Salander Case May Change the Art Market

A move to change the rules governing the sales of high-end art could result from the fallout of an embattled Upper East Side art gallery known for its extensive Renaissance and Baroque pieces, Salander-O’Reilly, art lawyers said.The law that governs sales is the uniform commercial code, and in other major transactions, such as sales of automobiles or real estate, there is a history of titles. Art sales are rarely as regulated.“You can’t buy real estate without getting the protection that what you’re acquiring is owned by the person selling it,” an attorney who specializes in commercial law, Lawrence Weinstein, said. “That doesn’t exist in the art world. What you’ve got in the art world is the furthest thing from that.”The owner of the gallery, Lawrence Salander, who faces about 40 lawsuits filed in the last two months in state and federal court, has voluntarily filed for Chapter 11 bankruptcy in federal court, and on Thursday, a creditor who claims she is owed $4.6 million from Mr. Salander filed a Chapter 7 involuntary bankruptcy petition against the gallery itself.Mr. Salander’s petition lists 53 creditors, and the 20 largest unsecured claims total at least $43 million, court records show. The claims of five creditors were not disclosed.In Chapter 7 bankruptcy, the debtor must liquidate his assets, and the court appoints a trustee to satisfy the creditors’ remaining claims and secure their payments. Under Chapter 11, the business is reorganized under a court-appointed trustee who operates the business to maximize future profits and to repay the debts.In the next several days, creditors will file claims against Mr. Salander to ensure they are part of the bankruptcy proceedings, which serve to insulate the party from future lawsuits.A bankruptcy attorney for Mr. Salander, John Moscow, said the voluntary petition was filed to allow the court to consider what money, assets, and liabilities exist and how those debts will be paid in a formal setting. “The next step is to actually do it,” he said.Today Mr. Salander will appear in the bankruptcy court in Poughkeepsie, where the petition was filed, to begin the proceedings.The attorney who filed the involuntary petition, Charles Lichtman, said there were too many competing and conflicting interests from creditors for any clear answer to emerge without the court intermediary.“The scope of this matter made it clear that a bankruptcy judge is far better situated to address everyone’s claims in one forum and to devote the time to the case that it requires,” Mr. Lichtman said.Mr. Salander also faces a criminal investigation by the Manhattan district attorney’s office, which recently obtained a search warrant for his computer records and documents, a spokeswoman, Jennifer Kushner, said.Mr. Salander has said the debts will all be repaid.“Everybody that I’ve ever owed money to in my life has been paid. The same thing’s going to happen now,” Mr. Salander told The New York Sun in an earlier interview. A home phone number has been disconnected, and calls left with his gallery were not returned.The bankruptcy filings mark the beginnings of a final step in the gallery’s long legal battle, and could spark a new focus on the glamorous — and often overlooked — sales record in the art gallery world.An attorney whose client, Renaissance Art Investors, claim they lost $60 million at the gallery said the move was certainly necessary, and could determine the future of the industry.“This might have larger ramifications in the art world,” Barry Slotnick said. “If there are other people who are doing business like Larry Salander did business, that would not be a good thing for the art gallery world. It might cause people some great concern.”In October, Mr. Slotnick filed an injunction against Mr. Salander in New York State Supreme Court that locked the gallery and effectively cancelled a show where Mr. Salander had hoped to sell a painting attributed to Caravaggio for $100 million.An attorney for the Art Dealers Association of America, Gilbert Edelson, said conversations like this one emerge each time a scandal rises in the art community.“The problem is, nobody has really suggested what it is you can do. 99.9% of all transactions in the art world have no problem, but this one does,” Mr. Edelson said. “I’m sure that there will be people saying things like, ‘We’ve got to do something about this.'”In 2005, another Upper East Side gallery known for its American art collection, Berry-Hill, filed for bankruptcy and listed more than 100 creditors, a debt of $50 million, and assets of between $50 million and $100 million.The booming art market in the last decade has attracted more money to the works, which then in turn can attract people who aren’t necessarily legitimate, Mr. Weinstein said. “When deals go wrong, the losses that people can suffer are huge.”U.S. bankruptcy code essentially allows a person to have a fresh start, but whether Mr. Salander’s reputation could withstand reopening his gallery remains to be seen.“Certainly [his reputation] has a stain on it,” Mr. Lichtman said. “I would bet heavily they will never reopen, nor should they..”

Salander Case May Change the Art Market

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