Former tennis champion John McEnroe was duped along with Bank of America, investment firms, art owners and collectors in a sophisticated $88 million art investment scam revealed in New York on Thursday.
Art dealer Lawrence Salander, 59, was arrested at his New York home on Thursday, when he and his gallery were charged with 100 counts, including grand larceny and securities fraud, Manhattan District Attorney Robert Morgenthau told a news conference.
Salander pleaded not guilty in New York's Supreme Court and his bail was set at $1 million. He faces up to 25 years in prison on the most serious charge.
"We intend to vigorously defend against these allegations in the courtroom." Salander's lawyer Charles Ross said.
So far, authorities have identified 26 victims of Salander's scheme, including McEnroe, who lost $2 million after investing a half share in two paintings, Arshile Gorky's "Pirate I and II." The share in the paintings was sold at the same time to another collector, and McEnroe never recouped the money, authorities said.
Morgenthau said the scheme, which lasted from 1994 to 2007, included luring investors who paid cash in exchange for shares of ownership of works of art.
"He sold artwork not owned by him and kept the money and lured investment money in fraudulent investment opportunities," Morgenthau said. Salander used the money to fund "an extravagant lifestyle" of lavish parties and private jets, he said.
At times, Morgenthau said, Salander inflated the value of paintings to score greater investments that were not returned to investors.
The investigation of Salander, the former owner of Salander-O'Reilly Galleries, continues. Other estates he looked after included paintings of the late father of actor Robert De Niro.
Renaissance Art Investors, a company focused on investment in old master paintings, lost $45 million in the scheme, authorities said.
Earl Davis, the son of American abstract painter Stuart Davis, lost $6.7 million, authorities said, while Bank of America lost $2 million after Salander lied about paintings he owned to secure a loan.
Hester Diamond, the widow of late renowned New York art dealer Harold Diamond and mother of Beastie Boys' Mike D, lost $6 million, authorities said.
McEnroe was alerted to the scheme when he learned an art collector owned the same painting he had, authorities said. A spokesman for McEnroe said he was on vacation and unable to be immediately reached.
Most of the artworks, which are yet to be valued, are being held in the custody of a bankruptcy court in Poughkeepsie, New York. Many of the investors have filed civil claims against Salander and his gallery, which filed for bankruptcy and closed in 2007.