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Art Dealer Lawrence Salander Indicted for Second Time (Update2)

By Philip Boroff and Lindsay Pollock

July 14 (Bloomberg) — Lawrence B. Salander was arrested for the second time in four months for his role in what Manhattan District Attorney Robert Morgenthau called the biggest art fraud in New York history.

Manacled and grimacing, the 60-year-old dealer, who at his peak counted hedge-fund managers and tennis star John McEnroe as clients, pleaded not guilty in criminal court this afternoon. Five hours earlier he surrendered to Morgenthau’s office in lower Manhattan.

Leigh Morse, a 53-year-old former top deputy in the now- defunct Salander-O’Reilly Galleries LLC, was also arrested and pleaded not guilty. She posted a $75,000 bond secured by her Riverside Drive apartment, said Ira Judelson, a bail bondsman. Judge Michael Obus didn’t set new bail for Salander, who in March posted $1 million with the help of friends.

The new charges add three counts against Salander to the 100-count indictment presented in March — and introduced a new bold-faced name to the criminal case. Morgenthau said Salander and Morse repeatedly sold works by Robert De Niro Sr., a painter who died in 1993, without informing his son, the actor Robert De Niro, or remitting proceeds.

“The moral of this case is, be careful who you consign your artwork to,” Morgenthau said in a press conference.

Biggest Art Scam

Morgenthau and his deputies said Salander in effect stole more than $92 million from collectors, artists and investors. They described it as the biggest art scam they were aware of. Salander-O’Reilly declared bankruptcy in November 2007, as did Salander and his wife, Julie.

“As always, there is more to this case than meets the eye,” Salander’s lawyer, Charles Ross, said outside the courtroom, without elaborating. Andrew Lankler, Morse’s lawyer, declined to comment. She was charged with grand larceny and scheming to defraud.

Morse recently opened Leigh Morse Fine Arts, a gallery on Manhattan’s Upper East Side.

On March 13, two weeks before Salander was arrested for the first time, Steven Harvey, a gallery director, pleaded guilty to falsifying business records in the first degree, a felony. Mark Dwyer, Morgenthau’s chief assistant, said he didn’t anticipate additional charges in the case.

“That’ll be about it,” he said in an interview.

A New York grand jury originally accused Salander and his gallery of stealing $88 million from investors, clients and Bank of America. He operated in a $154,000-a-month mansion off Madison Avenue. There he sold Old Master paintings and modernist artworks.

‘Pretty Good Spender’

A grand jury heard the case for six months and voted then to sit for another six months. Prosecutors said Salander sold the same artworks multiple times to pay debts and fund a lavish life, which included living in an Upper East Side townhouse and taking trips by private plane to Washington, D.C., and Europe.

Morgenthau said alleged victims won’t recover anything as part of the criminal case.

“He was a pretty good spender,” said Morgenthau, who turns 90 at the end of the month. “I don’t think there’s much chance of getting any money.”

In recent months, lawyers for Bank of America’s First Republic unit — which said it’s owed tens of millions of dollars by the gallery — have been negotiating with lawyers for the gallery and creditors on a compromise for sharing proceeds from the sale of the gallery’s art. Creditors have filed papers claiming they’re owed as much as $300 million by the gallery and Salander.

Salander recently started working at a new gallery in Millbrook, New York, where he lives. He has been running it with his father-in-law, Donald Dowden, Dowden testified in bankruptcy court. Salander in May declined to discuss who is financing the venture.

“We don’t know of any legal way to stop him until he’s been convicted,” said Micki Shulman, an assistant district attorney.

To contact the reporters on the story: Philip Boroff in New York at pboroff@bloomberg.net; Lindsay Pollock in New York at lindsaypollock@yahoo.com.