New York energy investor indicted for $45 million tax scheme

By Nate Raymond

NEW YORK (Reuters) – A New York energy investor has been indicted for engaging in a multiyear scheme to evade paying over $45 million in taxes in connection with the sale of an oil company and the purchase of paintings by European artists, U.S. prosecutors said on Monday.

Morris Zukerman, a former Morgan Stanley banker who serves as chairman of investment firm M.E. Zukerman & Co, pleaded not guilty at a hearing in federal court in Manhattan to charges that included tax evasion and wire fraud.

The charges followed a two-year grand jury investigation, Assistant U.S. Attorney Stanley Okula said in court. Both Okula and a lawyer for Zukerman, James Bruton, said he is in plea talks.

“Hopefully, we’ll be able to resolve this with the government to make things right and resolve things for Mr. Zukerman,” Bruton said following the hearing, where his client’s bail was set at $2.5 million.

Zukerman, 71, worked at Morgan Stanley from 1972 to 1988 and served as joint head of the investment bank’s energy group, according to his company’s website.

In 1988, he launched M.E. Zukerman & Co, which, according to its website, concentrated its investments in energy, natural resources and agriculture companies.

Prosecutors said Zukerman schemed to evade paying taxes on income earned on a 2008 sale of an oil company he co-owned through an M.E. Zukerman subsidiary with a publicly traded company that resulted in his firm receiving $130 million.

While the company was not named in court papers, around that same time his company sold a Texas-based firm called Penreco that was co-owned with ConocoPhillips.

Prosecutors said Zukerman transferred the sale’s proceeds to a trust and various corporations, including one from which he directed $50 million be used to buy paintings by European artists from the 15th through the 19th centuries.

In buying those paintings, which were used to decorate his Manhattan apartment and two family members’ apartments, Zukerman further sought to avoid over $4.5 million in New York state taxes owed on their purchases, prosecutors said.

He also schemed to avoid paying New York taxes on a $645,000 pair of diamond earrings, prosecutors said.

Zukerman also made $1 million in fraudulent deductions for charitable contributions related to buying property on Black Island off the coast of Maine, and orchestrated fraudulent investment interest expense deductions, prosecutors said.

The case is U.S. v. Zukerman, U.S. District Court, Southern District of New York, No. 16-cr-194.

(Reporting by Nate Raymond in New York; Editing by Jonathan Oatis)