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Leigh Morse, Convicted in Salander Ponzi Scheme, Denied Restitution Reprieve

But the dealer faces no penalties for slow payment

Inside the Salander-O'Reilly Galleries back in the day.

Inside the Salander-O’Reilly Galleries back in the day.

Almost four years to the day since Leigh Morse was ordered to repay victims $1.7 million for her role in the massive Salander-O’Reilly Galleries Ponzi scheme, the dealer, who continues to proclaim her innocence, lost a bid to have her restitution reduced or eliminated.

“She participated in a scheme that caused a great deal of damage,” New York Supreme Court Judge Michael Obus said at the end of the day-and-a-half hearing. “She is not innocent.” In a concession to the difficulty she’s had repaying in full, he didn’t specify a minimum amount due or threaten to send her back to jail on Rikers Island, where she was held on weekends for four months as part of her sentence. So far, she’s repaid $90,000 in cash and art to artist estates and foundations that were looted by the now-defunct Madison Avenue gallery. She was originally ordered to pay $1.7 million within five years.

Manhattan District Attorney Cyrus R. Vance Jr. said in a statement that he’s pleased the judge didn’t reduce the restitution. Three artist estates are still owed money in the case: Earl Davis, the son of modernist Stuart Davis; the Lachaise Foundation, which promotes the work of sculptor Gaston Lachaise; and the Frelinghuysen Morris Foundation, which operates the Frelinghuysen Morris House and Studio, the home of abstract artists George Morris and Suzy Frelinghuysen, in Lennox, Massachusetts. The restitution is a fraction of the $115 million that Morse’s former boss, Lawrence Salander, must pay victims. He’s wrapping up the fifth year of a 6-to-18-year sentence in New York’s medium security Mid-State Correctional Facility. His first bid for parole, in March, was denied. He and his former gallery filed for bankruptcy protection in late 2007.

Ronald Berutti, Morse’s lawyer, said in an email to ARTnews that he and Morse are “grateful” that risks of further incarceration “are in the past.” He said in the hearing that she was “at the end of her financial rope”; likewise, Morse testified that she can’t afford the $1.7 million. “No reasonable person familiar with the facts could believe that Leigh ever had the ability to pay the restitution obligation imposed,” he said in the email. “She will continue to battle by making her best efforts to meet her restitution obligations, but without the deadlines previously imposed.” In court, while Berutti acknowledged that Morse is a convicted felon, he added: “If there is a god, in his eyes, Leigh is innocent.”

The hearing, to assess her ability to pay and whether she’s made an earnest effort, put a microscope over her finances. After she testified that she lives simply with minimal expenses, Assistant District Attorney Kenn Kern confronted her with American Express records for a $274 pair of boots and tickets to concerts and The Audience on Broadway with Helen Mirren, among other expenses. Morse responded that her mother paid for the boots and that the dealer returned them. Morse said the evening outings were either gifts from others or business expenses.

“The defendant wants to have everything her way,” Kern said in court. “She doesn’t want to change her spending or her lifestyle.” He questioned her about expenses associated with a weekend property in Pennsylvania and whether she ever sought to generate money for victims by renting out or selling the Riverside Drive apartment near Columbia University that she owns with her husband, Sigmund Batruk. Batruk, who walks with the aid of a cane, suffered a serious brain injury in a near-fatal car accident in Haiti in 1991. He testified that Morse supports him financially and cares for him, and that he’s not open to selling the apartment, in part because it’s convenient to his doctors. Morse described the weekend home as “run-down” and worth less than the mortgage.

The dealer’s Upper East Side gallery, Leigh Morse Fine Arts, lost money in 2012 and 2013, her accountant, Alan Yedin, testified. But in the first 10 months of 2014, she took distributions of $93,000, according to a court filing Kern referenced. He requested that Obus continue to oversee the case and press Morse to make payments. “I ask you to stay the course a little longer,” Kern said to the judge.

In 2011, a jury found Morse, now 59, guilty of scheming to defraud in the first degree. Prosecutors charged that Morse defrauded artist estates and foundations by misleading or lying to them about the status of works that the gallery sold or traded away, leaving them unable to demand payment or their return. Prosecutors sought one to three years in prison and $9.1 million restitution. The Lachaise Foundation has called Morse “the right-hand woman to the Madoff of the Art World.”

Morse has admitted that she should have been more forthright with estates, but said that she never suspected that Salander wouldn’t pay his debts and that he was running a Ponzi scheme. “I always thought that everyone including me would be paid in the end,” she said in court when she was sentenced, on July 19, 2011.

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