Another Uptown Big Money Gallery Hits The Skids

Today's Page Six announced cheerily that uptown art dealer Larry Salander has put a $100-million price tag on a Caravaggio. But they don't mention that the old uptown dealership is in full-on crisis: At least 15 lawsuits have been filed against Salander O'Reilly in the last year. Even for a neighborhood filled with galleries that are accustomed to regular legal wranglings and late payments (and rents that run to $200K a month), this is nuts. How bad are things? Larry Salander got sued by John McEnroe, the godfather to one of his children. Youch!

According to Lindsay Pollock and Philip Boroff at Bloomberg News, Salander is being also being sued by a former landlord for (yoinks!) $1.7 million in back rent and penalties. Not paying rent, as you surely know, is one of the best tactics to "borrow" money against overhead.

In August, Salander O'Reilly was even sued by a "member" of the corporation, Myron Kunin, the hair salon heir. (Heh.) Another suer is Arthur Carter, the former New York Observer publisher, whose sculptures were represented by the gallery.

Salander's neighbor, the Berry-Hill gallery, filed for bankruptcy and nearly went out of business last year, because their business was maintained solely on borrowing. The bone of contention at Salander O'Reilly is similar: it's the art dealer's primary shuffle, which works like this. Every sale is actually a loan. The phrase "Ponzi scheme" gets bandied about— though it's not much more illicit than any decent hedge fund.

But speaking of hedge funds! Roy Lennox, of hedge-fund Caxton Associates, filed a suit that explains how the art dealers work. From Bloomberg:

Lennox and Salander became acquainted in early 2002 and Salander made his first proposal a year later, according to Lennox's suit. The dealer allegedly told Lennox he was short of funds to buy a painting by Jean-Baptiste-Camille Corot, a French 19th-century landscape artist, for $800,000. According to the suit, Salander said he'd lined up someone else to buy the same piece from him for $1.25 million, a 56 percent markup.

Lennox wired the dealer $400,000. A year later, as promised, Salander paid him back, plus $225,000, the suit alleges.

Ten deals with Lennox followed, according to the suit, most of them under the same template. Salander needed money to flip an artwork by a major artist. He'd lined up a buyer who'd pay a premium. Lennox need only invest and sit tight.

[...]

Most of the transactions were ``guaranteed by me personally,'' Salander wrote to Lennox, according to court documents. Yet after the first successful deal, Lennox received just one payment, according to the lawsuit. Over four years, Lennox gave Salander $3.6 million and got back $958,332, the complaint alleges.

See? It's easy! You borrow money to buy things, then you sell it to other people, and use that money to buy things that other people buy! It only doesn't work out when you fall short just once—because then your house of cards totally craps out. Soon enough, they run you out of town.