A bankruptcy court judge in the southern district of New York has ordered that art dealer Lawrence Salander cede control of his assets to an appointed trustee.
NEW YORK—A bankruptcy court judge in the southern district of New York has ordered that art dealer Lawrence Salander cede control of his assets to an appointed trustee. On April 17, Judge Cecelia G. Morris of U.S. Bankruptcy Court approved a request to convert the bankruptcy case of Salander and the now-shuttered Salander-O’Reilly Galleries from Chapter 11 status to Chapter 7 status which involves liquidation of all assets except those deemed “exempt.”
Diana Adams, U.S. Trustee for the Department of Justice, cited numerous factors in arguing that the case be converted, including the point that “the debtors have incurred substantial post-petition unpaid liabilities . . . had continuing losses . . . and are receiving funds from a source which is undisclosed on the operating reports.” Adams also cited “a frivolous motion in an ill-advised attempt to force the Gallery estate to employ Mr. Salander, over virtually universal opposition.”
According to the Adams filing, “the debtors’ post-petition conduct has not produced evidence of a compelling desire to place the creditors’ and the estate’s interest ahead of their own self–interest.” Salander’s attorneys did not respond to a request for comment on the ruling.
“Since all the debtors were doing was liquidating assets, it was believed by the creditors’ committee that the liquidation would best be handled by an appointed trustee,” Mark Tulis, of Oxman Tulis Kirkpatrick Whyatt & Geiger, White Plains, N.Y., told ARTnewsletter. Tulis is counsel for the official committee of unsecured creditors in Salander’s personal bankruptcy case.
Tulis had supported the U.S. Trustee’s motion in an April 16 filing, stating, “During the time after our firm’s retention, I focused on marshaling the Debtor’s assets . . . as of today, the case has gone nowhere. . . . Although a broker for the [Manhattan] townhouse was retained and an offer purportedly given, no deal has been consummated. After much prodding for months, a broker for the Millbrook house may now be retained.” The latter is a reference to Salander’s 60-acre estate in New York’s Hudson Valley region.
Earlier in the year, Salander had received court permission to place one of his private residences, a townhouse on Manhattan’s Upper East Side, for sale, with an asking price of $25 million (ANL, 2/5/08).
According to the ruling by Judge Morris, the Salanders must turn over all records and property of the estate to the Chapter 7 trustee. Within 30 days they must also “file an accounting of all receipts and disbursements made, together with a schedule of all unpaid debts.”
Just days before the conversion ruling, the Salander-O’Reilly Galleries’ 20,000-volume book collection was sold to Peter Kraus, of New York’s Ursus Rare Books, for $350,000 on April 14.
Attorneys for Salander-O’Reilly Galleries and secured lender First Republic Bank—to which Salander and the gallery owe approximately $50 million—had solicited bids for the expansive library that comprises rare books, first-edition works and reference materials. Interested buyers were given until April 14 to submit bids in U.S. bankruptcy court in downtown Manhattan. Requirements related to the auction originally stipulated that bids exceed the existing minimum bid of $350,000 by at least $10,000.
“We had a lot of interest in the library—it’s an extremely large collection, and that was part of the difficulty in selling it,” says Joseph Sarachek, of Triax Capital Advisors, who was appointed chief restructuring officer in the case. “We had time pressures because we are moving,” he tells ARTnewsletter. “We are not disappointed. It is really a substantial amount of money.”
Under the terms of a rent settlement between Salander and gallery landlord RFR Holdings, which is controlled by art collector Aby Rosen, Salander was scheduled to vacate the gallery premises at 20-22 East 71st Street by April 30.
Sarachek said proceedings are under way for an auction at Stair Galleries, Hudson, N.Y., of the furniture housed at the gallery, while more than 400 Oriental rugs that were in the gallery inventory will likely be offered for sale at a smaller Manhattan auction house when court approval is granted.
Authorities in the case are also exploring the sale of Edouard Manet’s La Femme aux chiens—a painting Salander had given to the landlord as security; it was to be returned to him as a provision of the rent settlement agreement. In a previous filing, Salander estimated the value of the painting at up to $2 million.