By Jennie Nadel.
U.S. v. Mary Boone, No. 1:18-CR000634 (S.D.N.Y. filed May 9, 2019).
In May 2019, New York art dealer Mary Boone was sentenced to two-and-a-half years in jail for two counts of tax fraud. This was not her first encounter with the law in her nearly 50-year-long career in the art world. Let her story be a lesson for other gallerists and art dealers.
Boone began her career at Bykert Gallery New York in 1970 as a secretary, with a background in fine arts and art history. She soon set out on her own and opened her first gallery space in 1977 in SoHo. At the time, she sold works by Jean-Michel Basquiat, Julian Schnabel, and Ross Bleckner. In 1982, New York Magazine heralded Boone as “The New Queen of the Art Scene.” Later, in 1996, her gallery moved to Midtown and she opened a second location in Chelsea.
Boone first popped up on the legal radar in 2016 after the famous actor Alec Baldwin filed suit. The actor sued Boone for selling him a painting that she claimed was “Sea and Mirror” (1996) by artist Ross Bleckner when in fact it was a different work than the one she had promised him. Baldwin remained vocal during the suit as well as after the settlement. The legal battle ended in a seven-figure settlement, in which Boone was forced to pay out an undisclosed amount. Baldwin stated, “maybe I’ll have Ross paint a picture of the seven-figure check that Mary paid me to settle.” He even said he planned to take the painting on tour and give a lecture about fraud in the art world.
False Tax Returns and Real Sentencing
On September 5, 2018, the U.S. Attorney’s Office of the Southern District of New York filed suit against Boone for multiple false statements on her Income Tax Return for 2011. The extent of Boone’s false tax statements spanned both her gallery’s forms as well as her personal forms. As a business, her gallery filed Form 1065, or Partnership Tax Return. Form 1065 does not require partnerships to pay income taxes – that is delegated to partners who declare the income or loss on their personal income tax returns, or Form 1040. At the time of filing, Boone held 90 percent partnership interest in her gallery, which was reported on the IRS Schedule K-1 (“Partner’s Share of Income, Credits, Deductions, etc.”).
Boone’s offence began with the handwritten check registers that she gave to her certified public accountant (“CPA”). Her CPA provided Boone with bookkeeping and tax preparation services for the gallery’s main operating account. Every month Boone handed her CPA debit-related check stubs, noted as “commission,” “rent,” or “cartage.” These debits were then filed as tax-deductible business expenses. The CPA then aggregated the information provided by Boone to create monthly general ledgers of the gallery’s income and expenses, and then prepared the gallery’s Form 1065 for 2011. The Schedule K-1, which lists Boone as having 90 percent partnership interest in the gallery, was then used for her own individual income tax return, her Form 1040.
Boone did not provide the CPA with any other financial records and secretly kept a second business account. The 1065 report shows a false business loss of $53,521, when in reality the gallery made a profit of around $3.7 million. Boone also used funds from the gallery to pay for around $1.6 million in personal expenses by using business checks. Some of the money went to remodeling her Manhattan apartment, and some went to rent for her second apartment (where she was living while the first was still being renovated). Boone did not have to pay income taxes because she included these expenses as tax-deductible business expenses. Her $500,000 payment to her remodeling contractor for her first apartment was labeled and filed as “commission.” While the 1065 report showed a loss of $53,520, the business was actually profitable, Boone had transferred approximately $9.5 million from her primary business account into the second hidden business account. Boone made these bank transfers to her hidden account look like income or expenses that she then gave to her CPA, thereby overstating business expenses.
Boone’s own personal income Form 1040 was also materially false. It stated that her income from the Gallery was a guaranteed payment of $50,000 and interest income of around $60,000. Boone was able to falsify her 1040 because it related to the 90 percent share of the gallery’s reported business loss in Form 1065.
Boone’s two main mistakes were the false reports on her 1040 which was then reflected in the business’ 1065:
- She overstated the gallery’s tax-deductible business expense by filing her personal expenses under the business.
- She overstated business expenses when in reality the money was being transferred to a second business account.
Boone was arrested on September 15 and was released on a $1 million probation that same day. Her travel was restricted to Manhattan and she was forced to surrender all her travel documents. At Boone’s arraignment, she pleaded guilty to both counts of tax fraud.
The Art World’s Response
Following Boone’s guilty plea, artists and professional acquaintances came to Boone’s defense asking for leniency and testifying to her good character. Ai Weiwei and Jeffrey Deitch were among the 100 famous art world figures who wrote letters in support of Boone, pleading for the court’s mercy. Boone’s lawyers also submitted a letter to the judge after her guilty plea. They claimed mental instability and emotional childhood trauma as the cause of her actions with the hope to ease her sentence. They asked the judge to consider Boone’s “unique personal background, troubled childhood, and her history of mental illness.” The document contained the request that Boone not serve jail time and recommended 100 hours of community service.
Following her guilty plea, Boone was sentenced to two-and-a-half years in prison by District Judge Alvin Hellerstein and was granted up to one year of supervised release. She will also serve 180 hours of community service with 90 hours going towards the instruction of high school teachers in a program about the visual arts; additionally, she will be required to pay restitution of nearly $4 million. While it is not the decision of the court, Boone has announced her decision to shut down her Chelsea and Midtown galleries after 42 years of operation. At the time of her arrest, she had 11 employees and represented 29 artists. Judge Hellerstein initially stated Boone should surrender within 60 days of her sentencing, but following pleas from her lawyers she was given an extension until May 15 at 2 PM. She is currently serving her sentence at Danbury Correctional Facility in Connecticut.
Takeaways from the Boone Criminal Case
Because many lawsuits in the art world are civil rather than criminal, most settle and few prominent art figures serve actual jail time. The last major criminal case against a prominent art figure was the sentencing of A. Alfred Taubman, former chairman of Sotheby’s. In 2002, Taubman was sentenced to 355 days in prison and fined $7.5 million for a six-year price-fixing scheme with Christie’s. Taubman ended up serving nine-and-a-half months in prison at Federal Medical Center in Rochester, Minnesota.
In the case of Mary Boone, her lawyers were able to paint a very emotional and convincing response as to why the dealer should serve non-jail time. However, Judge Hellerstein ultimately decided against the suggestions given by Boone’s lawyers, and she was sentenced to two-and-a-half years in prison.
Interestingly enough, Judge Hellerstein presided over the case of Shepard Fairey v. Associated Press, another dispute involving art, where famous street artist Shepard Fairey (a.k.a. Obey), known for creating the “Hope” poster of former President Barack Obama during his 2008 campaign, sued Associated Press to establish that his poster did not infringe on Associated Press’ copyright of an image originally taken by freelance photographer Mannie Garcia. Associated Press countersued on the grounds of infringement. Hellerstein allowed Fairey’s original counsel to withdraw, and in 2011 Fairey and Associated Press settled out of court.
Recent press coverage on Mary Boone has brought the legal issues and crimes that have been plaguing the art market in recent years into the mainstream spotlight. Alongside tax evasion claims, numerous fraud cases have also been brought against once-mighty galleries and dealers over the last decade, demonstrating that art world professionals are by no means impervious to legal liability.
The recent case of White v. Freedman saw Judge Paul Gardephe of the Southern District of New York permit fraud claims to proceed against Knoedler Gallery owners Michael Hammer and his company, 831 Holdings, holding them liable for any fraud that might have been committed by the gallery. Here, the theory of liability rested upon the factual possibility that Hammer mixed his personal expenses with his business expenses, thereby losing any limited liability protection he may have had as a company owner.
Another recent case, Greenway II, LLC v. Wildenstein & Co., was brought on claims of fraud based on the sale of a Pierre Bonnard painting, Still Life with Basket of Fruit, which was recently discovered to be an inauthentic work. Whilst the case is still ongoing and the question of whether Wildenstein made deliberately fraudulent claims to the plaintiff-collector remains to be answered, one thing is clear: art world professionals need to take a cue from these recent cases and exercise further caution in their practice.
As amorphous and unpredictable as the art market may be, the law can be unforgiving to those who would exploit it. Art market dealers and other art professionals of the world – beware! Ruinous suits may be just around the corner.
 U.S. v. Mary Boone, No. 1:18-CR000634 (S.D.N.Y. filed May 9, 2019).
 Alec Baldwin v. Mary Boone et al., No. 654807/2016 (N.Y. Sup. Ct., filed Sept. 12, 2016).
 Henri Neuendorf, Mary Boone Will Write Alec Baldwin a Seven-Figure Check to Settle Dispute Over Bleckner Bain-and-Switch, ArtNet, Nov. 2017. https://news.artnet.com/art-world/alec-baldwin-mary-boone-settlement-1147589
 Sarah Cascone, ‘She Changed My Life for the Better’: Read the Letters Ai Weiwei and Other Art Figures Wrote to Advocate Leniency for Mary Boone, ArtNet, Jan. 2019. https://news.artnet.com/art-world/art-world-letters-supporting-mary-boone-1435009
 Sarah Cascone, After Pleading Guilty to Tax Fraud, Mary Boone’s Lawyers Cite Childhood Trauma and Mental Instability in a Bid to Avert Jail Time, ArtNet, Jan. 2019. https://news.artnet.com/art-world/mary-boone-tries-avoiding-jail-time-1433860
 Colin Moynihan, Mary Boone to Close Her Galleries as She Heads to Prison, NYT, Feb. 2019. https://www.nytimes.com/2019/02/25/arts/design/mary-boone-galleries-close-prison.html
 United States v. Taubman, 297 F.3d 161 (2d Cir. 2002).
 Fairey v. Associated Press, No. 1:09-cv-1123-AKH (S.D.N.Y. 2010).
 White v. Freedman, No. 1:13-CV-01193 (S.D.N.Y. ordered May 8, 2019).
 Greenway II, LLC v. Wildenstein & Co., No. 1:19-CV-04093 (S.D.N.Y. filed May 7, 2019).
About the Author: Jennie Nadel is a graduate from Johns Hopkins University with a major in History of Art and double minor in Museums & Society and Visual Arts. She was a Summer 2018 and a Spring 2019 intern at the Center for Art Law. She is currently pursuing a M.A. in Art Business at Sotheby’s Institute as well as interning at Winston Art Group.