she is being made an example of,” he said. “I don’t see misogyny here, what I see is something short of a miracle.”

Mary Boone Tax Fraud Case: A Whistleblower Could Receive $300,000 in Reward for Tip-Off