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Experts Sort Hundreds of Art Claims Linked to Salander Case

Attorneys and other experts handling the Salander-O’Reilly Galleries’ Chapter 11 bankruptcy proceedings have begun to analyze hundreds of claims on thousands of artworks that were inventoried and removed from the now shuttered gallery on the Upper East Side of Manhattan.

NEW YORK—Attorneys and other experts handling the Salander-O’Reilly Galleries’ Chapter 11 bankruptcy proceedings have begun to analyze hundreds of claims on thousands of artworks that were inventoried and removed from the now shuttered gallery on the Upper East Side of Manhattan.

Claimants were instructed to follow a protocol that required them to provide detailed information about the work or works, the factual basis for their claim and any documentation—such as consignment agreements, contracts or letters—that support the assertion of an interest. The deadline for claims submissions was June 15.

Robert Feinstein, of Pachulski Stang Ziehl & Jones, who represents the committee of unsecured creditors, told ARTnewsletter that this marked a “turning point” in the case, in that experts can finally begin to sort out who owns or has interest in which works.

Prior to the bankruptcy filings last November, art dealer Lawrence Salander and Salander-O’Reilly Galleries were the targets of dozens of lawsuits alleging breach of contract, misappropriation of artworks, fraud and other misconduct. Plaintiffs include the collector and former professional tennis player John McEnroe, actor Robert De Niro and the estate of the late Kenneth R. Thomson, a Canadian billionaire and art collector, among other prominent collectors and investors. The gallery was shut down last October, when New York State Supreme Court Judge Richard B. Lowe III granted an attorney’s request to change the locks in order to prevent Salander’s having any further access to any of the artworks in dispute.

Auctions of Salander Property Net $1.9M

Joseph Sarachek, of Triax Capital Advisors, who was appointed chief restructuring officer in the case, took stock of the art and other property related to the bankruptcy filing. These comprise more than 6,000 objects, including paintings, sculptures, antique furniture and rugs, both at the gallery and in the Manhattan townhouse and Millbrook, N.Y., home of the gallery owner and his wife, Julie Salander.

On June 7, 17th- and 18th-century European furniture, some American furniture and various decorative objects from the Salander estate were auctioned at Stair Galleries in Hudson, N.Y.; a group of approximately 400 Oriental carpets was sold at Manhattan’s Tepper Galleries on May 30. Sarachek told ARTnewsletter the sales grossed about $1.9 million, characterizing them as “extremely successful.”

The remainder of the inventory—roughly 4,100 objects of art—are the focus of the claims process, Sarachek says. He is heading a working group of approximately six people that includes Feinstein as well as representatives for First Republic Bank, a secured creditor to whom Salander owes approximately $50 million. The group also includes attorney Joseph M. Vann of Cohen, Tauber, Spievack & Wagner, who was appointed as a representative for artists involved in the claims process. U.S. bankruptcy court judge Martin Glenn was appointed as mediator on a pro bono basis. If mediation fails to resolve all of the outstanding claims, the remaining claims will then be brought before Judge Cecelia G. Morris, the U.S. ¬bankruptcy court judge presiding over the case.

Feinstein said claims were made against “roughly half the art” inventoried. The protocol prioritizes claims of work by living artists and their heirs, he says. After that, the working group will examine the various claims put forth by collectors, investors and consignors.

The art will be classified into three categories, says Feinstein: art that is indisputably owned by artists and their heirs and will be returned; artworks that are indisputably owned by the bankruptcy estate and which will eventually be sold once experts determine the best method of sale; and “in between, all the material that is in dispute.” Representatives in the working group are optimistic that with mediation by Glenn they will be able to establish ownership rights.

The largest claim put forth to date is from Renaissance Art Investors (RAI), which is controlled by Donald Schupak, chairman of Triumph Apparel Company (formerly Danskin). In court filings, Renaissance claimed 816 paintings and sculptures by artists including Benvenuto Cellini, Albrecht Dürer, Anthony Van Dyck and Peter Paul Rubens. RAI has furnished Uniform Commercial Code filings for all of the works in question (the UCC governs the sale or transfer of property), as well as copies of a 26-page consignment agreement dated Jan. 1, 2006 and signed by Schupak and Salander.

According to the claim, “RAI and the Debtor entered into a series of transactions by which RAI became the owner of all of the Debtor’s Renaissance art.” As part of the 2006 consignment agreement, “RAI consigned the purchased Renaissance art to the Debtor and engaged the Debtor to act as RAI’s exclusive consignee.”

Barry Slotnick, of Buchanan Ingersoll & Rooney, is representing RAI and Schupak. Slotnick told ARTnewsletter, “We had a stipulation that was signed and presented to the court when we were in the Supreme Court, before bankruptcy, which clearly indicated that my clients owned all of the Renaissance art.” Slotnick adds that RAI’s claim extends beyond the 816 works named in the list.

According to the court filing, RAI “asserts an ownership interest in all Renaissance artwork owned by the Debtor before or after the date of the bankruptcy filing, including but not limited to . . . all ‘old master paintings, drawings, sculptures, reliefs, tapestries, and other objects of art created in Europe during or after the 12th-century A.D. . . . RAI asserts a claim on and to any and all artwork on the Inventory List which falls within the definition of Renaissance art.”

Townhouse Up for Sale

Meanwhile, the Salanders’ private Upper East Side townhouse has been on the market since February of this year, with an asking price of $25 million. Also still for sale is Edouard Manet’s La Femme aux chiens—a painting Salander had given to the gallery landlord as security. It was returned to Salander under the provisions of a March 14 rent settlement agreement with the stipulation that a “prompt” sale be carried out in order to satisfy a $694,374 outstanding payment due to the landlord. In a previous filing, Salander had estimated the value of the painting at up to $2 million.

The property that was occupied by the gallery, at 20 East 71st Street, is owned by RFR Holdings, which is controlled by art collector Aby Rosen. Attorneys for the building, dissatisfied with the length of time that has elapsed since the court order was issued, recently sought another order enforcing the terms of the agreement. According to the filing: “The Debtor . . . has read the word ‘prompt’ out of the agreement . . . As the Debtor now has [the painting], the Landlord turned over its valuable collateral to the Debtor but will not receive payment on its secured claim within a reasonable amount of time.”

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