In art as well as finance, Warren Buffett's statement that "it's only when the tide goes out that you learn who's been swimming naked" certainly holds true. As Richard Fuld discovered last November, when his collection sold for less than 70 percent of its estimated value, a market that has driven prices through the roof may have created some unrealistic expectations.

As critics argue over whether the recession is good or bad for art, it is clear that it is definitely bad for the people who sell it. Some merchants have used a bullish market to drive prices upward and elevate artists of marginal talent, while others, such as Lawrence Salander, have crossed the dividing line between questionable ethics and outright fraud.

Salander's scheme reads like a checklist of potential art scams. On a basic level, he offered investors shares in works that he either did not own or had already sold. In the case of John McEnroe, for example, Salander convinced the tennis great to buy half shares in two paintings, Arshile Gorky's Pirate I and Pirate II. McEnroe later discovered that the shares, for which he had paid $2 million, already belonged to someone else.

The share-oversubscription scam duped numerous purchasers, including Renaissance Art Investors, a company that specializes in old master's paintings. Salander also seemed to have a knack for snaring relatives of the rich and famous: his client list included Robert DeNiro's father, Beastie Boys singer Mike D's mother, and the son of American abstract painter Stuart Davis. Furthermore, in addition to his share oversubscriptions, Salander had a lucrative sideline in loans. He managed to cheat Bank of America out of $2 million by mortgaging paintings that he didn't own.

The greatest strength in Salander's scheme lay in its simplicity. Unlike Bernie Madoff, who had to continually find fresh money to replenish his business, Salander merely had to keep investors from discovering each other. In 2007, however, he filed for bankruptcy amid a raft of lawsuits.