As Bernard Madoff used stocks to lure investors, prosecutors say Manhattan gallery owner Lawrence B. Salander used works of art.
Salander, the owner of an Upper East Side gallery with a star-studded clientele including actor Robert DeNiro and tennis star John McEnroe, was charged last week with operating a de-facto Ponzi scheme that defrauded art owners, investors and a bank of at least $88 million.
Prosecutors accuse Salander, 59, of selling expensive paintings to multiple would-be buyers, promising each that he would share the works’ proceeds evenly between himself and each benefactor. Often, he kept the proceeds himself.
The longtime owner of Salander-O’Reilly Galleries - ranked the best art gallery in the world in 2003 by a luxury art magazine - also lured investors into bogus “ghost” investments. Deputy Bureau Chief Martha Shulman said that’s how Salander bilked McEnroe of more than $2 million.
It began when Salander sold the tennis star a half-interest in a painting by 20th-century artist Arshile Gorky, and said they would split the profits when the painting was sold to someone else, she said.
McEnroe, who served as an apprentice to the gallery as his tennis career was winding down, later learned the painting was on someone’s wall, but Salander had not reported the sale or any profits to him. When McEnroe confronted Salander, the gallery owner gave him a half interest in another Gorky painting.
McEnroe lost that painting after he gave it to Christies for an exhibit and the auction house refused to return it, prosecutors said. Officials there told him someone else had claimed the painting and put a lien on it.
“Why sell it just once when you can sell it three times?” said Manhattan District Attorney Robert Morgenthau.
Salander also allegedly stole nearly 50 paintings from DeNiro, all of which were painted by the actor’s late father, Robert DeNiro Sr. After Salander was entrusted with the paintings, DeNiro claims in his own suit against the dealer, Salander sold them to help settle the estimated $100 million debt he was facing after declaring bankruptcy in late 2007.
Salander is said to have used the money for the sale to corner the market on Renaissance art and to lead a lavish lifestyle, which included owning and maintaining an Upper East Side townhouse and a 60-acre estate in Millbrook, NY, buying his wife expensive jewelry and flying around the world on a private jet.
A 100-count indictment names Salander and Salander-O’Reilly Galleries LLC on a gamut of charges that include grand larceny, securities fraud and forgery. The crimes defrauded 26 people and occurred between July 1994 and November 2007.
At his arraignment in State Supreme Court in Manhattan last week, Shulman told Justice Michael Obus that in late 2006 into 2007, even as Salander’s clients begged for return of their art or repayment, he was buying his wife $500,000 worth of jewelry, paying $150,000 for a family trip by private jet to Europe, and paying $67,000 for a family trip by private jet to California.
The biggest loss was reportedly sustained by Renaissance Art Investors which paid Salander $42 million for 328 Renaissance period art works.
Another big loser was Earl Davis, the son of the late Stuart Davis, who consigned 96 of his father’s paintings to Salander for sale and who is believed to have lost $6.7 million as a result of works that were sold without Earl Davis’ authorization and at significantly reduced prices.
The estates of several modern artists were listed among the victims – among them, those of Ralston Crawford, Elie Nadelman, Louis Kahn, Giorgio Cavallon, George McNeil, Suzy Frelinghuysen and George Morris.
Prosecutors said the investigation is continuing and that Salander’s thefts could eventually total $100 million. If convicted of first-degree grand larceny, Salander could face up to 25 years in prison.
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