Originally posted here at bloomberg.com.

Oct. 29 (Bloomberg) — Sotheby’s sued embattled New York art dealer Lawrence Salander and his gallery, alleging that Salander-O’Reilly Galleries owes it more than $1.64 million. The auction house sought permission to sell artworks that it says were consigned to it by Salander.

An Oct. 19 court order forbids any auction house from moving artworks that are “connected to” the gallery or Salander himself, according to the Sotheby’s suit.

“The order is causing real damage to Sotheby’s and others and has the potential to do far more damage,” Jan Prasens, managing director of Sotheby’s Financial Services, said in an Oct. 25 affidavit. “Buyers who have bid on, and are paying for, consigned works cannot retrieve what is, by law, now their property.”

Salander and his gallery are facing about two dozen suits seeking tens of millions of dollars. They accuse Salander, 58, of selling art on consignment and pocketing all the proceeds; soliciting investments on deals in which he guaranteed profits but paid back little or nothing; and reneging on loans, bills and credit card charges. The gallery has been closed to the public since early October.

In an interview last month, Salander said he intended to pay all his debts. He declined to comment on specific allegations. His lawyer, David Mollon, has said a bankruptcy filing is likely.

Loan Agreement

In January 2005, Sotheby’s agreed to a complex arrangement, according to Prasens’s affidavit. The auction house would buy a 50 percent interest in artworks from Salander-O’Reilly in connection with selling other Salander works on consignment and lending money to the gallery. Sotheby’s today is owed $1.64 million, plus $25,000 in interest that’s growing by $350 a day, according to the affidavit.

Mollon declined to comment on the suit, which was filed Oct. 26 in state Supreme Court in Manhattan.

Sotheby’s said in the suit and affidavit that Salander is in default on the loan agreement. The suit does not specify the artworks that Sotheby’s seeks to sell. It portrays itself as an innocent third party damaged by unrelated litigation.

“Some works have already had to be pulled from auction and others will have to be,” Prasens said. “In what is now one of the most robust art markets ever to be seen, the consequences of not selling now could be significant.”

To contact the writer of this story: Philip Boroff in New York at pboroff@bloomberg.net .

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