Looking back now, friends say that it was clear last summer that something was bothering Larry Salander. He had stopped returning their phone calls, and many hadn’t spoken to him or seen him in months. Those who had run into him on the street or seen him briefly at Salander-O’Reilly, his gallery on Manhattan’s Upper East Side, were struck by how haggard he looked. He seemed distracted and tense, "totally wired," one artist and longtime friend recalls.

By late June, many who knew Salander were aware that he was under some financial pressure, though they did not know all the details. In May, he’d been sued by two clients—the tennis star John McEnroe and Earl Davis, the son of the noted American painter Stuart Davis—who claimed that Salander owed them money and, in Davis’ case, paintings by his father that had been stored at Salander’s gallery and were now missing. (See a slideshow of some of the players and victims.)

Together, McEnroe and Davis were demanding more than $3 million from Salander, but more remarkable than the amount of money involved was the fact that the suits had been filed by two of the art dealer’s closest friends. Disputes between clients and dealers are not uncommon in the art world, and many thought that if Salander was experiencing any financial strain, it was a short-term problem that he would soon resolve.

At 58, Larry Salander was one of New York’s most respected and powerful art dealers. During his 35 years in the business, he had developed a sterling reputation, not only for his integrity, his eye for quality, and his brilliant shows, but also for his business acumen. In 2003, an art-industry report had named Salander-O’Reilly the best gallery in the world, and although not everyone shared that view, by 2007 many believed that Salander was well on his way to achieving that distinction. Some were surprised when, about six years ago, Salander—who had long specialized in American Modernists—suddenly began to expand into Gothic, Baroque, and Renaissance art. But others applauded it as a sign of his originality and boldness, as they did the opening, in the fall of 2005, after a renovation rumored to have cost more than $2 million, of Salander’s new gallery on East 71st Street in a magnificent 25,000-square-foot, seven-story Italianate mansion, whose sweeping marble staircases and velvet-lined rooms were reminiscent of the grandest old European galleries.