A court case in France involving the owners of Wildenstein & Company, one of the world’s most revered art galleries, presents a cautionary tale for multi-generational family businesses, particularly in France.
The case involves Guy Wildenstein, the fourth generation Franco-American heir to the family’s estate, which includes the famous New York art gallery, along with his deceased brother Alec. The prosecution has alleged the brothers hid much of their inherited fortune in tax havens and consequently evaded tax. Also involved in the case are Alec’s second-wife Liouba Stoupakova and his son, also called Alec, as well as a number of other non-family individuals connected to the management of the estate. All the defendants deny wrongdoing.
Set against this has been numerous family quarrels that go back to the 1990s. A Vanity Fair article in 1998 detailed the messy divorce between Alec and his first wife Jocelyne. The article also estimated the family’s wealth then at $5 billion.
In an interview last October with Paris Match, Guy said he knew little about his father’s estate and that he was neither a tax or financial specialist. He added that at the time of his father’s death there was no French law obliging people to declare estates held in trusts.
The interview also said there were many wealthy families in France anxiously awaiting the outcome of the trial, which is expected to last a month. Many of the country’s wealthiest families have used tax havens to avoid France’s high tax burden, which includes a wealth tax. Of course, most have done so legitimately, but there is often a grey area in terms of what is legal and illegal when it comes to such matters.
A successful prosecution of Guy and his co-defendants will swing the balance very much in favour of the state and against most forms of tax planning involving offshore finance centres. Other court cases against wealthy families could follow.
Asked about the next generation by Paris Match, Guy said he foresees his eldest daughter Vanessa becoming more involved in the business. That could happen sooner than he might have hoped if the prosecution win their case. Guy faces 10 years in jail and a fine in back taxes of more than €500 million if found guilty.