Economy & Business Investigations

Customers have always paid premium prices for the fine jewelry, china and silverware at Cartier, the world-renowned emporium for the elite on Manhattan's Fifth Avenue. But in recent years they have apparently been getting bargains, and illegal ones at that. Law-enforcement officials charged last week that the store has been helping customers evade sales taxes, which are 8.25% in New York City. Store Manager S. Howard Warnock was indicted on 156 counts of falsifying business records, and Assistant Manager Thomas Foster was named in 124 counts. They could face a $5,000 fine and a four-year prison term for each count.

A probe of Cartier revealed that at least $260,000 in taxes went unpaid on 125 sales over three years. Warnock and Foster allegedly allowed some customers, who will not be prosecuted, to supply false non-New York shipping addresses (out-of-state buyers are exempt from sales taxes). Investigators charge that Cartier sent empty boxes to the bogus addresses, but the jewels left the store in the customers' pockets. Similar tax scams could be depriving New York State and local governments of more than $100 million in tax revenue annually; several retailers are still under investigation. Said New York City Mayor Ed Koch: "Tax evaders be warned. This is only the beginning."