On Jan. 11, 1977, Smithsonian gem and mineral curator Paul Desautels and a private mineral dealer walked through the Smithsonian's exhibition hall and back rooms, selecting rare specimens of California gold, Norwegian silver, and African azurite from locked display cases and drawers. Over the next three months, Desautels says, he secretly sold a total of 35 specimens through the dealer to a wealthy private collector and Smithsonian donor named Barry Yampol, head of a major telecommunications firm.
Today a white card reading "specimen removed for further study" marks the empty spot in a case where there was once a Brazilian blue crystal that had been in the national collection since 1927. There is no mention of museum specimens going to Yampol in Smithsonian records. Desautels explains:
"Barry Yampol wanted to buy some specimens from the collection and I couldn't sell them to him. It was that old unwritten rule, 'You don't sell from the collection' . . . So I decided to find some way they could be sold where they would not appear on the record as a sale."
That way, Desautels says, was to have Yampol pay for the stones by depositing about $120,000 worth of stock as a gift to a Smithsonian endowment fund. To account for the 35 stones, Desautels says he disguised the sale as an exchange, minerals for minerals, which would have been permitted.
From his perspective, Yampol says there was no direct purchase from the Smithsonian. Yampol's attorney, Theodore C. Sorensen, says any contribution from Yampol to the Smithsonian was a gift, not payment for specimens. In addition, Sorensen says Yampol's actions were perfectly proper.
The mineral dealer, Gary Hansen, says "Paul's Desautels' version is absolutely the truth and that's the way it happened."
By all available accounts, both Desautels and Yampol had a sincere interest in expanding and improving the nation's gem and mineral collection, generally considered the finest in the world. In a relationship that lasted five years, Yampol emerged as one of the Smithsonian's most prominent donors. Says Sorensen, "His Yampol's purpose was wholly charitable. Geology and mineralogy are a hobby which are separate from his business interests. He had a great respect for the Smithsonian."
At 45, Yampol heads Graphic Scanning Corp., the nation's largest radio paging company. He lives on a secluded 25-plus acre retreat beside president Theodore Roosevelt's Sagamore Hill estate on Oyster Bay, Long Island. According to a 1982 Securities and Exchange Commission filing, he and his wife own Graphic Scanning stock that is now worth about $96 million. Yampol's mineral collection is considered to be one of the finest private collections in the nation.
A detailed examination of the five-year relationship between Yampol, the corporate magnate, Desautels, the world-renowned collection builder, and the Smithsonian, one of the great museums of the world, also shows the following:
From 1979 to 1981, Desautels, while a full-time $55,000-a-year Smithsonian employe, says he received a total of about $20,000 in consulting fees paid in monthly installments to act as a consultant to Gemini Investment Co., which had been established by Yampol to offer private gem and mineral tax-shelter investments. A spokesman said Yampol did not personally profit from providing investors with the tax-shelter specimens, which were to be donated to various museums, including the Smithsonian, and that Yampol was merely trying to encourage gem and mineral donations.
Some specimens that Desautels says he was paid to help acquire for these tax shelters were then donated to the Smithsonian, where they were accepted and put into the collection by Desautels. He says he did not initially know the specimens he had helped acquire were going to be donated to the Smithsonian, and says that when he learned about that he severed his relationship with the investment firm.
In 1979 Yampol set up The Research Charitable Trust, which was to be "operated exclusively for the benefit" of the Smithsonian. With the approval of both the IRS and the Smithsonian, the trust was to be like an arm of the Smithsonian, giving financial support for mineralogical research and acquisition of specimens. The trust had regular charitable tax status and contributions of money, minerals and gems could be deducted. The records and history of the trust show that it was used by numerous investment groups as a tax shelter. Yampol says he did not personally donate specimens to the trust or to the museum, and in no way profited from the trust.
Among the various tax shelter gifts to The Research Charitable Trust were: a 17,685-carat blue topaz recorded in trust documents at a value of $566,000 and given by Yampol's tax lawyer and two other investors; a 589.2-carat orange Morganite--"probably the largest in the world," according to Desautels--bought for an estimated $35,000, and later sold for an amount that could not be determined. When the buyer donated it to the trust, documents recorded its value at $250,410. A spokeman for Yampol says the values assigned the individual stones in trust records were those set on behalf of the donors by independent appraisers not affiliated with the Smithsonian or Yampol.
In addition, Yampol arranged for others to donate specimens directly to the Smithsonian, among them a 7,033- carat blue topaz bought for an estimated $115,000 and later donated by an investment group that included three directors of the investment banking firm of Blythe Eastman Paine Webber. Trust records placed the value of the topaz at $703,300, about six times what it sold for about a year earlier. It could not be learned, however, how much the investors paid for the topaz or took in tax deductions on their gifts.
A 57-pound cranberry-red rubellite valued in trust documents at $15.6 million was lent to the Smithsonian through the trust Yampol established. The rubellite was owned by Yampol and an investment group that included three senior executives of Entenmann's Bakery.
In 1981 the relationship between Yampol and the Smithsonian deteriorated. Smithsonian lawyers and officials became concerned about the trust and ordered all relations severed. According to Smithsonian records, the lawyers were concerned about the name of the trust, which on July 31, 1979, had been changed to the Research Charitable Trust of the Smithsonian Institution. Only the Board of Regents, the governing body of the Smithsonian, could authorize the use of the Smithsonian name, legal counsel said.
Smithsonian lawyers questioned who controlled the trust--Yampol and two of his communications firm board members occupied three of the five seats on the trust's board of directors. In addition, the Smithsonian had questions about why specimens were lent to a Paris museum. On Sept. 9, 1981, the trust voted to name additional museums as beneficiaries. The next day the Smithsonian notified Yampol it was ending its relationship with the trust and told the IRS of its action.
Over the next several months lawyers for both the Smithsonian and Yampol arranged a divorce. According to Smithsonian and trust records, the Smithsonian kept everything donated directly to the museum--an estimated $2.5 million worth of specimens, much of which had been tax shelter gifts, as well as more than $300,000 in endowment funds.
The Smithsonian returned everything else--an estimated $1.8 million worth of cash, stock and specimens donated to the trust, $1.3 million worth of other specimens and stock acquired by the trust, more than $330,000 of trust income and gains from the sale of stock, a $600,000 computer system lent by Yampol, as well as nearly $600,000 worth of jade and aquamarine, and the $15.6 million rubellite.
Says Smithsonian Under Secretary Philip S. Hughes, speaking of the collapse of the relationship between the Smithsonian and the trust, "We didn't want to be associated with it, simple as that . . . "
Desautels, who retired from the Smithsonian last year, says he believes Yampol had the museum's interests at heart.
"Let me tell you Barry Yampol has been wronged," says Desautels. "I'm not saying that he's an angel or the nicest person on earth. He's not. But he has been grossly wronged because his entire relationship with the institution has been in the role of the benefactor.
"This business about selling him those specimens, well certainly there must have been some advantage to him in that. He got the specimens, yes. But his whole plan was to give his entire collection to the Smithsonian . . . . I think a benefactor is entitled to benefit," Desautels says. The 35 Stones
"I don't mean to sound conniving about it," says Desautels, "but with my kindly ministrations and encouragement and enthusiasm and planning, he Yampol eventually decided he wanted to help us."
On Aug. 29, 1976, Yampol gave the Smithsonian more than $175,000 worth of Graphic Scanning stock to establish a Mineral Endowment Fund to support the collection. Desautels claims that four months later Yampol wanted some specimens from the Smithsonian.
" 'Well,' he said, 'I want to buy some,' and I said, 'I can't really sell them to you and I don't want the money, but if you just take the money and put it in the Mineral Endowment Fund, we'll find a way to do it,' and that's what I proceeded to do," says Desautels.
Desautels says he did not sell any specimens that were important to the collection. The specimens were selected by Desautels and Hansen, a St. Louis mineral dealer who has had numerous transactions with both the Smithsonian and Yampol, according to Desautels.
"Gary Hansen and I went over them together and Gary had a kind of veto on whether they were acceptable for Yampol's collection because he knew Yampol's collection, which I didn't."
Several specimens that Desautels says were selected for Yampol were on exhibit. "The fact they came off of display is not significant," says Desautels, who says better specimens were in storage. Less than 3 percent of the museum's collection is on display.
Desautels identified a March 1, 1977, list of 35 specimens, which he says are the minerals that went to Yampol. Among the specimens was an African azurite that was on exhibit, a specimen of pyromorphite that belonged to 1931 Nobel Laureate Karl Bosch, smithsonite--named for Smithsonian founder James Smithson--beryl, gold, adamite and silver.
Four of the specimens that Desautels says went to Yampol had been given to the Smithsonian by donor John J. Trelawney with express restrictions that "the specimens which are the subject of this gift . . . shall not be sold."
Says Desautels, "On paper it says I have to do thus and so, but Trelawney and I are very close friends. There's not a damn thing I could do with his collection that he wouldn't approve of."
Trelawney says he has "absolute confidence" in the curators, but when told that some of his specimens had possibly been sold, said, "I just can't believe they would do that."
Desautels says another specimen that went to Yampol was a German manganite that was on display. Desautels says he replaced it with a specimen from the storeroom. Today the description beneath the replacement stone refers incorrectly to the piece that Desautels says went to Yampol six years ago.
Says Desautels, "Never trust those labels. Some of them match and some of them don't."
Of the specimens that went to Yampol, Desautels says, "I put very, very fat prices on them, very fat, inflated, highly inflated I would say.
" . . . I'm sure these are things you couldn't buy on the open market. I'm sure he had that in mind, so he was paying a premium. All I know is, he did not object to the price."
Museum records show Hansen took 20 specimens on Jan. 11, 1977, and that 15 more were shipped on March 1, 1977.
In May 1977, according to museum officials, Yampol gave the Smithsonian a gift of more than $120,000 worth of Graphic Scanning stock. Desautels says it was this "gift" that paid for the specimens. "There was no hesitation in carrying through his Yampol's side of the bargain." Yampol strongly disputes this, saying there was no direct sale.
To disguise the transaction, Desautels says he recorded it as an exchange with Hansen--the 35 stones for eight other valuable stones. But Desautels says he owed money for the eight incoming stones. To pay for them, he says he later overpaid Hansen for 59 other stones in a separate transaction, thus squaring his account with Hansen.
Desautels paid $66,000 for Hansen's 59 specimens, which he says were worth only a fraction of that amount. The $66,000 came out of the mineral fund established by Yampol's 1976 gift, Desautels contends.
Hansen confirmed the transaction this week but declined to discuss any details. "I think the museum in the long run got more than adequate things back for what they gave up," he says. "In my opinion, it's unfortunate that museums cannot sell things directly . . . but still the effect was that the money was used to buy other things for the collection."
Desautels, who as curator built the collection largely through exchanges because the museum lacked the cash, says he wanted the Smithsonian to have money "so that future curators wouldn't have to live hand-to-mouth and do all of this nonsense. See, none of this would have been necessary if we had money, none of it. I think the great scandal here is that the national collections . . . don't have any money." The Trust
In January 1979, Yampol formed the Research Charitable Trust to benefit the Smithsonian's Department of Mineral Sciences. Yampol donated $510,000 worth of Graphic Scanning stock to the trust.
After IRS and Smithsonian approval, Desautels and department Chairman Dan Appleman were made trustees of its five-member board, and were to represent Smithsonian interests.
That same year, Yampol set up Gemini Investment Co., which offered investors gems and minerals they could use as tax shelters. A Gemini brochure lists the Smithsonian and the Research Charitable Trust among the possible recipients of tax-shelter gifts.
Yampol was president of Gemini and chairman of the trust's board. Desautels was, in addition to his duties at the Smithsonian and on the trust's board, a paid consultant to Gemini.
Says Desautels " . . . Sooner or later they people with an interest in minerals are going to ask me for advice and contacts and so on, which is exactly what he Yampol did . . . 'Where do you go? What's cooking now? What's the hot stuff? Where is the action?'. . . he got a lot of help from me. Barry and I were in constant communication.
"My understanding of my duties as a consultant to Gemini was to help find those materials which might be--which could be bought at a proper price so that they would make good tax-shelter gifts."
Desautels says his personal records show he received a total of about $20,000 from Gemini from August 1979, until January 1981. Throughout the period he was a full-time employe of the Smithsonian.
" . . . I remember Barry and I discussing the amount," says Desautels. "My problem at the time was supporting my mother in a nursing home and I knew that figure and we arranged the fee to be enough to cover that."
Desautels says he discovered in December 1980 that gifts he had helped to acquire for Gemini were being given to the Smithsonian, and shortly after discontinued his work for Gemini.
Says Desautels, "I just didn't want that connection at all . . . I just didn't like the feeling I had . . . It was too close where I would be looking for tax-shelter things which could be given to the Smithsonian . . . I got a little disturbed because then I saw myself in a position of accepting pay for advising people or helping people to do what I've been doing for nothing for years. And I got out because I just didn't think it was right."
Desautels says he disclosed a portion of the Gemini payments, but because the usual Smithsonian employe disclosure form didn't require it he did not describe in detail the work he was doing for the firm.
Alan Ullberg, a Smithsonian associate general counsel, says Desautels' forms were reviewed but not formally approved or disapproved. "The responsibility," says Ullberg, "is on the individual employe to come and talk to me if he thinks he has a problem." Yampol's Lawyer
On Dec. 15, 1980, Yampol's tax lawyer, Alvin Martin, and two of his tax clients, Michael Fourticq and another investor, donated a 17,685-carat blue topaz to the trust, according to trust documents. Martin says he purchased the topaz from Gemini. He estimates that the gift was deducted at about three times what was paid for it.
Trust documents record the stone's value at $566,000.
"I did a fair amount of research before I got involved as a donor," says Martin. "I wanted to make sure my legal theory was not incorrect . . . I would not be associated with anything that I thought was not supported by case law."
Martin discussed several advisory opinions, and cases he relied on before using the tax shelter. According to Martin, everything he did is perfectly legal and proper. He says the topaz was purchased at a discount and appraised by an independent appraiser whom he declined to name. He would not discuss specifically what was paid for the stone, or the deduction taken.
Says Michael Fourticq, "This is strictly an investment we made . . . We are not looking for any notoriety as being great benefactors of this thing." Edusco and the Blue Topaz
Ed Swoboda, a California collector, says he sold a 7,033-carat blue topaz to Yampol or Gemini for an estimated $115,000.
Desautels, as consultant to Gemini, says he suggested that Yampol buy the stone and negotiated its purchase.
The stone then went to Edusco Investment Company, a New Jersey partnership made up of James F. Cleary, John L. Kelsey, John E. Stoddard and Daniel D. McCarthy. Cleary, Kelsey and McCarthy are directors of Blythe Eastman Paine Webber. Stoddard is with another firm.
The investment, they say, has nothing to do with Blythe Eastman Paine Webber or the other firm.
They will not say how much they paid for the topaz or what deduction was taken when it was donated to the Smithsonian.
The stone was recorded in trust documents at a value of $703,300--six times the estimated price paid by Gemini or Yampol about a year before. Today the stone is on a pedestal in the Gem Stone Giants exhibition. It could not be learned how much of a tax deduction was actually taken.
Partner Kelsey says, "This was given good consideration by very, very fine tax advisers before the donation was made, and that's all I can tell you." The Bay Shore Group
In addition to Edusco, McCarthy is a partner in the Bay Shore Group, which includes several senior executives of Entenmann's Bakery, a nationally known firm. McCarthy introduced the Bay Shore Group partners to gem tax shelters, according to Robert D. Rosenthal, one of the partners and the executive vice president of Entenmann. Other partners include Robert Entenmann, chairman of the board, William Entenmann, vice chairman, and Harold Lubarsky and George Rosenthal.
Museum records show that in 1980 the Bay Shore Group donated 35 gem stones to the Smithsonian.
Rosenthal declined to say what was paid for the stones, what they were appraised at, or what deduction was taken. He says he is "99 percent sure" the deduction taken was less than five times the amount paid for the stones. "To me it's not relevant, because we're going to do what the appraisal said and I can assure you we would make sure that the appraisers are bona fide, legitimate and well-recognized people," Rosenthal says.
"We don't claim to be anything other than people in business, but there is something to be said when a museum accepts something. After all, it is run by the U.S. government. Yes, there was an economic advantage," Rosenthal says, "but at the same time, we benefited the country and we benefited the people of the country . . . I'm not denying that there's an economic advantage. That's the way it is. I can't change it. If you want to create a Utopia, maybe it would be done differently, I don't know."
Today the research trust is reconstituted as a private foundation, says attorney Sorensen. The rubellite once on display at the Smithsonian is now at the Academy of Natural Sciences of Philadelphia.
Desautels, who retired last August, says he continues to think about Yampol's private collection and how to get it for the Smithsonian.
"Of course," says Desautels, "the story isn't finished yet either, because I'm still hoping . . . I can get that collection back here . . . I can do that. It's not dead. That's not written off yet."