[MSN] WASHINGTON - Recent raids on museums in Southern California have stirred much questioning in the art world about why three federal agencies would devote four years to investigating what seems to be low-level smuggling and penny-ante tax fraud.

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February 4, 2008


Tax Scheme Is Blamed for Damage to Artifacts

By MATTHEW L. WALD

WASHINGTON - Recent raids on museums in Southern California have stirred
much questioning in the art world about why three federal agencies would
devote four years to investigating what seems to be low-level smuggling and
penny-ante tax fraud.

Yet tax experts say that the pattern of deceit outlined in court papers -
appraising art objects for amounts just below a threshold that sets off
higher scrutiny - is frequently investigated by the criminal enforcement arm
of the Internal Revenue Service.

And a scholar who aided in the investigation argues that the modest dollar
value of the objects - mostly artifacts from Southeast Asia that the
authorities say were probably looted - is vastly eclipsed by the damage that
looters wreak at archaeological sites, adding urgency to the inquiry.

The scholar, Joyce C. White, director of the Ban Chiang Project at the
University of Pennsylvania Museum of Archaeology and Anthropology, said that
the items smuggled and sold in the United States tend to be those that are
intact, and that for each intact item removed there were doubtless many
broken ones. When properly excavated, she said, the ensemble of items
establishes the date of the intact artifact and yields countless details
about historical and social context.

The looting of "any one piece of intact pottery represents the huge complete
erasures of books and books and books that would have, could have, been
written had the research been done," she said in a telephone interview.

Ms. White said that federal agents had enlisted her to inspect and
authenticate a range of Southeast Asian objects seized in raids from Jan. 25
to 30, and that she had also testified before a grand jury. No one has been
charged in the case.

Criminal enforcement agents of the Internal Revenue Service, the Interior
Department and Immigration and Customs Enforcement searched the Los Angeles
County Museum of Art, the Pacific Asia Museum in Pasadena, the Bowers Museum
in Santa Ana and the Mingei International Museum in San Diego, as well as a
gallery, homes and storage sites in the Los Angeles area. Applications for
the warrants said under the scheme, that smugglers and art dealers were
selling prehistoric artifacts to Americans, who were provided with inflated
appraisals. Then the art dealers arranged for the items to be donated to the
museums, so the donors could take a tax deduction.

To the average observer the operation might be dismissed as low-stakes
international intrigue. According to the warrants, many of the artifacts
were sold to the donors for around $1,500 each and then appraised at prices
just shy of $5,000. (Above that amount the paperwork requirements on a tax
return grow stiffer.) For a taxpayer in the maximum tax bracket, the savings
would be only about $700 a piece.

The artifacts, while not commonplace, may not qualify as rare. Many were
from the Ban Chiang culture, which existed in what is now northeastern
Thailand, from around 2100 B.C. to A.D. 200. Objects from that culture are
commonly offered for sale on eBay for example. And experts say they are
routinely sold by clandestine diggers and in stores in Bangkok, although
their export is technically illegal.

The objects in the California investigation were sometimes smuggled into the
United States using a ruse that seems comical. In a reversal of the classic
art fraud, they were genuine artifacts, but labeled reproductions, according
to court documents.

The looting galls anthropologists. "Intact artifacts tend to come from
burials," Ms. White said. "What you're seeing is the remains of graves from
all over Southeast Asia being commercially passed around, with all the
knowledge about human remains - race, sex, age, genetic makeup, the animal
remains that tell what food was eaten, the crucibles that show you how they
were making the metals - all thrown out."

Ms. White has participated in several research digs at the Ban Chiang site,
and the Penn museum conducted the first major dig at Ban Chiang in the
1960s.

At the center of the investigation are Robert Olson, who the search warrants
said smuggled looted antiquities out of Thailand, Myanmar and China, and
Jonathan Markell and his wife, Cari, owners of the Silk Roads Gallery in Los
Angeles.

In affidavits federal agents said that the Markells imported looted
antiquities provided by Mr. Olson and then arranged to donate them to
museums on behalf of clients who took inflated tax deductions for the gifts.
Some of the appraisals falsely stated that they were prepared by Roxanna M.
Brown, director of the Southeast Asian Ceramics Museum at Bangkok
University.

Ms. Brown said that trade in such artifacts was common. "All these things
are sold openly in expensive shopping centers," she said, although the
average tourist would probably not realize that the export of such artifacts
is illegal in Thailand.

Prices vary widely, depending on whether the item is bought in a high-end
store or "you go out in the country and buy it from one of the diggers," Ms.
Brown said. There have also been cases in which artifacts have been sold by
Thai police officers, who presumably confiscated them from scavengers, she
said. But the number of Ban Chiang items reaching the market seems to have
declined somewhat, she said.

"Looting of that material pretty much dried up in 2000 to 2003," she said.
"They've run out of easy sites."

Ms. Brown said that she had met Mr. Olson, but had never seen him in
Thailand, and that she understood that the Markells had also visited
Thailand "once or twice." The Markells have refused to comment by telephone
on the case and did not respond to e-mail queries early Sunday.

(Federal agents in the United States are also focusing on Barry L. MacLean,
an art collector and industrialist who is a vice chairman of the Art
Institute of Chicago and founded a private museum just north of Chicago.
According to federal documents related to search warrants Mr. MacLean bought
from Mr. Olson artifacts looted in Cambodia, Thailand, Myanmar and Vietnam.)

Tax experts and appraisers say that the practice of inflating the value of
"in-kind donations" is widespread, although the objects involved are usually
not prehistoric ax heads or pottery.

Burton J. Haynes, a lawyer in northern Virginia who is a former I.R.S.
criminal investigator, said taxpayers often list improbably high values for
used clothing or furniture donated to charities. "It's something a tax
preparer can inflate quite easily for a low-income taxpayer and make them
feel like they're getting away with something," he said.

But individual taxpayers also could be targeted, he said.

Scams involving art valuations have been common over the years, experts say.
"You bought a painting at an auction or a yard sale for $100, had it
appraised for $5,000 and donated it to the local Humane Society," said Roger
P. Durkin, an appraiser in Boston who said he had been called on by customs
officials, federal marshals, the F.B.I. and others to authenticate seized
goods. The size of the scams has shrunk as the I.R.S. has raised the
documentation requirements for goods valued at $5,000 or more, he said.

In addition, he said, recent changes in the law enable the I.R.S. to fine
appraisers who fraudulently overvalue items.

There is no indication that tax preparers are being investigated in the
looted antiquities case, although grand jury indictments of other
individuals are anticipated.

The January raids were different from most recent high-profile art
investigations, which have involved Classical antiquities excavated in Italy
or Greece and pursued by the governments in those countries.

"This investigation is calling attention to the importance of the global
archaeological record, and not just large expensive pieces of Classical
antiquity," Ms. White said in an e-mail message over the weekend.

http://www.nytimes.com/