Art Gallery Owner Pleads Guilty In Manhattan Federal Court To Filing False Tax Returns

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, and James D. Robnett, the Special Agent-in-Charge of the New York Field Office of the Internal Revenue Service, Criminal Investigation (“IRS-CI”), announced today MARY BOONE, a Manhattan art gallery owner, pled guilty to charges arising from her filing of federal income tax returns that falsely claimed approximately $1.6 million in personal expenses as tax deductible business expenses in 2011.  BOONE pled guilty before U.S. District Judge Alvin K. Hellerstein. 

U.S. Attorney Geoffrey S. Berman said:  “Mary Boone, a Manhattan art gallery owner, admitted to cheating the U.S. tax system by blatantly lying about her expenses and playing a shell game with bank accounts to hide her true assets.  While tax evasion may seem like a victimless crime, it isn’t; all Americans must pay their taxes.  And as Boone has learned, tax laws are not abstract.”

IRS-CI Special Agent-in-Charge James D. Robnett said:  “Operating a Manhattan art gallery did not entitle Mary Boone to evade paying her taxes.  It is a felony offense that carries severe consequences.  By falsely claiming millions of dollars of personal expenses as business expenses, Ms. Boone cheated all Americans, since law abiding citizens are expected to pay their fair share.”

According to the allegations contained in the Information to which BOONE pled guilty and statements made in court: 

BOONE owns and operates an art gallery (the “Gallery”) with two locations in Manhattan, New York.  At all relevant times, BOONE operated the Gallery as a partnership and was solely responsible for the Gallery’s finances.  In 2011, BOONE held a 90 percent partnership interest in the Gallery.  

In 2012, BOONE caused her accountant to file false and fraudulent 2011 federal income tax returns for the Gallery and for BOONE individually.  BOONE caused the Gallery’s 2011 partnership return, Form 1065, to report a false business loss of approximately $52,521, whereas, in reality, the Gallery made a profit of approximately $3.7 million in 2011.  BOONE perpetrated this tax fraud in part by using business funds to pay for over $1.6 million in personal expenses and then falsely claiming these personal expenses as business deductions.  For example, in 2011, BOONE issued approximately $800,000 in business checks to pay for the remodeling of BOONE’s Manhattan apartment, as well as approximately $120,000 more in business checks to pay for rent and other expenses for a second Manhattan apartment where BOONE lived while the remodeling was underway.  In order to conceal the personal nature of these and other expenses, and thereby evade income taxes, BOONE falsely characterized approximately $1.6 million in personal expenses as tax deductible business expenses in handwritten check registers that BOONE provided to her accountant.  For example, BOONE falsely characterized a $500,000 payment to a contractor for remodeling BOONE’s apartment as “commission.” 

BOONE also caused the 2011 Form 1065 to report a false business loss by artificially inflating the Gallery’s stated expenses and, to a lesser degree, the Gallery’s stated income.  BOONE did so by, among other things, providing check registers to her accountant that falsely characterized transactions such as bank transfers as income or expenses.  For example, in 2011, BOONE transferred approximately $9.5 million from one business bank account to another, and falsely characterized these bank transfers as tax deductible business expenses, such as commissions to artists.

Through this conduct, BOONE also caused her 2011 individual income tax return, Form 1040, to be materially false.  Instead of reporting BOONE’s partnership share of the Gallery’s $3.7 million profit, BOONE’s 2011 Form 1040 reported BOONE’s personal income as limited to a payment of approximately $50,000 and interest income of approximately $60,000, and offset that reported income by BOONE’s share of the Gallery’s false reported business loss.  Through this scheme, BOONE evaded over $1.2 million in federal taxes and reported a false tax liability of merely $335 on the Form 1040. 

BOONE engaged in similar tax fraud schemes for the calendar years 2009 and 2010.  In all, BOONE caused the IRS losses totaling over $3 million, not including penalties and interest.

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BOONE, 66, of New York, New York, pled guilty to two counts of filing a false federal income tax return, each of which carries a maximum sentence of three years in prison.  BOONE has agreed to pay restitution to the IRS in the amount of at least $3,097,160, which represents the additional tax due and owing as a result of BOONE’s filing of false individual and corporate income tax returns for the calendar years 2009, 2010, and 2011.  Sentencing is scheduled for January 18, 2019, at 11 a.m. before Judge Hellerstein.

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

Mr. Berman praised the outstanding work of IRS Criminal Investigation in this case.

This case is being prosecuted by the Office’s Complex Frauds and Cybercrime Unit. Assistant U.S. Attorney Olga I. Zverovich is in charge of the prosecution.