Three Defendants Charged In Manhattan Federal Court In Connection With $33 Million Art Fraud Scheme

Preet Bharara, the United States Attorney for the Southern District of New York, George Venizelos, the Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation (“FBI”), and Shantelle P. Kitchen, the Acting Special Agent-in-Charge of the New York Field Office of the Internal Revenue Service, Criminal Investigation (“IRS-CI”), announced today the unsealing of a twelve-count Indictment charging JOSE CARLOS BERGANTINOS DIAZ, JESUS ANGEL BERGANTINOS DIAZ, and PEI SHEN QIAN with orchestrating a $33 million scheme to create and sell paintings that they pretended were painted by world-famous artists but were, in fact, created by QIAN. The Indictment further charges JOSE CARLOS BERGANTINOS DIAZ and JESUS ANGEL BERGANTINOS DIAZ with laundering the proceeds of the fraud, and charges JOSE CARLOS BERGANTINOS DIAZ with hiding international bank accounts and millions of dollars in illicit income from the IRS. QIAN is also charged with lying to FBI agents investigating the scheme. JESUS ANGEL BERGANTINOS DIAZ and JOSE CARLOS BERGANTINOS DIAZ were arrested on April 14, 2014, and April 18, 2014, respectively, in Spain, and QIAN is believed to be located in China. The case has been assigned to U.S. District Court Judge Sidney H. Stein.

Manhattan U.S. Attorney Preet Bharara said: “Today’s charges paint a picture of perpetual lies and greed. As alleged, the defendants tricked victims into paying more than $33 million for worthless paintings which they fabricated in the names of world-famous artists. The Bergantinos Diaz brothers then laundered and hid their illegal proceeds overseas. With today’s Indictment, the defendants must now answer for their alleged roles as modern masters of forgery and deceit.”

FBI Assistant Director-in-Charge Venizelos said: “As alleged, a meeting on a New York street corner would lead to a worldwide art fraud scheme that netted the defendants more than $33 million over two decades. The charges announced today show the many facets the conspirators went through to peddle fraudulent creations as famous artwork to be sold for a large profit. These charges also show the FBI’s commitment to investigate and bring to justice those who use fraud as a means to make money.”

IRS Special Agent-in-Charge Shantelle Kitchen said: “This indictment represents a significant accomplishment in the unravelling of a major international art fraud conspiracy with underlying complex financial criminal activity. The Internal Revenue Service has made international tax administration a top priority and this investigation illustrates the government's resolve in uncovering, investigating and prosecuting tax evasion and money laundering schemes with international implications. Furthermore, it reminds the public that the proceeds from illegal sales, in this case, the sale of counterfeit paintings, can be taxable.”

According to the allegations contained in the Indictment unsealed today in Manhattan federal court:

From the early 1990’s through at least June 2009, JOSE CARLOS BERGANTINOS DIAZ, JESUS ANGEL BERGANTINOS DIAZ, PEI SHEN QIAN, and Glafira Rosales engaged in a scheme to create and sell paintings that they pretended were painted by world-famous abstract expressionist artists, including Mark Rothko, Jackson Pollock, Willem de Kooning, Richard Diebenkorn, Robert Motherwell, Barnett Newman, Sam Francis, and Franz Kline, among others (the “Fake Works”). By knowingly and falsely claiming that the Fake Works were painted by these famous artists, JOSE CARLOS BERGANTINOS DIAZ, JESUS ANGEL BERGANTINOS DIAZ, QIAN, and Rosales were able to trick purchasers into paying tens of millions of dollars in total for many of the Fake Works which, as the defendants and Rosales well knew, were essentially worthless. In fact, the Fake Works were created by QIAN, with guidance from Rosales and the other defendants.

JOSE CARLOS BERGANTINOS DIAZ first met QIAN on a street corner in Manhattan, where QIAN was selling paintings. Thereafter, QIAN created the Fake Works at the request of, and in exchange for payments from, JOSE CARLOS BERGANTINOS DIAZ, JESUS ANGEL BERGANTINOS DIAZ, and Rosales.

JOSE CARLOS BERGANTINOS DIAZ purchased canvases of old paintings at flea markets, and stained newer canvases with tea bags, which he gave to QIAN to create the Fake Works, and thereby create the false appearance that the Fake Works had been created decades earlier. In addition, JOSE CARLOS BERGANTINOS DIAZ, JESUS ANGEL BERGANTINOS DIAZ, and Rosales created false provenances (i.e., historical ownership records) for particular Fake Works in order to dupe purchasers into believing that those Fake Works were painted by particular famous artists, instead of by QIAN. All told, the defendants earned more than $33 million from the scheme to create and sell the Fake Works.

Further, to conceal the illegal nature and origin of the proceeds from the scheme, JOSE CARLOS BERGANTINOS DIAZ, JESUS ANGEL BERGANTINOS DIAZ, and Rosales laundered the fraud proceeds by transferring them through foreign and domestic bank accounts that they controlled. JOSE CARLOS BERGANTINOS DIAZ also hid over $7 million of his illicit income from the IRS and knowingly failed to report the existence of his foreign bank accounts, as required by law.

Finally, during an interview with FBI agents investigating the scheme, QIAN falsely claimed, among other things, that he did not recognize Rosales’s name, that QIAN was unfamiliar with the names of certain artists (including artists whose names QIAN had repeatedly signed on paintings he created in order to trick purchasers into believing those artists had created the paintings), and that QIAN had never attempted to create paintings mimicking the style of certain abstract expressionist artists.

JOSE CARLOS BERGANTINOS DIAZ, 58, of Sands Point, New York, is charged with one count of conspiracy to commit wire fraud, one count of wire fraud, one count of conspiracy to commit money laundering, and one count of money laundering, each of which carries a maximum sentence of 20 years in prison. He is also charged with one count of conspiracy to defraud the IRS, which carries a maximum sentence of five years in prison, three counts of filing false tax returns, each of which carries a maximum sentence of three years in prison, and four counts of willful failure to file a Report of Foreign Bank and Financial Accounts, each of which carries a maximum sentence of five years in prison.

JESUS ANGEL BERGANTINOS DIAZ, 65, of Lugo, Spain, is charged with one count of conspiracy to commit wire fraud, one count of wire fraud, one count of conspiracy to commit money laundering, and one count of money laundering.

PEI SHEN QIAN, 75, of Queens, New York, is charged with one count of conspiracy to commit wire fraud and one count of wire fraud. He is also charged with one count of making false statements to agents of the FBI, which carries a maximum of five years in prison.

The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendants will be determined by the judge.

Rosales was previously charged in Indictment 13 Cr. 518. On September 16, 2013, Rosales pled guilty to all nine counts of the Indictment. Rosales awaits sentencing before the U.S. District Judge Katherine P. Failla.

Mr. Bharara praised the outstanding efforts of the FBI and IRS-CI in the investigation, which he noted is ongoing.

This case is being handled by the Office’s Complex Frauds Unit. Assistant U.S. Attorneys Jason P. Hernandez and Stanley J. Okula, Jr., are in charge of the prosecution.

The charges and allegations contained in the Indictment are merely accusations, and the defendants are presumed innocent unless and until proven guilty.

U.S. v. Bergantinos Diaz, et al. Indictment