Big Art Big Theft; The Lawrence B. Salander Indictment

Posted on March 27, 2009


Big Art Big Theft;

The Lawrence B. Salander Indictment

Lawrence B. Salander of O’Reilly Galleries LLC was arrested on a 100 count indictment. Below, is a news release from the New York District Attorney Robert M. Morgenthau about the case?

The indictment outlines how Salander built one of the most powerful art empires on fraud and deceit while he lived life as large as any Wall Street mogul did. Salander’s built an empire built based on illusion and manipulation of those who trusted him. He has pled not guilty to all charges. I predict that if Salander goes to trial that it will be the first time the secret details of how the Big Art Market functions will come to light and we will all learn the truth behind closed doors.

Link to NYC District Attorney Website


March 26, 2009

Contact: Alicia Maxey Greene

Manhattan District Attorney Robert M. Morgenthau announced today the arrest and 100-count indictment of former art gallery owner LAWRENCE B. SALANDER and the SALANDER-O’REILLY GALLERIES, LLC for stealing $88 million from investors, owners, and a bank.

The defendants, SALANDER, 59, and the SALANDER-O’REILLY GALLERIES, have been indicted on multiple charges of grand larceny, securities fraud, scheme to defraud, forgery, criminal possession of a forged instrument, falsifying business records, and perjury against SALANDER. The crimes charged in the indictment occurred between July 1994 and November 2007.

The investigation leading to today’s indictment revealed that SALANDER, the manager and co-owner of the SALANDER-O’REILLY GALLERIES, defrauded 26 victims resulting in the theft of millions of dollars. SALANDER stole from his victims in two primary ways: he sold artwork not owned by him and kept the money; and lured investment money in fraudulent investment opportunities.

Investors in this case are individuals or entities that paid cash in exchange for an ownership interest in a work of art. Investment deals were presented in two ways, as a pre-sale or speculative investment. In pre-sales, SALANDER represented to an investor that a work of art had already been sold to a buyer who needed time to pay. SALANDER told the investor that he could purchase a percentage of the work based on SALANDER’s actual cost and then share a corresponding percentage of the sales price when it was paid. For example: SALANDER would claim that he purchased a work of art for $500,000 and had a buyer who agreed to pay $1 million in the future. SALANDER offered the investor a 50 percent interest in the art work for $250,000 with the assurance that upon receipt of the purchase price the investor would receive his initial investment plus an additional $250,000 as profit. In a speculative investment, SALANDER offered an investor the opportunity to purchase a work of art with him at cost, and thereafter SALANDER would sell the artwork at a greatly increased value and they would split the profit.

The fraud in each investment opportunity occurred when SALANDER did not own the work of art he offered for investment in whole or in part, or he misrepresented the actual terms of the investment. The misrepresented terms included: inflation of the purported cost (cost fraud), the sale of greater than 100 percent interest in a single work (oversale), the fabrication of the existence of the pre-sale (ghost investment), failure to pay the return when the money came in on the purported investment, or the misrepresentation of the amount payable to the investor (fraudulent retention).

For example: Renaissance Art Investors, LLC (RAI) was one of the gallery’s largest investors. RAI paid SALANDER-O’REILLY GALLERIES $42 million at closing for approximately 328 Renaissance works of art.  As part of the deal, RAI, which was put together by the Schupak Group, a merchant bank owned by Donald Schupak and his son Andrew Schupak, simultaneously consigned the works back to SALANDER-O’REILLY GALLERIES to market and sell. The $42 million was paid based upon SALANDER’s representations of the deal. However, SALANDER misrepresented almost every aspect of this investment including the cost and source of the works sold. For example, SALANDER claimed to have purchased the majority of Renaissance artworks from private dealers and estates mostly throughout Europe, yet the investigation revealed that he actually purchased a large number of works of art from public auction houses throughout Europe and the United States. SALANDER also intentionally withheld from RAI the reporting of millions of dollars in sales of RAI artworks after the closing of the deal and failed to turn over the proceeds of the sale. To support his misrepresentations, SALANDER provided RAI with forged invoices, fraudulent cash disbursement entries, falsified internal documents reflecting source and cost data, and falsified monthly inventories.

Owners of art as used in this case are individuals or estates that own works of art and consign them to the gallery for sale, exhibition, or appraisal. Upon the sale of artworks at agreed upon prices, the owners were to receive the balance of the sale price minus the commission owed the gallery. The majority of the estates are the heirs of prominent 20th Century American artists, including the estates of Stuart Davis, Ralston Crawford, Elie Nadelman, Louis Kahn, Giorgio Cavallon, George McNeil, Suzy Frelinghuysen and George Morris. The thefts from this category of victims occurred pursuant to unauthorized transactions including: sales below owners’ authorized prices, sales of artwork not delivered for sale at the time of the transactions, the use of the artworks as investment vehicles for third parties, or the use of the artworks to satisfy debts owed to third parties. These transactions were completed without consent from, notice to, or payment to the owners.

For example: in the case of the Estate of Stuart Davis, SALANDER and the SALANDER-O’REILLY GALLERIES sold over 50 Stuart Davis works of art consigned by the estate. The evidence showed that a majority of those works were sold without authorization at significantly reduced prices and without notice and payment to the Davis estate, a theft totaling over $6.7 million.  Altogether, the SALANDER-O’REILLY GALLERIES failed to produce or pay for 96 Davis works of art consigned to the gallery by the estate after repeated demands for the return of all works.

The bank in this case is the Bank of America from which SALANDER applied for a personal loan for himself and his wife, Julie.  In support of his loan application, SALANDER offered certain artwork as security and provided documents to establish that his wife owned that artwork.  In fact, several pieces were never owned by LAWRENCE SALANDER nor Julie Salander, but were owned by other individuals, including John McEnroe and the Estate of Dr. Alexander Pearlman. After previous offerings of collateral were rejected, these false filings enabled SALANDER to obtain a $2 million loan.

The investigation further revealed that SALANDER used the stolen funds for two primary purposes: to finance his self-imposed mission to corner the market in Renaissance Art, and to support his extravagant lifestyle, which included travel by private jet within the United States and to Europe, a lavish party for his wife at the Frick Collection, and the purchase and maintenance of his Manhattan townhouse and 66-acre estate in Millbrook, Dutchess County, New York.

He co-founded SALANDER-O’REILLY GALLERIES in 1976. In 2005, the gallery moved from its original location on 79th Street to a five-story building located at 22 East 71st Street. He continued to control the daily business practices of the gallery until it closed in November 2007, pursuant to the filing of an involuntary Chapter 7 bankruptcy case.

The indictment charges SALANDER with 14 counts and the SALANDER-O’REILLY GALLERIES with 13 counts of Grand Larceny in the First Degree, a class B Felony, which is punishable by up to 8⅓ to 25 years in prison; each defendant with 10  counts of Grand Larceny in the Second Degree, a class C felony, which is punishable by up to 5 to 15 years in prison; 3 counts of Grand Larceny in the Third Degree, 5 counts of Forgery in the Second Degree, and 5 counts of Criminal Possession of a Forged Instrument in the Second Degree, all class D felonies, which are punishable by up to 2⅓ to 7 years in prison; 6 counts of Securities Fraud under the Martin Act (General Business Law §352-c(6)), 1 count of Scheme to Defraud in the First Degree, and 55 counts against SALANDER and 53 counts against the SALANDER-O’REILLY GALLERIES of Falsifying Business Records in the First Degree, all class E felonies, which are punishable by up to 1⅓ to 4 years in prison. SALANDER was also charged with 1 count of Perjury in the First Degree, a class D felony, which is punishable by up to 2⅓ to 7 years in prison.

Mr. Morgenthau thanked Detective Mark Fishstein of the New York City Police Department Major Case Squad for his assistance in the investigation.

Deputy Bureau Chief Micki Shulman and Assistant District Attorney Tanya Apparicio of the Frauds Bureau presented the case to the grand jury under the supervision of Frauds Bureau Chief Michael Kitsis and Deputy Bureau Chief Jeannette Molina and Chief of the Investigations Division Patrick Dugan.  Investigators Jeremy Rosenberg,  Jack Patterson, Siobhan Berry and Reginald Barometre assisted in the investigation under the supervision of Chief Investigator Joseph Pennisi and Deputy Chief Terence Mulderrig.  Others involved in the investigation included Investigative Analyst Yiyang Wu, and Trial Preparation Assistants David Lamb and Daniel Biller of the Frauds Bureau, and Financial Investigator Jay Liang supervised by Frank Puma, Chief of the Financial Crimes Bureau. IT Analyst Selena Ley and her supervisor, IT Deputy Director Steven Moran, also assisted.

Defendant Information:

Deep Hollow Road
Millbrook, New York

22 East 71st Street
New York, New York