NEW YORK CITY ARCHIVES

The Tax Evaders

The indictment al­leges that Bulgari used the “empty box” scam to illegally allow customers — including Henry Kissinger, Frank Sinatra, Mary Tyler Moore, and Donald Trump — to avoid paying New York State sales tax.

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The Voice has learned that Henry Kissinger, Frank Sinatra, Mary Tyler Moore, Donald Trump, and other celebrities were involved in a sales tax evasion scam that result­ed in the indictment last year of an exclu­sive Fifth Avenue jeweler and two of its executives.

Danaos Ltd., which operates the Bul­gari jewelry store in the Hotel Pierre, was charged in the indictment with failing to collect sales tax on more than $1.5 mil­lion in transactions. The indictment al­leges that Bulgari and two of its officials, Nicola Bulgari and Richard Storm, used the “empty box” scam to illegally allow customers to avoid paying New York State sales tax. Customers with out-of-­state addresses would have their pur­chases recorded as being mailed or deliv­ered to them in order to avoid paying sales tax. However, the indictment charged, customers would leave Bulgari with their jewelry, while store employees would mail an empty box, or one contain­ing a piece of costume jewelry, to the out­-of-state address.

The Danaos indictment refers to 101 separate transactions, ranging from $240 to $130,000 per item, on which the scheme was employed. While Attorney General Robert Abrams, who is prosecut­ing the Bulgari case, has refused to re­lease customer names, the Voice has in­terviewed two former Bulgari employees who took part in the scam and compiled a partial list of these customers.

Both former employees detailed how Bulgari security personnel would package worthless chokers and mail them to customers and how, at Christmastime, they would prebox dozens of chokers to be prepared for the holiday tax evasion rush. The employees also noted that se­curity officials would designate the bogus shipments by marking an asterisk next to the transaction in the company’s regis­tered mail logbook. Bulgari employees, investigators discovered, often put only enough postage for an empty box on packages supposedly containing items ranging in weight from a few ounces to several pounds.

During the period audited by state investigators — December 1980 to March 1983 — Bulgari customers involved in the empty box scam included:

  • Henry Kissinger, who made two pur­chases, totaling about $20,000, on which he did not pay sales tax. His lawyer, Ar­thur Liman, does not dispute this, but claims that Bulgari “should have charged him the tax, but they didn’t. It’s their fault.” Liman said that Kissinger’s assis­tant, Chris Vick, was subpoenaed to tes­tify before the grand jury, but that Kis­singer himself was not called. While Liman denied that empty boxes were sent to two Washington, D.C., addresses, a former Bulgari employee told the Voice that he delivered the boxes to the post office.
  • Frank Sinatra had jewelry delivered, on at least three occasions, to his Waldorf Towers suite, where an aide would sign for it. Empty boxes were mailed to casi­nos in Las Vegas and Atlantic City, ac­cording to a former Bulgari employee, who estimated Sinatra’s purchases at about $30,000.
  • Mary Tyler Moore purchased about $20,000 in jewelry during the audited pe­riod and had it delivered to her West Side home. The empty boxes were sent to a business associate in New Jersey. Jack­ie Becher, Moore’s publicist, said the ac­tress was busy rehearsing a new play and would have no comment.
  • Donald Trump, according to the for­mer employees, made at least two pur­chases at the store — a necklace for $50,000 and a second purchase of about $15,000. On the smaller purchase, an empty box was sent to the Connecticut home of Trump’s former attorney Roy Cohn. Trump’s spokesman, Howard Ru­benstein, said that the developer denied using the empty box scheme and that his purchases at Bulgari “were bona fide transactions.”
  • Takeover specialist Ronald Perel­man, who last week made a $40 million profit on a stock sale, was one of the store’s biggest customers, and often bene­fited from the scam. A Bulgari employee would deliver Perelman’s jewels to the East 63rd Street headquarters of MacAn­drews & Forbes, his company. Bulgari’s business records made it appear that the jewelry was actually mailed to a Philadel­phia address. On one occasion, store re­cords were doctored to make it appear that a Bulgari car drove to Philadelphia to deliver an item to Perelman. Ruben­stein, Perelman’s spokesman, said that the businessman contends “he made no such purchases and did not appear before the grand jury.”
  • Adnan Khashoggi, the billionaire Saudi Arabian arms dealer, made two purchases totaling more than $200,000 worth of silver items and had them deliv­ered by courier to his Olympic Towers residence. The empty boxes were sent to Geneva. Khashoggi is reported to be the world’s richest man; the empty box scheme saved him about $17,000.
  • C. Z. Guest, who writes a weekly gar­dening column for the Post and is a sta­ple on New York’s social scene, allowed various friends to use her Florida estate as a dumping ground for empty boxes. Guest, herself one of Bulgari’s biggest customers, refused to answer Voice questions.
  • Television producer Mark Goodson used a Fair Lawn, New Jersey, address for his empty boxes. A spokesman for Goodson said be was subpoenaed to tes­tify before the grand jury, but never did. Goodson’s lawyer, Roy Blakeman, did not return Voice calls.

Though many customers, in effect, conspired with Bulgari to evade sales tax, Abrams has contended that since it is a retailer’s obligation to collect sales tax, they are the only ones who can be suc­cessfully prosecuted. Later this week, Storm and Bulgari will appear before Judge Harold Rothwax where a plea agreement may be announced. ■

This article from the Village Voice Archive was posted on November 15, 2020

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