Even in the Opaque Art World, Taxes are Certain: Glafira Rosales/Gonzalez Indicted for Income Tax Evasion

Knoedler Gallery was a reputable art gallery, in existence for over 150 years. When it closed in 2011, accusations that it sold forgeries were just starting to mount. Art collectors are still steaming over purchases of suspect artworks. In fact, another case, according to the New York Times Reporter Patricia Cohen this one is No.6, has been filed earlier this month by the former ambassador to Romania, Nicholas F. Taubman who bought a fake Clyfford Still from the now defunct gallery in 2005. Like dozens of other suspect works, this Clyfford Still came to Knoedler from the stock of the Long Island art dealer Glafira Rosales, a.k.a. Glafira Gonzales (“Rosales”).

Naturalized citizen of the United States, Rosales sold dozens of art works attributed to important 20th century artists, including Mark Rothko, Robert Motherwell, and Jackson Pollock on behalf of fictitious clients. As a part of her elaborate scheme, Rosales lead the Knoedler staff to believe that all of the works she offered were owned and consigned to her by others. Between 2006 and 2008, the proceeds of Rosales’ sales exceeded $14 million. Now, the charges brought against her allege that she was “dealing in fake artworks for fake clients;” however, this is not the thrust of the accusations. In a complaint dated May 20, 2013, Rosales is accused of evading taxes owed on the proceeds from the sale of these fake works. It is an Al Capone story all over again, minus the murder and prostitution.

For years, Rosales omitted or significantly understated her gross receipts; she also failed to comply with mandatory IRS filing requirements. Specifically, Rosales under-reported her income, by omitting at least $12.5 million from her returns between 2006 and 2008. Also, between 2007 and 2011, she failed to report to the IRS the existence and worth of her foreign bank accounts, a mandatory requirement for U.S. taxpayers with foreign holdings in excess of $10,000 during any given year. The IRS investigators were able to trace money transfers to accounts connected to Rosales located in La Coruna and Lugo, Spain.

The eight counts of violations brought against Rosales, if combined (three false tax returns and five years of willful failure to file disclosures), carry a maximum penalty of 34 years in prison and a maximum fine of $1,550,000.

If Glafira Rosales qualifies as the Trojan Horse of the Knoedler Gallery, the Achilles hill of that horse may be her income tax forms.

Source: Sealed Complaint; The New York Times.