Just for FYI purposes, and discussion....
A LIFE OF Money and myths
Sunday, April 25, 2004
BY MARY JO PATTERSON, MARK MUELLER AND TED SHERMAN
A few years ago, before Herbert Axelrod became an international fugitive
fleeing the grasp of the United States government, a group of fish aquarium hobbyists traveled to a nature center in Bucks County, Pa., to hear him speak.
In the universe of hard-core fish heads, as some fish hobbyists
affectionately call each other, the somewhat disheveled man with the
Hemingway look and the knack for storytelling was an irresistible draw.
An entrepreneurial genius who had amassed a fortune in the pet- publishing field as the owner of TFH Publications in Neptune, he had tutored countless novice pet owners and fish hobbyists for a half-century through his books. He claimed to have discovered numerous species of exotic fish as a fearless globetrotter. But he was also known as a plagiarist and a ruthless businessman who operated through charm and intimidation, constantly suing or threatening lawsuits. Ted Coletti, an aquarium fish hobbyist and historian from Denville who was
present that day in Pennsylvania, remembers Axelrod as informative and
kindly. But he also remembers Axelrod telling a fish tale of the whopper
"During the question period, someone asked, 'What was your greatest
accomplishment?' He said, 'Introducing African cichlids,'" Coletti said last
week, referring to a species of tropical fish imported into the United
States. "That statement was an exaggeration. Someone else did that.
"That was Axelrod, always adding to his own myth."
In the days since Axelrod's indictment in a tax evasion conspiracy and his
flight to Cuba, it has become clear that myth and reality were always hard
to separate in the life of Herbert Axelrod, whether the subject be tropical
fish, charity or musical instruments.
When Axelrod sold his collection of rare Italian violins to the New Jersey
Symphony Orchestra last year, saying he had parted with a $50 million value for only $18 million, he was hailed as the greatest arts benefactor in the state's history.
But he seemed to burst out of nowhere. No one in the arts world appeared to know much of anything about his background. With his flamboyant and hardy manner -- he once grabbed multiple lamb chops off a tray at an NJSO gala while other guests nibbled daintily -- he definitely was different. But he had money.
On April 12, 2004, Axelrod, 76 years old, was indicted on federal charges of conspiring to defraud the Internal Revenue Service and of aiding and
abetting the filing of a false tax return. Accused of hiding huge sums of
money in secret offshore accounts, he faces a sentence of up to five years
in prison if convicted.
On Wednesday, when Axelrod failed to appear in Trenton for his arraignment, federal authorities issued a warrant for his arrest. Axelrod surfaced within hours at the Hemingway Marina outside Havana and proclaimed his innocence.
"I am not a criminal. I don't feel like one," he said Friday, raising his
palms upward in a pleading gesture. He was seated in the kitchen of a
$60-a-day bungalow by the ocean, working on a yet another pet book.
Axelrod said that rather than fleeing, he was already living his retirement
years overseas. After his indictment, he decided to stay. "I'm an old man,"
he said. "I'm not looking forward to spending any time in a jail or fighting
GRASPING FOR UNDERSTANDING
Many people, especially those who did not meet Axelrod until he showed up in Newark to sell his instruments, say they are shocked at the government's charges.
But a review of lawsuits, public documents and interviews with those who
were once close to Axelrod suggest he was never quite what people thought.
Court papers filed in a pending lawsuit against him depict him as a liar and
a womanizer who funneled cash in the form of author's payments to a woman with whom he had a years-long affair.
Today, the message boards of the nation's aquarium hobbyists are burning up with the news: The godfather of the tropical fish business has become a fugitive from justice.
The New Jersey music world is reeling, and the federal charges have raised questions about the Axelrod's deal with the orchestra.
On the other hand, Paul Loiselle, curator of freshwater fishes at the famed
New York Aquarium in Coney Island, is feeling vindicated. Like so many
others in this world, he was remembering his own ugly encounter with
Axelrod. A decade ago, Axelrod obtained and printed photographs taken by Loiselle without his authorization.
"I can't think of anybody I'd rather see in trouble with the IRS," Loiselle
said Friday. "He successfully used the legal system to bully me. He had a
history of using the legal system to bully opponents."
Axelrod has his defenders, too. Some say they found him remarkably generous, both in his personal life and as a philanthropist.
"I looked up to him," said Rene Morel, a New York-based violin dealer who
worked many years in the shop of Jacques Francais, a violin dealer who once worked for Axelrod. "He knew I loved good wine, so he used to give me a bottle of the best French wine, which I could never have afforded myself, just out of his good heart. When he was in a good mood, he took you to the best restaurants, the best champagne."
But other acquaintances pointed to a darker side, marked by a pattern of
betrayal and deceit.
"In my opinion, he is one of the most truly evil people I have ever met in
my lifetime," said Albert J. Klee, a writer whom Axelrod sued over a
magazine article critical of one of Axelrod's business lines. Klee said he
did not mention Axelrod's name in the article.
Klee said Axelrod also sued his publisher, who -- unable to defend a libel
suit -- settled by selling Axelrod his magazine.
"This is only one item in a long list" of transgressions committed by
Axelrod, Klee said in an e-mail message.
A NICKEL A WEEK
Herbert Axelrod was born in Bayonne, the son of Russian immigrant parents, and grew up during the Depression. Though his parents were employed -- his father as a math teacher, his mother by the Navy -- he grew up respecting the twin virtues of thrift and hard work, he told interviewers. Young Herbert studied violin with his father, who gave music lessons on the side.
Also, Axelrod liked to emphasize, he was taught the value of charity.
"He taught his grandparents English in return for which they taught him
Russian-Jewish philosophy. There is no man so poor that there isn't someone more poor was the slogan over the metal box, or 'pushkie,' into which Herbert split his weekly 5 cents allowance, starting a tradition of charity that still continues today," states a biographical sketch posted on the Web site of the University of Guelph in Ontario.
Axelrod is a benefactor of the Canadian university, having donated a
valuable collection of fish fossils in 1989. The donation was arranged by a
friend, Eugene Balon, then a professor in the university's department of
At the time, Axelrod appraised the fossils' value at $24 million. But, Balon
says now, Axelrod inflated their value. "Nobody would have paid $24
million," he said last week.
Possibly because he lived close to the water, Axelrod became interested in
marine life quite early.
In a 1992 interview published by Knight-Ridder Newspapers, he said he became an "environmental activist" at the age of 10 when oil from a ship fouled the waters near Bayonne. The interview was prompted by a new line of books, the "Save-Our-Planet" series, he was rolling out at TFH Publications.
"So I got mad. I went to see the mayor, the Coast Guard, anyone else who would listen. My friends and I began a protest movement," Axelrod said. "Then America entered World War II. The beaches were closed by the military. Our crusade ended. But I learned how terrible it is to see the earth, waters and animals destroyed."
Axelrod was educated at New York University, where he earned three degrees. While he has told interviewers he earned his Ph.D. in medicine, a spokesman for NYU said last week the doctorate came from the university's School of Education.
His thesis, published in 1960, was titled, "The Use of Statistical
Techniques in Medical and Dental Papers: A Critique."
As for his interest in fish, that developed when he landed a job at the
Museum of Natural History. He watched over fish in the museum's aquariums.
In the 1950s, he took his first steps into the publishing world and
introduced a number of tiny specialty publications about aquarium fish.
Before long, however, he became involved in two hot disputes that earned him a reputation as a plagiarist and a cheat, says Alan Fletcher, a 76-year-old retired Cornell University professor in Ithaca, N.Y. The reputation stuck, Fletcher said.
"I have no reason to be vicious or nasty or anything else with him,"
Fletcher says. "He has been far more successful than I in his life, and I
admire that. He hustled like mad and walked into the business at the right
Fletcher remembers Axelrod, on one occasion during that era, alighting from a powder-blue Cadillac, dressed to the nines. Peeking out of his breast pocket was a row of the finest Cuban cigars, lined up so everyone could read their labels.
Fletcher, a former aquatic biologist for the Pennsylvania Fish Commission,
was editor of a Philadelphia-based journal called Aquarium Magazine. "It was the world's leading publication" at the time, Fletcher said last week.
The magazine's publisher was William T. Innes, a worldwide authority on
exotic fish. In 1935, Innes had authored a text, "Exotic Aquarium Fishes,"
regarded as the bible of its field.
Fletcher said Axelrod proved to be a spectacularly successful competitor.
"Innes was very old and tired and couldn't compete. In the late 1950s and
early'60s, Axelrod kind of took over" the field and trounced the
competition, Fletcher said.
Axelrod then decided to compete with Innes' book by publishing his own. He eventually co-authored "The Handbook of Tropical Aquarium Fishes" in 1955 with a well-known scientist from the Smithsonian Institution.
But he illustrated it with plates stolen from the Innes book, for which he
was promptly sued, according to Fletcher, who attended the trial.
"Innes' book was full of gorgeous color plates" of fish, Fletcher said. "He
took black-and-white photos and had an artist paint the colors over them.
They were works of art. (Axelrod) stole Innes' color plates and blacked over the backgrounds, leaving the individual fish."
A "very responsible" editor at Axelrod's publishing house studied the page
proofs of the book before publication and figured out what he had done,
Innes successfully sued in federal court. Because he could not establish
that Axelrod's actions had cost him any money, Innes was not awarded any damages, Fletcher said. The court ordered Axelrod to pay Innes $1 and give Innes credits for the photographs in the upcoming book.
Around the same time, Axelrod became involved in another dispute. It became an international affair, investigated by an august body in London called the International Commission of Zoological Nomenclature.
This battle, fought between Axelrod and an academic, involved the naming of an aquarium fish, the cardinal tetra, that had just been introduced from Brazil into the United States. It was a gorgeous little fish that glowed, with a red belly and a neon stripe, and was immediately a huge commercial success.
According to Fletcher, who was again peripherally involved, Axelrod claimed to have discovered the fish in one of the wildest jungles of Brazil. Because the cardinal tetra was new to science, the discovery needed to be documented in professional fish literature. Axelrod did so in one of his own publications. In describing the tetra, he named the little fish after
himself: Cheiro don axelrodi.
A competing claim was entered by George Meyers, a Stanford University
professor who also documented the existence of the fish. In his paper, a
professional journal, he called the fish Hyphessobrycon cardinalis.
The commission in London decided the dispute in Axelrod's favor, noting that his article had been published just ahead of Meyers'. Axelrod got to name the fish.
Rumors were rampant that Axelrod had backdated his publication, according to Fletcher. He said the commission members informed Meyers "they were well aware that something dishonest had happened" but could not figure it out.
What's more, Axelrod did not really discover the fish as he claimed,
In reality -- and this was something the commission documented -- Axelrod found his cardinal tetras at a New Jersey fish store.
Meyers, meanwhile, had obtained his tetras from Fletcher. The same fish
supplier, in Ardsley, N.Y., excited by the tiny fishes' beauty, had sent
them to Aquarium Magazine.
From the 1960s forward, Axelrod's enterprise grew ever more profitable.
TFH Publications claimed it controlled the most comprehensive "animal
reference database" in the world.
"Guppy to Great Dane, hamster to hedgehog, whatever your pet, TFH
Publications has expert knowledge and guidance to help you and your pet
enjoy a long and happy life together," the company's Web site states today.
TFH has been under new ownership since 1998. Axelrod sold the company to Central Garden & Pet Co., a California company, for at least $80 million in December 1997.
One year later, Central Garden and Axelrod were in court, suing and
Lawyers for Central Garden went to federal investigators in 2000. The
Central Garden lawsuit, which has yet to go to trial, spells out the federal
fraud charged in the government's indictment.
Papers filed in the lawsuit fill six cardboard boxes in the Monmouth County
Courthouse. They provide more detail than the two-count indictment brought by U.S. Attorney Christopher J. Christie.
They allege a far wider scheme of deceit by Axelrod over the years,
including his siphoning of more than $3 million into bank accounts in
Switzerland and the Cayman Islands; illicit business deals in Cuba; payments to support a longtime extramarital relationship that were recorded as author's fees; at least a quarter of a million dollars in charitable contributions falsely booked as advertising expenses; and the wide-scale concealing of books in warehouses to fraudulently boost sales figures.
Axelrod's longtime personal attorney, Douglas Calhoun, would not comment on the matter.
The claims filed in the civil case, however, allege years of financial
jiggering of the books. Central Garden accuses Axelrod of using the company to support indulgences from cigars to women while committing tax fraud and diverting payments meant for TFH into his own bank accounts.
According to the court documents, Axelrod made a deal to sell his company for $70 million in cash and a $10 million loan. He told Central Garden he wanted the loan for cash to buy a quartet of Stradivarius violins.
The terms of the contract provided the prospect of additional money going to Axelrod, contingent on the performance of the company under Central Garden.
Those earnings, however, never materialized, the court papers allege. In
fact, the revenues of TFH Publications were far lower than expected.
Axelrod and his wife, Evelyn, immediately filed suit against Central Garden
for damages, alleging management failures that jeopardized the prospects of achieving those higher earnings.
As Central Garden's accountants started digging into the company it had just bought, though, they discovered that the revenue figures they had been given for TFH Publications were a fiction, the lawsuit alleges.
The reason, according to Central Garden, was that Axelrod had arrangements with customers allowing him to stock their warehouses with books they never ordered, a move designed to pad short-term sales figures.
It's a scheme called "channel stuffing," in which the market channels are
literally stuffed with goods that are neither needed nor wanted, and
recorded as sales.
"After we bought TFH from Herb Axelrod in 1997, we discovered that prior to our purchase, Herb Axelrod had committed tax and other frauds, including the knowing sale of defective products and channel stuffing, that inflated the apparent value of TFH," Central Garden spokeswoman Brandy Bergman said.
The company countersued the Axelrods, alleging fraud, misrepresentation and breach of fiduciary duty.
As the company dug deeper into the TFH books, meanwhile, it found evidence of a massive tax scam involving the payment by Axelrod of $1 million to a former vice president of marketing, Gary Hersch, according to papers filed in the case.
In depositions, Axelrod did not deny the payment.
"When I was going to sell TFH Publications, one or two of the people to whom I wanted to sell the company were upset at the contract I had with Gary Hersch. I wanted to get out of that contract, so I made a deal with Gary Hersch for a million-dollar payment," he said in sworn testimony. "I didn't have the cash to give him right away, the million, so I said that as money came in (from Nylabone England, a British customer of TFH Publications), that's the way the payments would be made."
Evelyn Axelrod was in charge of the company's accounts receivable, and
according to the court records, Axelrod said he had his wife's assistant get
the checks from Nylabone and have Hersch sign a receipt for the checks.
He would not confirm how the checks were transferred, but Central Garden said it found the checks had been passed to Hersch through Swiss bank accounts.
In depositions, Hersch said he was told to keep the diversions "totally
Other papers filed with the court claim the Axelrods siphoned at least $3.8
million out of the business into their Swiss and Cayman Island accounts, a
charge they denied in responses.
And Central Garden said there were other questionable expenses hidden within TFH's books.
One of the company's most prolific writers was a woman by the name of Anmarie Barrie. She wrote dozens of pet books, including such titles as "Guinea Pigs for Those Who Care," "Step-by-Step Book About Rabbits," and "Conures as a New Pet."
In a deposition filed in the case, Barrie was asked to define a conure.
"A bird," she replied.
"Do you know what type of a bird it is?" she was asked.
"No, I don't," she said. (It is a species of parrot.)
Before meeting Axelrod, Barrie was a receptionist who worked at the office of his dentist in Tinton Falls, according to her deposition. Axelrod later paid to put her through Seton Hall Law School, from which she graduated in 1989.
According to documents filed in Central Garden's lawsuit, Axelrod had an
ongoing, intimate relationship with Barrie and helped support her by paying her as the author of rewritten TFH books.
Between 1990 and 1997, Barrie was credited with writing dozens of pet books, receiving at least $63,874 in payments for books she said she put together from her own research and old manuscripts in one week's time.
Barrie is referred to in last week's indictment as a dental hygienist but is
not named. The indictment says the former hygienist traveled to Switzerland with Axelrod to open a bank account there. The indictment charges that Axelrod deposited money in the account and told her to maintain the account to conceal the cash from the Internal Revenue Service.
Now believed to be married and living in another state, Barrie could not be
reached for comment.
A forensic accountant for Central Garden also reported finding evidence that Axelrod arranged with Nylabone Ltd. to pay his personal credit card
expenses, deducting them from money owed TFH for goods sold. Much of those expenses were incurred in Cuba.
The investigator for the company said Axelrod told Nylabone he wanted the expenses covered "because it is basically illegal for an American to do
business in Cuba, and I would prefer not to have the receipts and bills
Axelrod invoked his Fifth Amendment right not to incriminate himself when he was asked by Central Garden's lawyers about the trips.
Documents obtained by The Star-Ledger show that in December 2002, Hersch agreed to cooperate with federal investigators and plead guilty once the government filed a one-count charge of conspiracy to defraud the United States, for failing to report the payments from Axelrod on his tax returns.
The charge has not yet been filed.
But even before Hersch's plea deal, Axelrod had begun to sell off his
assets. Earlier in 2002, Axelrod introduced himself to the New Jersey
Symphony Orchestra with what everyone thought was a unique deal.
He wanted to sell some violins.
DREAM COME TRUE
Axelrod's April 2002 offer was mesmerizing. For $25 million -- half of the
collection's actual value, he claimed -- he would part with 30 rare stringed
instruments from Italy's Golden Age.
They included 12 violins and a cello made by Antonio Stradivari, three
Guarneri del Gesu violins, a 1620 Amati viola and other prized strings from
the 17th and 18th centuries.
Never before, experts said, had such a collection been placed in the hands
of single orchestra. For the NJSO, a cash-strapped, second-tier orchestra
forever dimmed by its counterpart in New York City, it seemed like an
"I want to put New Jersey on the map," Axelrod said at the time. "I want
this to be the best-sounding orchestra in the world."
What unfolded over the following year was a mad scramble to raise money -- no small feat for an operation that had run up a $1.1 million deficit the previous year.
In June of 2002, the orchestra missed a deadline arbitrarily imposed by
Axelrod. He extended it. Later, when the $25 million price seemed out of
reach, he knocked it down to $18 million.
Finally, by April 2003, the NJSO had cobbled together $14 million in loans.
Axelrod held an additional $4 million note. The dream, it seemed, had been realized.
"No orchestra has ever gotten a gift such as this," Victor Parsonnet,
chairman of the NJSO's board of directors, said at the time. "No one has
ever had this kind of bonanza. What it will do for the orchestra, in terms
of attracting attention worldwide, is worth it."
The deal's closure brought acclaim to the orchestra and Axelrod both. He was seen as having donated $32 million to the orchestra -- the difference
between the price tag and the instruments' valuation.
That largess landed him a spot on the Chronicle of Philanthropy's annual
list of the nation's 60 top benefactors, alongside the founders of
McDonald's and Dell, the computer manufacturer.
It is only since Axelrod's indictment and flight to Cuba that his
arrangement with the orchestra, and his motivation for it, have come under new scrutiny.
Last week, three independent experts in the exclusive rare-instruments field told The Star-Ledger that Axelrod's initial $50 million valuation was wildly inflated. They questioned whether he used the high appraisals for tax write-offs.
The experts, at least one of whom has examined several of the instruments, said even the $18 million price seemed a little high.
Whether Axelrod did deduct some or all of the $32 million difference between his valuation and the purchase price could not be determined. Federal officials, while not offering specific information on their probe, said the investigation was ongoing and could extend beyond the tax charges already filed against Axelrod.
"We certainly haven't limited ourselves," said Michael Drewniak, a spokesman for the U.S. Attorney's Office in Newark.
NJSO officials said they had not been contacted by the FBI or the IRS, and
they stood by the purchase as a good deal. They also stood by Axelrod's
initial valuation of the instruments. A review of the orchestra's tax forms
found the instruments' value listed at $48.9 million. The strings were
insured for that amount.
Simon Woods, the NJSO's president and chief executive officer, said the
orchestra reached the figure after hiring "one of the top people in the
business" to perform a painstaking appraisal.
That man, Woods said, was Dietmar Machold, a violin dealer based in New York and Vienna.
Machold also is Axelrod's longtime business partner, handling the purchase
and sale of instruments on the millionaire's behalf since the early 1990s.
Machold did not respond to messages left at his New York office or to his
e-mail address in Austria.
For additional confirmation of the collection's value, the NJSO brought in
several experts to examine a few pieces each. Woods would not identify those experts, saying the parties had signed confidentiality agreements, a
standard practice in the field.
"It's a business where people make subjective opinions," Woods said. "(They) want to keep them confidential."
He said the experts were asked to make "their own separate opinions about the instruments" and not to comment on Machold's overall appraisal.
"They confirmed to us that the deal we were getting was a good deal, a very good deal," Woods said.
The orchestra did not contract for additional full appraisals because of the
high cost, Woods said. Full appraisals are based on a percentage of the
value of the instruments, meaning that the higher the appraisal, the more
expensive the valuation.
Woods would not say how much Machold charged for his valuation.
Asked whether he believed the collection is worth nearly $50 million, Woods replied, "I'm going by the official valuation."
That opinion is at odds with comments made last year by Parsonnet, the
chairman of the NJSO board. In a New York Times Magazine article on the
high-profile sale, Parsonnet said the orchestra's independent appraisals had produced a figure "somewhere closer to $25 million."
In an interview Friday, Parsonnet said he doesn't recall how he arrived at
the $25 million figure.
"I don't remember how it came out of my head," he said. "I'm a cardiac
surgeon. I'm not a businessman. We had our business people going over this. I wasn't in on all the details of that, and I may have spoken out of turn."
Parsonnet added: "We did our due diligence. We had a good deal. The
instruments are a marvelous purchase, and we are happy with them."
The NJSO deal is not the only one now being questioned.
In 1998, Axelrod donated four inlaid Stradivarius instruments -- two
violins, a viola and cello -- to the Smithsonian Institution's National
Museum of American History. He placed the value of the strings at $50
The independent experts contacted by The Star-Ledger last week by turns
called the valuation "ludicrous," "preposterous" and "a joke." One,
Chicago-based violin dealer Robert Bein, said the strings are likely worth
under $15 million.
A spokeswoman for the Smithsonian said the instruments' value had been
verified when the museum took possession of them.
In the interview Friday, Axelrod denied inflating the prices of the
instruments he refers to simply as his fiddles. He also said he had always
planned to retire to Cuba, where he loves the fishing, the weather and the
Over the past year, Axelrod has liquidated his many assets, from more than a dozen properties in Florida to his oceanside home in Deal, which was valued at $6.5 million.
The sale of the violins to the NJSO marked another big sale, one that, in
rare-instrument circles, moved rather quickly. Experts have said that
selling the strings piecemeal to various dealers would have taken far longer than the year it took to sew up the agreement with the New Jersey orchestra.
Throughout the process of selling off his empire, Axelrod knew federal
investigators were mounting a case against him. According to filings in the
Monmouth County lawsuit, he knew of the probe as far back as 2000, when his lawyers complained that Axelrod's business enemies, by bringing information to the U.S. Attorney's Office, were using the threat of criminal action to seek an advantage in the case.
Today Axelrod says he is not sure what his future holds. Someday, he said, he would like to come back to New Jersey.
Of one thing, Axelrod said, he is certain.
"I am not a criminal. I don't feel like one," he said. "Nobody can ever say
that I hurt anyone."
Staff writers Peggy McGlone, Willa Conrad and Brian Donohue contributed to this report.