Posted on 12/13/2008 2:49:10 AM PST by TheMole
Prosecutors have expanded their investigation of prominent New York attorney Marc Dreier, uncovering hundreds of millions more of missing funds in what they characterize as an "extraordinary" fraud played out over two years.
A federal magistrate judge ordered Dreier to remain behind bars Thursday, denying bail because of the "enormous risk of flight." Dreier was arrested in New York Sunday evening and has been charged with fraud in an alleged brazen scheme to bilk sophisticated hedge funds.
Assistant U.S. Attorney Jonathan Streeter said in court Thursday the loss from the alleged fraud is $380 million, well more than the $113 million cited in criminal charges filed Monday because of new information pouring into the prosecutor's office.
The alleged fraud ... targeted some of the most sophisticated institutional investors. Dreier, a Harvard and Yale-educated litigator with a roster of celebrity clients at the 238-attorney firm he founded in 1996, is a "Houdini of impersonation and false pretenses," Streeter said at Thursday's bail hearing.
Dreier's lawyer, Gerald Shargel, had asked that Dreier be released on a $10 million bond signed by Dreier's 19-year-old son and 85-year-old mother and allowed to live under house arrest at his beach home in Quogue, N.Y., or at his Manhattan apartment.
Shargel also told Judge Douglas Eaton that Dreier was prepared to meet with the court-appointed receiver of the Dreier LLP law firm Thursday evening to help identify and locate assets and would provide a complete financial statement. None of Dreier's money is overseas, he said.
[snip]
Prosecutors initially accused Dreier of selling $113 million of fake notes to two hedge funds in October in an elaborate scheme that involved forgery and ruse. Canadian law enforcement arrested Dreier last week alleging he impersonated the senior counsel of a major Canadian pension fund to effect a similar scheme.
(Excerpt) Read more at forbes.com ...
The New York City office of 250-lawyer Dreier LLP was in turmoil last week following the Tuesday arrest of its founder, Marc S. Dreier, in Toronto on an impersonation charge.
"It's like an atom bomb went off in the building -- people are stunned and dazed," a lawyer in the firm said Friday.
After three days in jail, Dreier posted $100,000 bail Friday following a hearing at the Ontario Court of Justice earlier in the afternoon, according to a spokesman for the Canadian Ministry of the Attorney General.
In an interview, Dreier's lawyer, Edward Greenspan, said Dreier was expected to return to the United States by Sunday.
The news that Dreier would not arrive until Sunday upset efforts to arrange a Saturday meeting among Dreier, the firm's only equity partner, and its other lawyers. Two sources had reported efforts to arrange a Saturday meeting.
Meanwhile, Robert Gold, of the New York office of Wilson Sonsini Goodrich & Rosati, confirmed that he and two other lawyers at his firm, Glenn C. Colton and Michael Sommer, will be representing a "substantial group of partners and associates at the firm."
The trio had been retained, Gold said, to examine firm operations and finances, including escrow accounts.
Gold added that, as far as he is aware, as of Friday afternoon, Dreier had yet to retain counsel in New York.
"Impersonation" under Canadian law is considered an "indictable offense" punishable by at least two years in prison, according to Constable Tonyo Vella, a Toronto Police Service spokesman.
"Basically," Vella said, Dreier is being accused of "impersonat[ing] himself as someone else and not himself."
A spokesman at the Ministry of the Attorney General said the charge is based on 403B of the criminal code, which makes it a crime to fraudulently impersonate someone with the "intent to obtain any property or an interest in any property."
But Dreier's lawyer in Canada, Greenspan, said his client has been charged with a "relatively minor" offense. Under the applicable law, the charge could be upgraded to an indictable offense if the prosecutor elects to do so, said Greenspan of Toronto law firm Greenspan, White.
The Toronto Globe and Mail, which sent a reporter to the bail hearing, reported that the charges against Dreier stem from a multimillion-dollar deal between the Ontario Teachers Pension Plan and Fortress Credit Opportunities. Dreier pretended to be Michael Padfield, senior legal counsel for investments at Ontario Teachers, according to legal documents. When Padfield arrived, police were called.
When Greenspan was asked why Dreier was in Toronto, he did not give an explanation.
Dreier, 58, was the former head of litigation in the New York office of Fulbright & Jaworski and, more recently, a partner at Rosenman & Colin, according to his firm biography.
In a statement, the pension fund said it "learned of fraudulent behavior by an individual visiting our premises" and immediately alerted police.
"No Teachers' staff member was involved in the fraudulent behavior," the statement said. "We have reviewed our security procedures in relation to this situation and we believe that no Teachers' funds are involved."
The Dreier firm's contract partners held an emergency meeting Thursday night to discuss the matter, according to a person familiar with the situation. In addition, the firm canceled a holiday party at the Waldorf-Astoria, a lawyer at the firm said.
Dreier's employees received an e-mail stating "it is critically important that any queries from the press be dispatched to" two of the firm's spokespeople, neither of whom have provided comment.
The legal blog Above the Law first broke the news of Dreier's arrest Thursday night.
The arrest is likely to pose unique problems for Dreier LLP.
Founded in 1996, the New York-based firm operates more like a corporation than a partnership, with Dreier, the sole equity partner, controlling expenses and liabilities. All other partners get guaranteed base compensation for two- or three-year periods and a bonus based on fees generated.
"This is a system for lawyers who believe democracy is overrated -- or at least that it is in business," Dreier wrote in a 2007 opinion piece in The National Law Journal, a New York Law Journal affiliate. "Under this alternative model, all policy decisions ultimately reside with the single equity partner."
You need an Ivy league education just to figure out this sentence.
Was it Citicorp that didn't even list CDO in its 06 filing, and took a 30billion loss on them in its 07 filing?
Madows accountant for his 20 billion dollar fund, worked out of a single office, a had, supposedly three employees, one near eighty living in Florida, and one sectary, and the other guy noted for ‘tight pants and tie dye shirts’.
Madows scheme was investigated by the SEC in 06.
Reportedly, there are in just Washington alone 12,000 Federal employees that over see the financial sector.
By the way, how's that Sarbanes Ox working?
Good thing Cox is loyal, as that is the only standard for a Bush.
You mean the Libertarian ideal of only enforcing contracts wouldn't work?
It's been a gold mine for IT consultants and it really established London as a financial center as companies fled there.
One has to also consider that when it’s difficult to make money legitimately, more people will turn to scams.
Fry him. My own attorney is in prison for laundering money at this moment. My escrow account was bled, of course. I have no pity on any of them.
This wouldn’t by any chance be another major Democrat donor ?
Corrupt lawyer ping!
He can just surrender his law license and the charges will be dropped. Works well I hear, but you may have to be from Texas for it to work... or maybe just an ex-Texan. Who knows.
Good question. Doesn't look like he's anywhere near as major as Madoff, but he seems to be a Dem. From www.opensecrets.org, a search for the 2008 cycle shows these two donations:
DREIER, MARC NEW YORK,NY 10022 KASOWITZ BENSON TORRES & FRIEDMAN,/ 4/16/08 $5,000 Democratic Senatorial Campaign Cmte (D)
DREIER, MARC NEW YORK,NY 10022 DREIER LLP/FOUNDER AND MANAGING PAR 5/3/07 $2,300 Richardson, Bill (D)
Richardson? I guess this guy is a moderate Dem by NY standards.
This is from the NYTs....had to chuckle....
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