Who is Larry Salander?
Larry Salander was born in Long Beach, New York, in 1949 and went to the University of Miami before dropping out to run his father’s antique shop. He opened his own shop a few years later, followed by one on Madison Avenue in New York, branching out into fine art. By 1977 he had become the youngest member of the Appraisers Association of America. Over the next three decades, he would win acclaim in the art world for being a shrewd investor and championing upcoming artists. In 2003 one lifestyle magazine called his gallery the best in the world.
What was the scam?
To fund an extravagant lifestyle, including shopping trips to Europe by private jet and two houses in New York, Salander started to sell items loaned to his gallery by artists and collectors, pocketing the cash. He also set up a Ponzi-style scheme that involved investors buying shares in artworks that he promised he would be able to resell for a large profit. They were then encouraged to reinvest the profits in other deals, along with other investors. Some works were sold to multiple investors. Salander raised more money by setting up a $45m art fund, Renaissance Art Investors.
What happened next?
The apparent success of the schemes meant that investors were initially happy to put
money into Salander’s projects. However, as he started to run out of money, cheques are written by his gallery began to bounce. His inability to repay the money he had promised investors, as well as complaints that work had been sold without their permission, leading to a large number of lawsuits and his gallery was eventually shut down. In 2010 he pleaded guilty to 30 counts of grand larceny and fraud and was sentenced to between six and 18 years in prison.
What lessons are to be learned?
Salander admitted stealing $100m and was ordered to pay $114m in restitution, but it
is estimated that the true losses may be closer to $300m. Among Salander’s victims
were various artists, actor Robert De Niro, tennis legend John McEnroe and hedge-fund
manager Roy Lennox. Lennox, who invested $3.57m in one of Salander’s scams, later
acknowledged that the episode had taught him a valuable lesson-namely, that even if you have the ability to make money, “you have to work just as hard to keep it”. It also shows that expertise gained in one area of investing does not necessarily translate into others.
Kris Paterson is a writer for WhatJobs.com