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February 12th, 2015
What to Do if You Receive a Subpoena
The press has reported on an investigation by the New York County District Attorney's Office into whether New York-based art galleries and collectors are properly collecting and paying sales tax on art purchases. According to the press, several galleries have confirmed receipt of grand jury subpoenas requesting billing and shipping records related to art sales. Although the scope of this investigation is unclear, the District Attorney's Office conducted a similar investigation several years ago into sales tax practices in the art world. That investigation reportedly recouped tens of millions of dollars in unpaid taxes and fines.
Upon receiving a subpoena or being contacted by investigators, consider these practical pointers:
- You are not obligated to speak with investigators. Investigators from the District Attorney's Office may visit your premises either to serve a subpoena seeking business records, or to talk to you generally about your business practices. You are not obligated to speak to law enforcement personnel including investigators from the District Attorney's Office. Any statements to investigators -- even the most innocent -- can be used against you. Talk to an attorney experienced in handling criminal investigations before having a conversation with investigators.
- If you have questions, ask your lawyer. If you have any questions about a subpoena, save the questions for your lawyer. Don't ask the investigator serving the subpoena. You should assume that the service of a subpoena for your business records, including records relating to the payment and collection of sales tax, is a serious matter that may implicate you or your business and you should discuss any questions or concerns with your own lawyers.
- Preserve records. Upon receipt of a subpoena, you should preserve all records until you can review them with your attorney. The deletion of any record, including deletions in the normal course of business, can be discovered and could be viewed as an attempt to cover up wrongdoing. As we all know, the cover-up may be worse than the crime.
- Do not discuss the investigation. Do not discuss the investigation or the receipt of a subpoena with anyone other than your attorney. Conversations with customers or employees or even with art consultants or accountants are not privileged and investigators can always ask such people to tell them about conversations that you initiated. Even the most innocuous comment can be misinterpreted. Do not discuss the subpoena or the investigation with anyone other than your lawyer.
If you have any questions about sales tax investigations or art-related legal issues, please contact Brian Maas at (212) 705-4836 or email@example.com, Amelia Brankov at (212) 826-5574 or firstname.lastname@example.org or any other member of the Frankfurt Kurnit Art Law Group or Securities Fraud & White Collar Defense Group.
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