Marc Stuart Dreier
Encyclopedia
Marc Stuart Dreier formerly an American lawyer
from New York City
, was sentenced to 20 years in federal prison
on July 13, 2009. He is scheduled for release on October 26, 2026. He is housed at FCI Sandstone
, Minnesota
. He had pleaded guilty on May 11, 2009 to eight charges in the United States District Court for the Southern District of New York
. The eight charges included one count of conspiracy to commit securities fraud
and wire fraud
, one count of money laundering
, one count of securities fraud and five counts of wire fraud in a scheme to sell $700 million in fictitious promissory notes. Since December, 2008, Dreier was implicated in a massive investment fraud case which allegedly began in 2004. He was the sole equity partner
of the dissolved law firm
, Dreier, LLP.
Dreier was charged around the same time that Bernard Madoff
confessed to his fraud.
Civil charges, filed in December 2008 by the U.S. Securities and Exchange Commission, are pending.
On October 8, 2009, the state of New York disbarred him. He had been inducted in May 1976.
of Long Island
, in an affluent area known as the Five Towns
. His father, a Polish immigrant
, owned a chain of movie theaters. Dreier presided over the Lawrence High School
student council, and graduated "most likely to succeed". He graduated from Yale University
in 1972 with a Bachelor of Arts
, and earned a Juris Doctor
from Harvard Law School
in 1975. He began his career as a "shining star" in the late 1970s at Rosenman & Colin
, Freund, Lewis & Cohen, then a 90-lawyer litigation firm, and was well regarded. "He was a very smart, hard-working guy....Funny, personable -- part of the social mix," but what most distinguished him was his ability to think on his feet. "He's very quick. Very smart."
In the early 1980s, Dreier was named a partner at Rosenman. In 1987, he married a Rosenman associate named Elisa Peters. He and his wife separated in 2000, around the time that Dreier broke with a partner and started his own firm.
Dreier's son, Spencer, attended Union College
for part of his freshman year, but transferred to another school. On May 29, 2009, he filed a defamation lawsuit against his former roommate, Ben Clorite, for one million dollars. The lawsuit claims that Clorite assaulted him and defamed him on the Wall Street Journal's Law Blog.
In 1989, he joined the New York office of Fulbright & Jaworski
. Dreier would become co-head of litigation in New York—but the firm noted in a statement released after his arrest that at the time Dreier left Fulbright, in March 1995, there were only ten New York litigators.
He worked for Duker & Barrett, for less than a year. (Its founding partner, William Duker, would later plead guilty to four counts of fraud called "one of the most serious cases of legal fraud" ever prosecuted.)
In 1996, he teamed with a Florida lawyer named Neil Baritz, who had a small corporate and securities practice, to found a firm called Dreier & Baritz, a precursor to Dreier LLP in 1996, but struggled to distinguish his practice.
From 1999 to 2002, Dreier, Baritz & Federman was formed and would have offices in New York, Boca Raton, with most associates in Oklahoma. Dreier would run the new firm's already leased Park Avenue office. Dreier favored plaintiff
class-action lawsuits, which brought in large revenue. Federman had problems with Dreier's spending and his managerial style and secrecy, which culminated in a lawsuit.
Dreier pushed to impress, acquiring expensive trappings. He and his wife had owned a house in Westhampton
. He bought a place in Quogue
, and then the house next door. He purchased the $18 million 121 feet (36.9 m) yacht
Seascape, with a crew of 10 and a Jacuzzi
, and docked it in New York
and St. Martin. Dreier owned a waterfront home in the Hamptons, a Manhattan triplex, and leased a penthouse on Ocean Avenue in Santa Monica, California
. He drove a Mercedes 500
in New York and an Aston Martin
in California. He was considered a "bon vivant" because he dated beautiful women, was a member of the Harmonie Club
, and maintained a continuously high profile at charity events.
had $30 million to $40 million worth of art, including works by Picasso and a Warhol depiction of Jacqueline Kennedy Onassis
.
Dreier operated like a corporation and not like a partnership. Mr. Dreier was the sole equity partner
owner and controlled all of the firm's finances and handled all administrative functions. There was no executive committee and no partners meetings. All deals were structured so that only he knew all the specifics and had access to all accounts. Dreier convinced lawyers that such an arrangement was best by emphasizing that it would allow them to concentrate on law, while he worried about running the firm.
He hired lawyers on three-year contracts, fixing their salary and paying bonuses based on the fees each lawyer brought in. According to court filings, some lawyers received more than $50,000 in salary every two weeks.
In 2007, Mr. Dreier expanded to Los Angeles and brought in Hollywood superstar lawyer Stanton "Larry" Stein, whose clients included the Olsen Twins and Hilary Duff
. The expansion boosted Dreier LLP's revenue to $90 million in 2007 from $60 million in 2006, according to court filings. However, the office actually operated at a net loss of approximately one million dollars a month, despite the burgeoning volume of business. On January 27, 2009, Paul S. Anik, 54 (partner at Dreier Stein Kahan Browne Woods George, LLP) died from a sudden stress-related heart attack.
On September 28, 2008, New York Magazine stated that 20 attorneys of the firm and its affiliates were selected for inclusion in "New York Super Lawyers, 2008 Edition" by Law & Politics, the legal publisher and independent researcher of multiple nationwide surveys. In 2007, 16 attorneys were named.
Dreier's two children were on his payroll, and he spent $10-million of the firm's money at New York's Gagosian Gallery
in 2008.
In March, 2009, the law firm Fox Rothschild
acquired Pastore Osterberg, a firm in Stamford, Connecticut
, founded by Dreier attorneys, in late 2008. Joe Pastore and Eric Osterberg will join along with seven other Dreier attorneys. They will focus on litigation, telecommunications, technology, securities, and intellectual property.
, participated in several of the largest retail bankruptcies in previous years, including Kmart
, FAO Schwarz Inc., KB Toys
Inc., Stage Stores
, Office Max, and eToys.com
. During his legal career, Traub has had his own ethical controversies, especially conflict of interest
issues which continue to shadow him.
Traub became a Dreier partner, earning in the range of $1 million or more, according to the statement of financial affairs, and co-chair with Norman Kinel of the bankruptcy practice.
On December 5, 2008, Traub sent a letter to clients announcing he and other bankruptcy lawyers had resigned from the firm, but would continue to practice together as their former partnership, Traub, Bonacquist & Fox LLP. “In light of recent developments, of which we were unaware until yesterday, we have resigned from Dreier LLP, effective immediately,” the letter states.
In February, 2009, Epstein, Becker & Green, a firm specializing in government contracts, brought the seven-member Traub/Dreier bankruptcy team into their New York office: Paul Traub, Steven E. Fox, Wendy G. Marcari and Maura I. Russell; and associates Brett J. Nizzo, Anthony B. Stumbo and Bradford Tobin. The firm has 400 attorneys based in eleven US cities.
As of December, 2008, Harold F. Bonacquist, a passive partner, is a political attaché at the United States
Consulate in Istanbul
, Turkey
.
, a billionaire real estate dealmaker. The most recent case was the unsuccessful eviction of Bank of America
Securities LLC from his flagship Manhattan building, 9 West 57th St., on the dubious grounds that one of the bank's brokers had been accused of illegal trading.
In 2000 Solow decided to litigate for ownership a $10 million oceanfront house in East Hampton
. Peter Morton
, co-founder of the Hard Rock Cafe
restaurant chain, had signed a contract to purchase the home from Dr. Gary Feldstein. Solow tried to break their contract and buy the place himself. Years of litigation ensued. Dreier filed suits in state courts in Manhattan and Suffolk County, in federal court in both the Eastern and Southern Districts of New York, in bankruptcy court in Florida, and in several corresponding appellate courts. "He had a certain glibness, this certainty that he could get away with that which other lawyers couldn't," says Feldstein's lawyer, Kevin Smith, whom Dreier named as a defendant in one of the suits. "He was like Gatsby without the charm." In 2003, the United States Court of Appeals for the Second Circuit
, citing their "extensive history of persistent, repetitive, and vexatious litigation," ordered Solow and Dreier to pay double costs to Morton and Feldstein. The litigation cost Solow an estimated $6 million in legal fees, much of it going to Dreier.
In February 2004, advertisements labeled "legal notices" ran in The New York Times
and the New York Post
. The bogus ads, a costly embarrassment, informed "all unsecured creditors" in developer Peter Kalikow's 1994 Chapter 11 reorganization that they "might have additional rights of recovery" because of Kalikow's failure "to make truthful disclosure." More than 50 calls and 18 faxes came in to the Evergence Capital Advisors, Inc., by creditors. Evergence was a defunct Florida corporation run by Kosta Kovachev, a Belgrade-born, onetime Morgan Stanley
broker facing SEC charges for his alleged participation in a $20 million Ponzi scheme
, for which he ultimately paid the SEC $358,148 in penalties and interest. The Evergence phone and fax numbers went directly to telephone lines at 499 Park Ave. -- the offices of Dreier, LLP. It was Dreier who had purchased the newspaper ads, using Evergence and Kovachev as a front. And after Manhattan federal bankruptcy court Judge Burton Lifland, who oversaw Kalikow's bankruptcy, (and who is presiding in the Madoff Investment Scandal
bankruptcy) ordered Dreier to disclose his client's identity: Solow had hired Dreier to place the ads. Lifland ordered Dreier and Solow, to pay about $300,000 in sanctions to Kalikow.
In November, 2008, Dreier allegedly claimed that Solow was looking to raise $500 million by selling short-term, high-interest notes which audit report, Dreier had allegedly forged. The report had been used to try to dupe a hedge fund
, Whippoorwill Associates, into buying bogus Solow Realty promissory notes. On October 15, Fund managers, who had bought $115 million of the notes in 2006 or 2007, had demanded the meeting at Solow's offices when they weren't repaid on schedule. Dreier arranged it with Kovachev, posing as Solow's controller. In October 2008, Dreier allegedly sent a Connecticut hedge fund's managing director documents that he said were Solow's audited financial statements, and the fund bought a forged $25 million note, for $13.5 million. Dreier allegedly sent a New York hedge fund the same documents he'd given the Connecticut fund, but portfolio managers wanted more information. Dreier forwarded four e-mails that purported to be from other funds that had purchased Solow notes, as well as a Dreier LLP opinion letter vouching for the notes. A portfolio manager subsequently asked to speak directly to someone at Solow Realty. Dreier scheduled a conference call for Oct. 23, and provided a telephone number located in the conference room at Dreier LLP's offices in Stamford, Connecticut
. Kovachev allegedly got on the phone, and, pretending to be Solow CEO Steven Cherniak, answered questions about the notes and Solow's finances. The next day the hedge fund bought about $100 million in notes. Both the Connecticut and New York funds were dubious and brought their doubts to Solow Realty and its audit firm. In November, one hedge fund manager told Dreier that he'd called Solow Realty, and copied him on an e-mail to Solow about the notes. Solow's attorneys subsequently contacted federal authorities, that Mr. Dreier might be engaged in financial fraud.
seeks over $84 million, and Fortress Credit Opportunities, part of Fortress Investment Group
, has filed a $61.9 million unsecured claim. Ex-law partner Bruce F. Bronster is seeking $767,000, and entertainment attorney, Lisa Bonner is claiming $448,365.
More than 800 pages of clients were named as "creditors holding unsecured non-priority claims", and have been filed in a New York court include Bill Cosby
, Tim Burton
, Justin Timberlake
, the music groups the Virgins, the Dead Trees and the Black Angels
, production company Monkey Dog Music, Harry Connick, Jr.
, Elvis Costello
, Jon Bon Jovi
, Diana Krall
, 50 Cent
, Echo & the Bunnymen
and companies representing the Doors
, the B-52's
and the Ramones
. Sports figures include baseball players Andy Pettitte
and Sammy Sosa
, tennis star Maria Sharapova
and hockey player Kevin Weekes
, teams Manchester United F.C.
and the New York Mets
and the Major League Baseball Players Association
.
In March, 2008 Dreier sued client, Judith Regan
, claiming she owed the firm, fees in connection with her $100 million defamation and breach of contract
suit against her former employer, News Corp.’s HarperCollins
Publishers LLC. On Dec. 9, 2008, Regan claimed Dreier tried to extort a settlement from her and improperly disclosed her $10.75 million settlement with HarperCollins.
rejected the prosecutors' request of a maximum responding, "he is not Mr. (Bernard) Madoff
from any analysis, and that’s why I can’t understand why the government is asking for 145 years." Dreier addressed the Court, his family, his clients and the lawyers who worked for him. “I’m sorry, deeply sorry, for the harm and the sadness that I have caused to so many people." The U.S. Probation
Department had recommended a sentence of 25 years.
In a recent letter to the Court, Dreier wrote: “I recall only that I was desperate for some measure of the success that I felt had eluded me. I lost my perspective and my moral grounding, and really, in a sense, I just lost my mind.”
At his plea hearing on May 11, 2009, Dreier read a statement, “I engineered a scheme to issue and sell fictitious promissory notes purportedly issued by companies in the United States and Canada,” and subsequently pleaded guilty of swindling $380M USD from various hedge fund
s by selling worthless financial instruments without any plea agreement with the government.
The United States Securities and Exchange Commission
has also filed a separate civil suit
against him for stealing funds from an escrow
account belonging to one of the firm's bankruptcy
clients.
An amended indictment on March 17, 2009 added an eighth count of money laundering
to the charges, and $700 million in forfeitures. From 2004 to December 2008, Dreier "sold to funds and others approximately $700 million worth of Fake Developer Notes and Fake Pension Plan Notes." The Case Number is: S1 09Cr085.
The eight-count indictment
states his deception began in 2004, that Dreier gave the purchasers of his notes false financial
statements; arranged meetings for investor
s with people who impersonated officials from purported issuers of the notes
; sold fake promissory note
s purportedly issued by a Canadian pension plan; and embezzled more than $ 400 million from his client escrow account.
Dreier may also be facing criminal charges in Canada
for impersonating an in-house lawyer at the Ontario Teachers' Pension Plan
in connection with a sale of financial instruments worth $44.7 million USD. He was released on bail
, only to be arrested again by U.S. authorities upon returning to New York.
Dreier had been initially released on bail on February 13, 2009. On February 5, 2009 U.S. District Judge Jed Rakoff in Manhattan
had written in a brief that a total of 10 conditions set for the release Marc Dreier, "will be sufficient to reasonably assure the defendant's appearance in court as required."
He issued a formal bail
order on February 9, 2009, to be freed on $10 million bond, under 24-hour house arrest
with armed guards and electronic monitoring. Judge Rakoff noted prosecutor
s had demonstrated, for the limited purposes of bail, that Mr. Dreier "is not only a master of deceit and a doyen of dishonesty, but the kind of person who, under stress, may resort to desperate measures" and his motive to flee was "palpable." but the bail package proposed by Mr. Dreier's lawyers "goes far to minimize this risk." The bond would be co-signed by his son and mother, holding them responsible if Mr. Dreier were to flee. He also ordered that all means of communication, other than a land-line telephone needed for electronic monitoring, be removed from Mr. Dreier's apartment and that no visitors would be allowed without approval from the government.
In a letter to the magistrate
judge
opposing bail, Assistant U.S. Attorney Jonathan R. Streeter had said, Dreier is "exceptionally deceptive, brazen, creative and resourceful in achieving his criminal goals."
On January 22, 2009, U.S. Magistrate Judge Douglas Eaton had modified his earlier ruling and set bond at $20 million dollars, requiring Dreier to secure bail with $10 million in cash or property and include at least four co-signers, who would be required to pay the money if Dreier flees. Dreier also would have to submit to electronic monitoring and see a psychiatrist twice a week. He had asked to be freed on a $10 million bond and subject to electronic monitoring. He said his mother and his 19-year-old son, Spencer would co-sign the bond. Dreier was subsequently placed under house arrest, and among one of the court-appointed security guards monitoring him was a retired F.B.I. agent.
Eaton told Shargel, "These are really extraordinary facts. His behavior was reckless, clever, improvising. Frankly, it suggests a mental disorder."
and wire fraud
, as well as a wire fraud charge, and admitting to impersonating an accountant for Solow Realty & Development at Mr. Dreier's request in a meeting with investors at their Manhattan offices; and then, impersonating Solow's then-Chief Executive, Steven Cherniak at Mr. Dreier's request in a separate phone call with investors. He had been arrested in December, 2008. He will forfeit his services payment from Dreier for the caper: $215,000. Sentencing of upwards of five years is scheduled for March 5, 2010, along with more than $100 million in restitution
.
On April 22, 2009, Kovachev had been arraigned on new charges: conspiracy to commit securities fraud, securities fraud
and wire fraud
, adding a forfeiture allegation seeking to obtain money placed by Kovachev in four different bank accounts. Kovachev had waived indictment and entered a plea of not guilty.
Kovachev was paid $115,000 from the Dreier firm’s operating account and $100,000 from its attorney trust account.
On December 4, 2008, while Dreier was in a Canadian jail attempting to move cash out of the law firm’s accounts, Kovachev appeared at the law firm to pick up three paintings. There were only two paintings, and Mr. Kovachev took them and left.
In 2006, he lost his broker's license from the National Association of Securities Dealers after being implicated in a $28 million Ponzi scheme. He refused to cooperate with investigators then and eventually paid more than $350,000 penalties and interest to settle the matter, without admitting wrongdoing.
The Case Number, dated December 18, 2008 is: USA v. Kosta S. Kovachev, 08 MAG 2792
pleaded guilty to conspiracy
to commit securities fraud and wire fraud, as well as securities fraud, at a hearing before U.S. Magistrate Judge Ronald L. Ellis in Manhattan. He has agreed to forfeit the compensation of $100,000 from Dreier in November, 2008 to impersonate both a person at a Canadian pension plan and a few days later a representative of an Icelandic hedge fund by telephone, in order to sell about $44.7 million in fictitious promissory notes. Sentencing is scheduled for February 5, 2010, of up to 20 years of incarceration.
From 1983 to 1986, he was a staff attorney in the Securities and Exchange Commission's Enforcement Division, and from 1987–2008, he was an analyst and money manager. Between 1999 and 2008, he and Dreier managed an investment fund together.
in connection with an elaborate scheme that raised at least $113 million from the sale of bogus promissory note
s.
The complaint alleges that since at least October 2008, Dreier had been marketing illegitimate promissory notes, including bogus notes of a New York–based real estate development company, to hedge funds and other private investment funds. He had closed at least three sales. Dreier convinced purchasers that the notes were genuine. He allegedly distributed fake financial statements and audit opinion letters of a reputable accounting firm, and recruited assistance to represent legitimate companies involved in the transactions, including false e-mail addresses and telephone numbers. Dreier directed that two purchasers of the bogus notes wire payment to what his law firm's escrow account. At least one purchaser discovered the fraud, and received the return of its investment. There is an unaccounting of approximately $100 million in known proceeds from the sale of the bogus notes. Dreier had been offering fictitious promissory notes in the name of former client, Solow Realty, a New York real estate development company. Since at least October, 2008 Dreier had approached at least three different investment funds with an offer to sell, at a deep discount, various short-term, unsecured promissory notes, ostensibly issued by Solow. Two of the investment funds agreed to purchase the notes (one fund purchased notes in two separate transactions) and forwarded the payments of approximately $113 million to an account in the name of "Dreier LLP Attorney Trust Account". A third fund was offered the notes, but declined to participate. All of the offers were accompanied by documents that Dreier subsequently admitted he knew were fabricated. Dreier offered the notes for sale even though he knew Solow had never issued them, had not authorized Dreier to market them, and knew nothing of their existence. Dreier had provided the hedge funds with fabricated documents including a "form" note and related agreements, "audited financial statements," and purported audit letters, which bore the forged signature of Solow's auditor, but which were printed on purported stationery of Solow's auditing firm. Dreier never told the representatives from the hedge funds that the entire marketing and sales plan was fictitious.
On December 8, 2008, the SEC filed declarations from firm controller John Provenzano and Dreier lawyer Norman N. Kinel. Provenzano detailed how millions of dollars were missing from client accounts. He stated that he was aware since he took his position in August 2005 of the disbursement of between $30 million and $40 million in Dreier accounts to pay for works of art. Dreier LLP maintained eight escrow accounts where client funds were commingled and eight other accounts for individual clients. Kinel e-mailed Dreier on Dec. 1 requesting disbursal of $38.5 million out of an escrow account on behalf of 360networks (USA) Inc., a client that had emerged from bankruptcy in 2002. Dreier had remained counsel for the official committee of unsecured creditors in connection with 360's Chapter 11 bankruptcy and Kinel asked for the money for distribution to unsecured creditors, but only $19 million remained in the accounts. Provenzano recounted that in phone conversations with other firm partners, Joel A. Chernov and Steven R. Gursky on Dec. 3 and Dec. 4. Dreier said that, had he not been in custody, he would have been able to return to New York and sell some of his art so the money could be returned. On both days, Provenzano was asked by Dreier, who was incarcerated in Canada on a charge of impersonation, related to his dealings with the hedge funds, to transfer $8 million and then $10 million from the escrow accounts into Dreier's own accounts, but Provenzano refused.
The case is SEC v. Dreier, 08-cv-10617 U.S. District Court for the Southern District of New York (Manhattan).
A 10 page list of property filed with the Court some of which includes: 5 bank
/investment
accounts; Boats: “Seascape,” 2005 Hessen Motor Yacht, 2008 Novorunia Equator Yacht Tender, Yamaha Waverunners (4); Cars: 2007 Aston Martin, DB9 Volante, 2006 BMW 650i convertible, 2000 Mercedes Benz S500 Sedan, 1997 Mercedes Benz SL500 Roadster; More than 100 works of Art: “Chair with Book on Red Carpet," David Hockney
; “First Painting with Bottle,” Roy Lichtenstein
; “Blue Jackie,” “White Jackie,” “Jackie Profile Looking Down,” Andy Warhol
; “Portrait of a Girl,” Pablo Picasso
; “Grand Masque,” Henri Matisse
; “Big Thief,” Tom Otterness
, and a 2006 high-definition
, Salma Hayek
video
by Soho
photographer Robert Wilson; Real Estate: New York City
condominium
151 E. 58th street; Hamptons
homes: East Quogue (2), Sag Harbor; Anguilla
, West Indies condominium (2).
After his arrest, Dreier attempted to transfer the two properties in the Hamptons
worth a total of US$12.5 million to his son, Spencer. Spencer asked the caretaker of the properties to file papers claiming the father in October signed over interest in the properties as a reward, because the son agreed to spend the summer with him. The caretaker declined to do so.
is the court-appointed receiver for Dreier LLP. On December 16, Pomerantz filed for Chapter 11 bankruptcy on behalf of the firm, declaring that "no effective management" exists at the firm in the wake of Dreier's arrest. Dreier was the sole equity partner of the firm. The firm owes malpractice insurance carrier Chubb Group of Insurance Companies more than $213,000 in unpaid bills by December 31, 2008, otherwise the $10 million insurance policy would expire and leave Dreier's 240 or so lawyers without coverage.
On March 26, 2009, Pomerantz disclosed he has recovered more than $100 million in assets, including $39 million in art; an $18 million, 121 feet (36.9 m) yacht; homes in Manhattan; three properties in the Hamptons east of New York; parcels in Anguilla
owned by Dreier or his family members; and five cars. The yacht, Seascape which liquidation price was reduced from $13.5 million to $12.5 million, was bought through the sale of fake notes. Dreier held stock certificates in an office safe and stakes in a company called People Capital and a startup bio-diesel firm in Argentina
. He also controlled an investment vehicle called Armada Partners. However, “large amounts” may not be collectible. Pomerantz's firm will be billing $1.4 million for its services.
On March 26, 2009, an auction held at the law office sold most of the firm's furnishings and accoutrements at rock bottom prices, with the exception for Mr. Dreier's furniture and paintings.
On June 17, 2009, his two neighboring oceanfront homes in Southampton/ East Quogue, New York will be auctioned for possibly up to $12.5 million.
On July 21, 2009, his 34th floor, 3000 square feet (278.7 m²) four-bedroom, five-bathrooms Manhattan apartment with massive outdoor terrace was sold at auction for $8.2 million, about $2 million less than the $10.43 million he paid in 2007.
involuntary bankruptcy
petition
for Dreier on January 26, 2009. Wachovia Bank National Association and the bankruptcy estate of 360networks Inc also joined Gowan in the involuntary petition
as creditors. The three said they are owed about $88.5 million.
Fortress Investment Group LLC, a private-equity and hedge-fund manager, lost $125.7 million buying phony promissory notes issued by Solow Realty & Development Co.. Elliott Management Corp., a hedge-fund firm lost $101.1 million. Eton Park Capital Management LP, lost $84.4 million; Perella Weinberg Partners, $46 million; Concordia Advisors LLC, $22.3 million; Novator, $20 million; and Meyer Ventures LLC, $13.4 million.
Dreier owes more than $40-million to various creditors, including many of its own lawyers.
Chapter 7 Trustee Salvatore LaMonica, who’s in charge of Dreier’s bankruptcy case in the personal liquidation proceeding initiated by several creditors, is seeking bankruptcy court permission to hire an auctioneer to sell off Dreier's three properties, the Upper East Side apartment, and the two neighboring properties in the Hamptons.
Dreier moves aggressively over the next few years to bring a number of affiliates under his umbrella, opening offices in Stamford, Conn., Albany, New York, Pittsburgh, Los Angeles and Santa Monica, Calif.
Dreier begins marketing promissory notes supposedly issued by Solow Realty & Development Co. to various hedge funds and investment funds. The "notes" pay between 8 percent and 12 percent interest with terms of between one and two years. In several instances, Dreier provides fake financial statements, backed up with forged letters purportedly issued by the accounting firm Berdon LLP.
News of his arrest sparks emergency partnership meetings and attorneys affiliated with the firm begin jumping ship.
The Securities and Exchange Commission files a civil suit against Dreier.
- partially compiled by Mark Hamblett, The American Lawyer
May 2, 2010 Documentary film about Marc Dreier, "Unraveled," directed by Marc Simon, has world premiere at Toronto Hot Docs Festival
Lawyer
A lawyer, according to Black's Law Dictionary, is "a person learned in the law; as an attorney, counsel or solicitor; a person who is practicing law." Law is the system of rules of conduct established by the sovereign government of a society to correct wrongs, maintain the stability of political...
from New York City
New York City
New York is the most populous city in the United States and the center of the New York Metropolitan Area, one of the most populous metropolitan areas in the world. New York exerts a significant impact upon global commerce, finance, media, art, fashion, research, technology, education, and...
, was sentenced to 20 years in federal prison
Federal prison
Federal prisons are run by national governments in countries where subdivisions of the country also operate prisons.In the United States federal prisons are operated by the Federal Bureau of Prisons. In Canada the Correctional Service of Canada operates federal prisons. Prison sentences in these...
on July 13, 2009. He is scheduled for release on October 26, 2026. He is housed at FCI Sandstone
Federal Correctional Institution, Sandstone
The Federal Correctional Institution in Sandstone, Minnesota, is a low security prison for male offenders.FCI Sandstone is situated about 100 miles northeast of Minneapolis/St...
, Minnesota
Minnesota
Minnesota is a U.S. state located in the Midwestern United States. The twelfth largest state of the U.S., it is the twenty-first most populous, with 5.3 million residents. Minnesota was carved out of the eastern half of the Minnesota Territory and admitted to the Union as the thirty-second state...
. He had pleaded guilty on May 11, 2009 to eight charges in the United States District Court for the Southern District of New York
United States District Court for the Southern District of New York
The United States District Court for the Southern District of New York is a federal district court. Appeals from the Southern District of New York are taken to the United States Court of Appeals for the Second Circuit The United States District Court for the Southern District of New York (in case...
. The eight charges included one count of conspiracy to commit securities fraud
Securities fraud
Securities fraud, also known as stock fraud and investment fraud, is a practice that induces investors to make purchase or sale decisions on the basis of false information, frequently resulting in losses, in violation of the securities laws....
and wire fraud
Wire fraud
Mail and wire fraud is a federal crime in the United States. Together, 18 U.S.C. §§ 1341, 1343, and 1346 reach any fraudulent scheme or artifice to intentionally deprive another of property or honest services with a nexus to mail or wire communication....
, one count of money laundering
Money laundering
Money laundering is the process of disguising illegal sources of money so that it looks like it came from legal sources. The methods by which money may be laundered are varied and can range in sophistication. Many regulatory and governmental authorities quote estimates each year for the amount...
, one count of securities fraud and five counts of wire fraud in a scheme to sell $700 million in fictitious promissory notes. Since December, 2008, Dreier was implicated in a massive investment fraud case which allegedly began in 2004. He was the sole equity partner
Equity partner
An equity partner is a partner in a partnership who is a part owner of the business, and is entitled to a proportion of the distributable profits of the partnership...
of the dissolved law firm
Law firm
A law firm is a business entity formed by one or more lawyers to engage in the practice of law. The primary service rendered by a law firm is to advise clients about their legal rights and responsibilities, and to represent clients in civil or criminal cases, business transactions, and other...
, Dreier, LLP.
Dreier was charged around the same time that Bernard Madoff
Bernard Madoff
Bernard Lawrence "Bernie" Madoff is a former American businessman, stockbroker, investment advisor, and financier. He is the former non-executive chairman of the NASDAQ stock market, and the admitted operator of a Ponzi scheme that is considered to be the largest financial fraud in U.S...
confessed to his fraud.
Civil charges, filed in December 2008 by the U.S. Securities and Exchange Commission, are pending.
On October 8, 2009, the state of New York disbarred him. He had been inducted in May 1976.
Early life, education, and career milestones
Marc Dreier grew up on the South ShoreSouth Shore (Long Island)
The South Shore of Long Island, in the U.S. state of New York, is the area along Long Island's Atlantic Ocean shoreline. Though some consider the South Shore to include parts of Queens, particularly the beach communities in the Rockaways such as Belle Harbor, the term is generally used to refer to...
of Long Island
Long Island
Long Island is an island located in the southeast part of the U.S. state of New York, just east of Manhattan. Stretching northeast into the Atlantic Ocean, Long Island contains four counties, two of which are boroughs of New York City , and two of which are mainly suburban...
, in an affluent area known as the Five Towns
Five Towns
The Five Towns is an informal grouping of villages and hamlets in Nassau County, New York, United States on the South Shore of western Long Island adjoining the border with Queens County in New York City. Despite the name, none of the communities is a town...
. His father, a Polish immigrant
Polish American
A Polish American , is a citizen of the United States of Polish descent. There are an estimated 10 million Polish Americans, representing about 3.2% of the population of the United States...
, owned a chain of movie theaters. Dreier presided over the Lawrence High School
Lawrence High School (New York)
Lawrence High School is a four-year public high school located in Cedarhurst on Long Island in New York, United States. It is a part of the Lawrence Public Schools, and is the district's only public high school.- Details :...
student council, and graduated "most likely to succeed". He graduated from Yale University
Yale University
Yale University is a private, Ivy League university located in New Haven, Connecticut, United States. Founded in 1701 in the Colony of Connecticut, the university is the third-oldest institution of higher education in the United States...
in 1972 with a Bachelor of Arts
Bachelor of Arts
A Bachelor of Arts , from the Latin artium baccalaureus, is a bachelor's degree awarded for an undergraduate course or program in either the liberal arts, the sciences, or both...
, and earned a Juris Doctor
Juris Doctor
Juris Doctor is a professional doctorate and first professional graduate degree in law.The degree was first awarded by Harvard University in the United States in the late 19th century and was created as a modern version of the old European doctor of law degree Juris Doctor (see etymology and...
from Harvard Law School
Harvard Law School
Harvard Law School is one of the professional graduate schools of Harvard University. Located in Cambridge, Massachusetts, it is the oldest continually-operating law school in the United States and is home to the largest academic law library in the world. The school is routinely ranked by the U.S...
in 1975. He began his career as a "shining star" in the late 1970s at Rosenman & Colin
Rosenman & Colin
Rosenman & Colin LLP was a New York City-based law firm that practiced from 1912 to 2002, at which point the firm merged with Chicago-based Katten Muchin Zavis to form Katten Muchin Rosenman...
, Freund, Lewis & Cohen, then a 90-lawyer litigation firm, and was well regarded. "He was a very smart, hard-working guy....Funny, personable -- part of the social mix," but what most distinguished him was his ability to think on his feet. "He's very quick. Very smart."
In the early 1980s, Dreier was named a partner at Rosenman. In 1987, he married a Rosenman associate named Elisa Peters. He and his wife separated in 2000, around the time that Dreier broke with a partner and started his own firm.
Dreier's son, Spencer, attended Union College
Union College
Union College is a private, non-denominational liberal arts college located in Schenectady, New York, United States. Founded in 1795, it was the first institution of higher learning chartered by the New York State Board of Regents. In the 19th century, it became the "Mother of Fraternities", as...
for part of his freshman year, but transferred to another school. On May 29, 2009, he filed a defamation lawsuit against his former roommate, Ben Clorite, for one million dollars. The lawsuit claims that Clorite assaulted him and defamed him on the Wall Street Journal's Law Blog.
In 1989, he joined the New York office of Fulbright & Jaworski
Fulbright & Jaworski
The international law firm of Fulbright & Jaworski L.L.P. is one of the largest law firms in the United States with nearly 1,000 attorneys in over 50 practice areas. The firm was founded in Houston in 1919 by R. C. Fulbright, an attorney working in railway regulation, and J.H. Crooker, a litigator...
. Dreier would become co-head of litigation in New York—but the firm noted in a statement released after his arrest that at the time Dreier left Fulbright, in March 1995, there were only ten New York litigators.
He worked for Duker & Barrett, for less than a year. (Its founding partner, William Duker, would later plead guilty to four counts of fraud called "one of the most serious cases of legal fraud" ever prosecuted.)
In 1996, he teamed with a Florida lawyer named Neil Baritz, who had a small corporate and securities practice, to found a firm called Dreier & Baritz, a precursor to Dreier LLP in 1996, but struggled to distinguish his practice.
From 1999 to 2002, Dreier, Baritz & Federman was formed and would have offices in New York, Boca Raton, with most associates in Oklahoma. Dreier would run the new firm's already leased Park Avenue office. Dreier favored plaintiff
Plaintiff
A plaintiff , also known as a claimant or complainant, is the term used in some jurisdictions for the party who initiates a lawsuit before a court...
class-action lawsuits, which brought in large revenue. Federman had problems with Dreier's spending and his managerial style and secrecy, which culminated in a lawsuit.
Dreier pushed to impress, acquiring expensive trappings. He and his wife had owned a house in Westhampton
Westhampton, New York
Westhampton is a hamlet in Suffolk County, New York, United States. The population was 2,869 at the 2000 census.Westhampton is in the Town of Southampton.-Geography:Westhampton is located at ....
. He bought a place in Quogue
Quogue, New York
Quogue is an incorporated village in Southampton, Suffolk County, New York on the South Shore of Long Island. As of the United States 2000 Census, the population was 1,018.-Geography:Quogue is located at ....
, and then the house next door. He purchased the $18 million 121 feet (36.9 m) yacht
Yacht
A yacht is a recreational boat or ship. The term originated from the Dutch Jacht meaning "hunt". It was originally defined as a light fast sailing vessel used by the Dutch navy to pursue pirates and other transgressors around and into the shallow waters of the Low Countries...
Seascape, with a crew of 10 and a Jacuzzi
Jacuzzi
Jacuzzi is a company that produces whirlpool bathtubs and spas. Its first product was a bath with massaging jets. The term "jacuzzi" is now often used generically to refer to any bathtub with massaging jets.-History:...
, and docked it in New York
New York
New York is a state in the Northeastern region of the United States. It is the nation's third most populous state. New York is bordered by New Jersey and Pennsylvania to the south, and by Connecticut, Massachusetts and Vermont to the east...
and St. Martin. Dreier owned a waterfront home in the Hamptons, a Manhattan triplex, and leased a penthouse on Ocean Avenue in Santa Monica, California
Santa Monica, California
Santa Monica is a beachfront city in western Los Angeles County, California, US. Situated on Santa Monica Bay, it is surrounded on three sides by the city of Los Angeles — Pacific Palisades on the northwest, Brentwood on the north, West Los Angeles on the northeast, Mar Vista on the east, and...
. He drove a Mercedes 500
Mercedes-Benz 500
Mercedes-Benz has sold a number of automobiles with the "500" model name, and the nomenclature usually refers the 5.0L V8 engine under the hood....
in New York and an Aston Martin
Aston Martin
Aston Martin Lagonda Limited is a British manufacturer of luxury sports cars, based in Gaydon, Warwickshire. The company name is derived from the name of one of the company's founders, Lionel Martin, and from the Aston Hill speed hillclimb near Aston Clinton in Buckinghamshire...
in California. He was considered a "bon vivant" because he dated beautiful women, was a member of the Harmonie Club
Harmonie Club
The Harmonie Club is an exclusive private social club in New York City. Founded in 1852, the venerable club is the second oldest social club in New York. It is located at 4 East 60th Street, in a building designed by Stanford White.-History:...
, and maintained a continuously high profile at charity events.
Dreier LLP
He founded his own firm in 2006 with offices in five cities. He promised lavish compensation. The headquarters at 499 Park AvenuePark Avenue (Manhattan)
Park Avenue is a wide boulevard that carries north and southbound traffic in New York City borough of Manhattan. Through most of its length, it runs parallel to Madison Avenue to the west and Lexington Avenue to the east....
had $30 million to $40 million worth of art, including works by Picasso and a Warhol depiction of Jacqueline Kennedy Onassis
Jacqueline Kennedy Onassis
Jacqueline Lee Bouvier "Jackie" Kennedy Onassis was the wife of the 35th President of the United States, John F. Kennedy, and served as First Lady of the United States during his presidency from 1961 until his assassination in 1963. Five years later she married Greek shipping magnate Aristotle...
.
Dreier operated like a corporation and not like a partnership. Mr. Dreier was the sole equity partner
Equity partner
An equity partner is a partner in a partnership who is a part owner of the business, and is entitled to a proportion of the distributable profits of the partnership...
owner and controlled all of the firm's finances and handled all administrative functions. There was no executive committee and no partners meetings. All deals were structured so that only he knew all the specifics and had access to all accounts. Dreier convinced lawyers that such an arrangement was best by emphasizing that it would allow them to concentrate on law, while he worried about running the firm.
He hired lawyers on three-year contracts, fixing their salary and paying bonuses based on the fees each lawyer brought in. According to court filings, some lawyers received more than $50,000 in salary every two weeks.
In 2007, Mr. Dreier expanded to Los Angeles and brought in Hollywood superstar lawyer Stanton "Larry" Stein, whose clients included the Olsen Twins and Hilary Duff
Hilary Duff
Hilary Erhard Duff is an American actress, singer-songwriter, entrepreneur, and author. After working in local theater plays and television commercials in her childhood, she achieved fame playing the title role in the Disney Channel television series Lizzie McGuire. She also reprised her role in...
. The expansion boosted Dreier LLP's revenue to $90 million in 2007 from $60 million in 2006, according to court filings. However, the office actually operated at a net loss of approximately one million dollars a month, despite the burgeoning volume of business. On January 27, 2009, Paul S. Anik, 54 (partner at Dreier Stein Kahan Browne Woods George, LLP) died from a sudden stress-related heart attack.
On September 28, 2008, New York Magazine stated that 20 attorneys of the firm and its affiliates were selected for inclusion in "New York Super Lawyers, 2008 Edition" by Law & Politics, the legal publisher and independent researcher of multiple nationwide surveys. In 2007, 16 attorneys were named.
Dreier's two children were on his payroll, and he spent $10-million of the firm's money at New York's Gagosian Gallery
Gagosian Gallery
Gagosian Gallery is a contemporary art gallery owned and directed by Larry Gagosian. There are currently eleven gallery spaces: three in New York; two in London; one in each of Beverly Hills, Rome, Athens, Paris, Geneva, Hong Kong and Moscow.-1980s:...
in 2008.
In March, 2009, the law firm Fox Rothschild
Fox Rothschild
Fox Rothschild LLP is a national law firm with more than 500 attorneys practicing in 16 offices coast to coast. Lawyers at the firm provide a full range of legal services to public and private business entities, charitable, medical and educational institutions and individuals throughout the...
acquired Pastore Osterberg, a firm in Stamford, Connecticut
Stamford, Connecticut
Stamford is a city in Fairfield County, Connecticut, United States. According to the 2010 census, the population of the city is 122,643, making it the fourth largest city in the state and the eighth largest city in New England...
, founded by Dreier attorneys, in late 2008. Joe Pastore and Eric Osterberg will join along with seven other Dreier attorneys. They will focus on litigation, telecommunications, technology, securities, and intellectual property.
Traub Bonacquist & Fox
In September, 2006, Dreier acquired a well-known bankruptcy law firm Traub, Bonacquist & Fox. Founding member and managing partner, Paul TraubPaul Traub
Paul R. Traub is an American lawyer, who specializes in business law, specifically bankruptcy, insolvency, and trial litigation. He has participated in several large retail bankruptcies, among them Kmart, FAO Schwarz Inc., KB Toys Inc., Stage Stores, Office Max, and eToys.com...
, participated in several of the largest retail bankruptcies in previous years, including Kmart
Kmart
Kmart, sometimes styled as "K-Mart," is a chain of discount department stores. The chain acquired Sears in 2005, forming a new corporation under the name Sears Holdings Corporation. The company was founded in 1962 and is the third largest discount store chain in the world, behind Wal-Mart and...
, FAO Schwarz Inc., KB Toys
KB Toys
K·B Toys was a chain of mall-based retail toy stores in the United States. It was founded in 1922 by the Kaufman brothers. K·B operated 605 stores in 44 U.S. states, Puerto Rico as well as Guam. It was privately held in Pittsfield, Massachusetts...
Inc., Stage Stores
Stage Stores
Stage Stores, Inc. is a department store company specializing mostly in retailing brand name clothing, accessories, cosmetics and footwear. It has its headquarters in Houston, Texas....
, Office Max, and eToys.com
EToys.com
eToys.com is a retail website that sells toys via the Internet. It was established by a startup company of the same name during the dotcom boom, but the company went bankrupt towards the end of the boom, after which the site went through a number of changes of ownership, and was acquired by Toys...
. During his legal career, Traub has had his own ethical controversies, especially conflict of interest
Conflict of interest
A conflict of interest occurs when an individual or organization is involved in multiple interests, one of which could possibly corrupt the motivation for an act in the other....
issues which continue to shadow him.
Traub became a Dreier partner, earning in the range of $1 million or more, according to the statement of financial affairs, and co-chair with Norman Kinel of the bankruptcy practice.
On December 5, 2008, Traub sent a letter to clients announcing he and other bankruptcy lawyers had resigned from the firm, but would continue to practice together as their former partnership, Traub, Bonacquist & Fox LLP. “In light of recent developments, of which we were unaware until yesterday, we have resigned from Dreier LLP, effective immediately,” the letter states.
In February, 2009, Epstein, Becker & Green, a firm specializing in government contracts, brought the seven-member Traub/Dreier bankruptcy team into their New York office: Paul Traub, Steven E. Fox, Wendy G. Marcari and Maura I. Russell; and associates Brett J. Nizzo, Anthony B. Stumbo and Bradford Tobin. The firm has 400 attorneys based in eleven US cities.
As of December, 2008, Harold F. Bonacquist, a passive partner, is a political attaché at the United States
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
Consulate in Istanbul
Istanbul
Istanbul , historically known as Byzantium and Constantinople , is the largest city of Turkey. Istanbul metropolitan province had 13.26 million people living in it as of December, 2010, which is 18% of Turkey's population and the 3rd largest metropolitan area in Europe after London and...
, Turkey
Turkey
Turkey , known officially as the Republic of Turkey , is a Eurasian country located in Western Asia and in East Thrace in Southeastern Europe...
.
Sheldon Solow
From 1998 to 2006, Dreier handled much litigation for Sheldon SolowSheldon Solow
-Biography:He was born in Brooklyn, New York. He attended New York University but dropped out. In 1972, he invested in what became the Solow Building, which houses KKR and Apollo Global Management....
, a billionaire real estate dealmaker. The most recent case was the unsuccessful eviction of Bank of America
Bank of America
Bank of America Corporation, an American multinational banking and financial services corporation, is the second largest bank holding company in the United States by assets, and the fourth largest bank in the U.S. by market capitalization. The bank is headquartered in Charlotte, North Carolina...
Securities LLC from his flagship Manhattan building, 9 West 57th St., on the dubious grounds that one of the bank's brokers had been accused of illegal trading.
In 2000 Solow decided to litigate for ownership a $10 million oceanfront house in East Hampton
East Hampton (town), New York
The Town of East Hampton is located in southeastern Suffolk County, New York, at the eastern end of the South Shore of Long Island. It is the easternmost town in the state of New York...
. Peter Morton
Peter Morton
Peter Morton was the co-founder with Isaac Tigrett of the Hard Rock Café, a chain of casual dining restaurants. His father is Arnie Morton, founder of Morton's, and his son is Harry Morton, founder of Pink Taco restaurants...
, co-founder of the Hard Rock Cafe
Hard Rock Cafe
Hard Rock Cafe is a chain of theme restaurants founded in 1971 by Americans Peter Morton & Isaac Tigrett. In 1979, the cafe began covering its walls with rock and roll memorabilia, a tradition which expanded to others in the chain. In 2006, Hard Rock was sold to the Seminole Tribe of Florida, and...
restaurant chain, had signed a contract to purchase the home from Dr. Gary Feldstein. Solow tried to break their contract and buy the place himself. Years of litigation ensued. Dreier filed suits in state courts in Manhattan and Suffolk County, in federal court in both the Eastern and Southern Districts of New York, in bankruptcy court in Florida, and in several corresponding appellate courts. "He had a certain glibness, this certainty that he could get away with that which other lawyers couldn't," says Feldstein's lawyer, Kevin Smith, whom Dreier named as a defendant in one of the suits. "He was like Gatsby without the charm." In 2003, the United States Court of Appeals for the Second Circuit
United States Court of Appeals for the Second Circuit
The United States Court of Appeals for the Second Circuit is one of the thirteen United States Courts of Appeals...
, citing their "extensive history of persistent, repetitive, and vexatious litigation," ordered Solow and Dreier to pay double costs to Morton and Feldstein. The litigation cost Solow an estimated $6 million in legal fees, much of it going to Dreier.
In February 2004, advertisements labeled "legal notices" ran in The New York Times
The New York Times
The New York Times is an American daily newspaper founded and continuously published in New York City since 1851. The New York Times has won 106 Pulitzer Prizes, the most of any news organization...
and the New York Post
New York Post
The New York Post is the 13th-oldest newspaper published in the United States and is generally acknowledged as the oldest to have been published continuously as a daily, although – as is the case with most other papers – its publication has been periodically interrupted by labor actions...
. The bogus ads, a costly embarrassment, informed "all unsecured creditors" in developer Peter Kalikow's 1994 Chapter 11 reorganization that they "might have additional rights of recovery" because of Kalikow's failure "to make truthful disclosure." More than 50 calls and 18 faxes came in to the Evergence Capital Advisors, Inc., by creditors. Evergence was a defunct Florida corporation run by Kosta Kovachev, a Belgrade-born, onetime Morgan Stanley
Morgan Stanley
Morgan Stanley is a global financial services firm headquartered in New York City serving a diversified group of corporations, governments, financial institutions, and individuals. Morgan Stanley also operates in 36 countries around the world, with over 600 offices and a workforce of over 60,000....
broker facing SEC charges for his alleged participation in a $20 million Ponzi scheme
Ponzi scheme
A Ponzi scheme is a fraudulent investment operation that pays returns to its investors from their own money or the money paid by subsequent investors, rather than from any actual profit earned by the individual or organization running the operation...
, for which he ultimately paid the SEC $358,148 in penalties and interest. The Evergence phone and fax numbers went directly to telephone lines at 499 Park Ave. -- the offices of Dreier, LLP. It was Dreier who had purchased the newspaper ads, using Evergence and Kovachev as a front. And after Manhattan federal bankruptcy court Judge Burton Lifland, who oversaw Kalikow's bankruptcy, (and who is presiding in the Madoff Investment Scandal
Madoff investment scandal
The Madoff investment scandal broke in December 2008 when former NASDAQ chairman Bernard Madoff admitted that the wealth management arm of his business was an elaborate Ponzi scheme....
bankruptcy) ordered Dreier to disclose his client's identity: Solow had hired Dreier to place the ads. Lifland ordered Dreier and Solow, to pay about $300,000 in sanctions to Kalikow.
In November, 2008, Dreier allegedly claimed that Solow was looking to raise $500 million by selling short-term, high-interest notes which audit report, Dreier had allegedly forged. The report had been used to try to dupe a hedge fund
Hedge fund
A hedge fund is a private pool of capital actively managed by an investment adviser. Hedge funds are only open for investment to a limited number of accredited or qualified investors who meet criteria set by regulators. These investors can be institutions, such as pension funds, university...
, Whippoorwill Associates, into buying bogus Solow Realty promissory notes. On October 15, Fund managers, who had bought $115 million of the notes in 2006 or 2007, had demanded the meeting at Solow's offices when they weren't repaid on schedule. Dreier arranged it with Kovachev, posing as Solow's controller. In October 2008, Dreier allegedly sent a Connecticut hedge fund's managing director documents that he said were Solow's audited financial statements, and the fund bought a forged $25 million note, for $13.5 million. Dreier allegedly sent a New York hedge fund the same documents he'd given the Connecticut fund, but portfolio managers wanted more information. Dreier forwarded four e-mails that purported to be from other funds that had purchased Solow notes, as well as a Dreier LLP opinion letter vouching for the notes. A portfolio manager subsequently asked to speak directly to someone at Solow Realty. Dreier scheduled a conference call for Oct. 23, and provided a telephone number located in the conference room at Dreier LLP's offices in Stamford, Connecticut
Stamford, Connecticut
Stamford is a city in Fairfield County, Connecticut, United States. According to the 2010 census, the population of the city is 122,643, making it the fourth largest city in the state and the eighth largest city in New England...
. Kovachev allegedly got on the phone, and, pretending to be Solow CEO Steven Cherniak, answered questions about the notes and Solow's finances. The next day the hedge fund bought about $100 million in notes. Both the Connecticut and New York funds were dubious and brought their doubts to Solow Realty and its audit firm. In November, one hedge fund manager told Dreier that he'd called Solow Realty, and copied him on an e-mail to Solow about the notes. Solow's attorneys subsequently contacted federal authorities, that Mr. Dreier might be engaged in financial fraud.
Client list
More than 200 creditors have filed a total of more than $450 million in claims. Eton Park Capital ManagementEton Park Capital Management
Eton Park Capital Management is a hedge fund, founded in November 2004 by former Goldman Sachs partner Eric Mindich. While at Goldman, he was a senior member of the investment bank's Principal Strategies group....
seeks over $84 million, and Fortress Credit Opportunities, part of Fortress Investment Group
Fortress Investment Group
Fortress Investment Group LLC is an investment management firm based in New York, New York. The company went public on February 9, 2007.-History:...
, has filed a $61.9 million unsecured claim. Ex-law partner Bruce F. Bronster is seeking $767,000, and entertainment attorney, Lisa Bonner is claiming $448,365.
More than 800 pages of clients were named as "creditors holding unsecured non-priority claims", and have been filed in a New York court include Bill Cosby
Bill Cosby
William Henry "Bill" Cosby, Jr. is an American comedian, actor, author, television producer, educator, musician and activist. A veteran stand-up performer, he got his start at various clubs, then landed a starring role in the 1960s action show, I Spy. He later starred in his own series, the...
, Tim Burton
Tim Burton
Timothy William "Tim" Burton is an American film director, film producer, writer and artist. He is famous for dark, quirky-themed movies such as Beetlejuice, Edward Scissorhands, The Nightmare Before Christmas, Ed Wood, Sleepy Hollow, Corpse Bride and Sweeney Todd: The Demon Barber of Fleet...
, Justin Timberlake
Justin Timberlake
Justin Randall Timberlake is an American pop musician and actor. He achieved early fame when he appeared as a contestant on Star Search, and went on to star in the Disney Channel television series The New Mickey Mouse Club, where he met future bandmate JC Chasez...
, the music groups the Virgins, the Dead Trees and the Black Angels
The Black Angels (band)
- History :Formed in May 2004, the band's name derives from the Velvet Underground song "The Black Angel's Death Song".In 2005, the Black Angels were featured on a dual-disc compilation album of psychedelic music called Psychedelica Vol.1 from Northern Star Records...
, production company Monkey Dog Music, Harry Connick, Jr.
Harry Connick, Jr.
Joseph Harry Fowler Connick, Jr. is an American singer, big-band leader/conductor, pianist, actor, and composer. He has sold over 25 million albums worldwide. Connick is ranked among the top 60 best-selling male artists in the United States by the Recording Industry Association of America, with...
, Elvis Costello
Elvis Costello
Elvis Costello , born Declan Patrick MacManus, is an English singer-songwriter. He came to prominence as an early participant in London's pub rock scene in the mid-1970s and later became associated with the punk/New Wave genre. Steeped in word play, the vocabulary of Costello's lyrics is broader...
, Jon Bon Jovi
Jon Bon Jovi
Jon Bon Jovi is an American musician, singer, songwriter, and actor, best known as the founder, occasional rhythm guitarist, and lead singer of rock band Bon Jovi, which was named after him...
, Diana Krall
Diana Krall
Diana Jean Krall, OC, OBC is a Canadian jazz pianist and singer, known for her contralto vocals. She has sold more than 6 million albums in the US and over 15 million worldwide; altogether, she has sold more albums than any other female jazz artist during the 1990s and 2000s...
, 50 Cent
50 Cent
Curtis James Jackson III , better known by his stage name 50 Cent, is an American rapper, entrepreneur, investor, record producer, and actor. He rose to fame with the release of his albums Get Rich or Die Tryin and The Massacre . Get Rich or Die Tryin has been certified eight times platinum by...
, Echo & the Bunnymen
Echo & the Bunnymen
Echo & the Bunnymen are an English post-punk band, formed in Liverpool in 1978. The original line-up consisted of vocalist Ian McCulloch, guitarist Will Sergeant and bass player Les Pattinson, supplemented by a drum machine. By 1980, Pete de Freitas had joined as the band's drummer, and their debut...
and companies representing the Doors
The Doors
The Doors were an American rock band formed in 1965 in Los Angeles, California, with vocalist Jim Morrison, keyboardist Ray Manzarek, drummer John Densmore, and guitarist Robby Krieger...
, the B-52's
The B-52's
The B-52's are an American rock band, formed in Athens, Georgia in 1976. The original line-up consisted of Fred Schneider , Kate Pierson , Cindy Wilson , Ricky Wilson , and Keith Strickland . Following Ricky Wilson's death in 1985 Strickland switched to guitar...
and the Ramones
Ramones
The Ramones were an American rock band that formed in the New York City neighborhood of Forest Hills, Queens, in 1974. They are often cited as the first punk rock group...
. Sports figures include baseball players Andy Pettitte
Andy Pettitte
Andrew Eugene Pettitte is a retired American left-handed Major League Baseball starting pitcher.In his major league career, he played for the New York Yankees from 1995–2003. He then signed with the Houston Astros, and played for them from 2004 through 2006. In 2007, Pettitte rejoined the Yankees...
and Sammy Sosa
Sammy Sosa
Samuel Peralta "Sammy" Sosa is a Dominican former professional baseball right fielder. Sosa played with four Major League Baseball teams over his career which spanned from 1989-2007....
, tennis star Maria Sharapova
Maria Sharapova
Maria Yuryevna Sharapova ,. is a Russian professional tennis player and a former world no. 1. A US resident since 1994, Sharapova has won 24 WTA singles titles, including three Grand Slam singles titles at the 2004 Wimbledon, 2006 US Open and 2008 Australian Open...
and hockey player Kevin Weekes
Kevin Weekes
Kevin Weekes is a retired Canadian professional ice hockey goaltender who most recently played for the New Jersey Devils of the National Hockey League . He is now a color commentator on Hockey Night in Canada, and a studio analyst for NHL on the Fly.- Player :Weekes' career began with the Owen...
, teams Manchester United F.C.
Manchester United F.C.
Manchester United Football Club is an English professional football club, based in Old Trafford, Greater Manchester, that plays in the Premier League. Founded as Newton Heath LYR Football Club in 1878, the club changed its name to Manchester United in 1902 and moved to Old Trafford in 1910.The 1958...
and the New York Mets
New York Mets
The New York Mets are a professional baseball team based in the borough of Queens in New York City, New York. They belong to Major League Baseball's National League East Division. One of baseball's first expansion teams, the Mets were founded in 1962 to replace New York's departed National League...
and the Major League Baseball Players Association
Major League Baseball Players Association
The Major League Baseball Players Association is the union of professional major-league baseball players.-History of MLBPA:The MLBPA was not the first attempt to unionize baseball players...
.
In March, 2008 Dreier sued client, Judith Regan
Judith Regan
Judith Regan is an American editor, producer, book publisher and television and radio talk show host. She is the mother of a son and a daughter and lives in New York City and Los Angeles.-Early life:...
, claiming she owed the firm, fees in connection with her $100 million defamation and breach of contract
Breach of contract
Breach of contract is a legal cause of action in which a binding agreement or bargained-for exchange is not honored by one or more of the parties to the contract by non-performance or interference with the other party's performance....
suit against her former employer, News Corp.’s HarperCollins
HarperCollins
HarperCollins is a publishing company owned by News Corporation. It is the combination of the publishers William Collins, Sons and Co Ltd, a British company, and Harper & Row, an American company, itself the result of an earlier merger of Harper & Brothers and Row, Peterson & Company. The worldwide...
Publishers LLC. On Dec. 9, 2008, Regan claimed Dreier tried to extort a settlement from her and improperly disclosed her $10.75 million settlement with HarperCollins.
Sentence and guilty plea
On July 13, Dreier was sentenced to 20 years, and ordered to begin his term immediately. Judge Jed S. RakoffJed S. Rakoff
Jed Saul Rakoff is a United States District Judge for the Southern District of New York.-Biography:Rakoff was born in Philadelphia, Pennsylvania August 1, 1943. Rakoff graduated with honors in English literature from Swarthmore College , earned his M. Phil. from Balliol College at Oxford University...
rejected the prosecutors' request of a maximum responding, "he is not Mr. (Bernard) Madoff
Bernard Madoff
Bernard Lawrence "Bernie" Madoff is a former American businessman, stockbroker, investment advisor, and financier. He is the former non-executive chairman of the NASDAQ stock market, and the admitted operator of a Ponzi scheme that is considered to be the largest financial fraud in U.S...
from any analysis, and that’s why I can’t understand why the government is asking for 145 years." Dreier addressed the Court, his family, his clients and the lawyers who worked for him. “I’m sorry, deeply sorry, for the harm and the sadness that I have caused to so many people." The U.S. Probation
Probation
Probation literally means testing of behaviour or abilities. In a legal sense, an offender on probation is ordered to follow certain conditions set forth by the court, often under the supervision of a probation officer...
Department had recommended a sentence of 25 years.
In a recent letter to the Court, Dreier wrote: “I recall only that I was desperate for some measure of the success that I felt had eluded me. I lost my perspective and my moral grounding, and really, in a sense, I just lost my mind.”
At his plea hearing on May 11, 2009, Dreier read a statement, “I engineered a scheme to issue and sell fictitious promissory notes purportedly issued by companies in the United States and Canada,” and subsequently pleaded guilty of swindling $380M USD from various hedge fund
Hedge fund
A hedge fund is a private pool of capital actively managed by an investment adviser. Hedge funds are only open for investment to a limited number of accredited or qualified investors who meet criteria set by regulators. These investors can be institutions, such as pension funds, university...
s by selling worthless financial instruments without any plea agreement with the government.
The United States Securities and Exchange Commission
United States Securities and Exchange Commission
The U.S. Securities and Exchange Commission is a federal agency which holds primary responsibility for enforcing the federal securities laws and regulating the securities industry, the nation's stock and options exchanges, and other electronic securities markets in the United States...
has also filed a separate civil suit
Lawsuit
A lawsuit or "suit in law" is a civil action brought in a court of law in which a plaintiff, a party who claims to have incurred loss as a result of a defendant's actions, demands a legal or equitable remedy. The defendant is required to respond to the plaintiff's complaint...
against him for stealing funds from an escrow
Escrow
An escrow is:* an arrangement made under contractual provisions between transacting parties, whereby an independent trusted third party receives and disburses money and/or documents for the transacting parties, with the timing of such disbursement by the third party dependent on the fulfillment of...
account belonging to one of the firm's bankruptcy
Bankruptcy in the United States
Bankruptcy in the United States is governed under the United States Constitution which authorizes Congress to enact "uniform Laws on the subject of Bankruptcies throughout the United States." Congress has exercised this authority several times since 1801, most recently by adopting the Bankruptcy...
clients.
An amended indictment on March 17, 2009 added an eighth count of money laundering
Money laundering
Money laundering is the process of disguising illegal sources of money so that it looks like it came from legal sources. The methods by which money may be laundered are varied and can range in sophistication. Many regulatory and governmental authorities quote estimates each year for the amount...
to the charges, and $700 million in forfeitures. From 2004 to December 2008, Dreier "sold to funds and others approximately $700 million worth of Fake Developer Notes and Fake Pension Plan Notes." The Case Number is: S1 09Cr085.
The eight-count indictment
Indictment
An indictment , in the common-law legal system, is a formal accusation that a person has committed a crime. In jurisdictions that maintain the concept of felonies, the serious criminal offence is a felony; jurisdictions that lack the concept of felonies often use that of an indictable offence—an...
states his deception began in 2004, that Dreier gave the purchasers of his notes false financial
FINANCIAL
FINANCIAL is the weekly English-language newspaper with offices in Tbilisi, Georgia and Kiev, Ukraine. Published by Intelligence Group LLC, FINANCIAL is focused on opinion leaders and top business decision-makers; It's about world’s largest companies, investing, careers, and small business. It is...
statements; arranged meetings for investor
Investor
An investor is a party that makes an investment into one or more categories of assets --- equity, debt securities, real estate, currency, commodity, derivatives such as put and call options, etc...
s with people who impersonated officials from purported issuers of the notes
Security (finance)
A security is generally a fungible, negotiable financial instrument representing financial value. Securities are broadly categorized into:* debt securities ,* equity securities, e.g., common stocks; and,...
; sold fake promissory note
Promissory note
A promissory note is a negotiable instrument, wherein one party makes an unconditional promise in writing to pay a determinate sum of money to the other , either at a fixed or determinable future time or on demand of the payee, under specific terms.Referred to as a note payable in accounting, or...
s purportedly issued by a Canadian pension plan; and embezzled more than $ 400 million from his client escrow account.
Dreier may also be facing criminal charges in Canada
Canada
Canada is a North American country consisting of ten provinces and three territories. Located in the northern part of the continent, it extends from the Atlantic Ocean in the east to the Pacific Ocean in the west, and northward into the Arctic Ocean...
for impersonating an in-house lawyer at the Ontario Teachers' Pension Plan
Ontario Teachers' Pension Plan
The Ontario Teachers' Pension Plan , commonly referred to as Teachers, is the organization responsible for administering pensions for public school teachers of the Canadian province of Ontario. The OTPP also invests the plan's pension fund, making it one of the largest and most powerful investment...
in connection with a sale of financial instruments worth $44.7 million USD. He was released on bail
Bail
Traditionally, bail is some form of property deposited or pledged to a court to persuade it to release a suspect from jail, on the understanding that the suspect will return for trial or forfeit the bail...
, only to be arrested again by U.S. authorities upon returning to New York.
Free on bail
At his plea hearing on May 11, 2009, Judge Rakoff said, “He has disgraced the honorable profession of law....There are 100 good reasons why Mr. Dreier should be jailed. By his own admission here today, he has shown that he is to be ranked with those who have committed some of the most egregious frauds in history.” Ultimately, the Judge ruled that Dreier remain free on bail pending his sentencing hearing on July 13, 2009.Dreier had been initially released on bail on February 13, 2009. On February 5, 2009 U.S. District Judge Jed Rakoff in Manhattan
Manhattan
Manhattan is the oldest and the most densely populated of the five boroughs of New York City. Located primarily on the island of Manhattan at the mouth of the Hudson River, the boundaries of the borough are identical to those of New York County, an original county of the state of New York...
had written in a brief that a total of 10 conditions set for the release Marc Dreier, "will be sufficient to reasonably assure the defendant's appearance in court as required."
He issued a formal bail
Bail
Traditionally, bail is some form of property deposited or pledged to a court to persuade it to release a suspect from jail, on the understanding that the suspect will return for trial or forfeit the bail...
order on February 9, 2009, to be freed on $10 million bond, under 24-hour house arrest
House arrest
In justice and law, house arrest is a measure by which a person is confined by the authorities to his or her residence. Travel is usually restricted, if allowed at all...
with armed guards and electronic monitoring. Judge Rakoff noted prosecutor
Prosecutor
The prosecutor is the chief legal representative of the prosecution in countries with either the common law adversarial system, or the civil law inquisitorial system...
s had demonstrated, for the limited purposes of bail, that Mr. Dreier "is not only a master of deceit and a doyen of dishonesty, but the kind of person who, under stress, may resort to desperate measures" and his motive to flee was "palpable." but the bail package proposed by Mr. Dreier's lawyers "goes far to minimize this risk." The bond would be co-signed by his son and mother, holding them responsible if Mr. Dreier were to flee. He also ordered that all means of communication, other than a land-line telephone needed for electronic monitoring, be removed from Mr. Dreier's apartment and that no visitors would be allowed without approval from the government.
In a letter to the magistrate
Magistrate
A magistrate is an officer of the state; in modern usage the term usually refers to a judge or prosecutor. This was not always the case; in ancient Rome, a magistratus was one of the highest government officers and possessed both judicial and executive powers. Today, in common law systems, a...
judge
Judge
A judge is a person who presides over court proceedings, either alone or as part of a panel of judges. The powers, functions, method of appointment, discipline, and training of judges vary widely across different jurisdictions. The judge is supposed to conduct the trial impartially and in an open...
opposing bail, Assistant U.S. Attorney Jonathan R. Streeter had said, Dreier is "exceptionally deceptive, brazen, creative and resourceful in achieving his criminal goals."
On January 22, 2009, U.S. Magistrate Judge Douglas Eaton had modified his earlier ruling and set bond at $20 million dollars, requiring Dreier to secure bail with $10 million in cash or property and include at least four co-signers, who would be required to pay the money if Dreier flees. Dreier also would have to submit to electronic monitoring and see a psychiatrist twice a week. He had asked to be freed on a $10 million bond and subject to electronic monitoring. He said his mother and his 19-year-old son, Spencer would co-sign the bond. Dreier was subsequently placed under house arrest, and among one of the court-appointed security guards monitoring him was a retired F.B.I. agent.
Eaton told Shargel, "These are really extraordinary facts. His behavior was reckless, clever, improvising. Frankly, it suggests a mental disorder."
Kosta S. Kovachev
On March 31, 2010, at a hearing before U.S. District Judge Naomi Reice Buchwald in Manhattan, Kosta S. Kovachev, 58, was sentenced to 46 months in prison and a fine of $215,000 the amount Dreier paid him for the impersonations. On November 2, 2009, he pleaded guilty to commit securities fraudSecurities fraud
Securities fraud, also known as stock fraud and investment fraud, is a practice that induces investors to make purchase or sale decisions on the basis of false information, frequently resulting in losses, in violation of the securities laws....
and wire fraud
Wire fraud
Mail and wire fraud is a federal crime in the United States. Together, 18 U.S.C. §§ 1341, 1343, and 1346 reach any fraudulent scheme or artifice to intentionally deprive another of property or honest services with a nexus to mail or wire communication....
, as well as a wire fraud charge, and admitting to impersonating an accountant for Solow Realty & Development at Mr. Dreier's request in a meeting with investors at their Manhattan offices; and then, impersonating Solow's then-Chief Executive, Steven Cherniak at Mr. Dreier's request in a separate phone call with investors. He had been arrested in December, 2008. He will forfeit his services payment from Dreier for the caper: $215,000. Sentencing of upwards of five years is scheduled for March 5, 2010, along with more than $100 million in restitution
Restitution
The law of restitution is the law of gains-based recovery. It is to be contrasted with the law of compensation, which is the law of loss-based recovery. Obligations to make restitution and obligations to pay compensation are each a type of legal response to events in the real world. When a court...
.
On April 22, 2009, Kovachev had been arraigned on new charges: conspiracy to commit securities fraud, securities fraud
Securities fraud
Securities fraud, also known as stock fraud and investment fraud, is a practice that induces investors to make purchase or sale decisions on the basis of false information, frequently resulting in losses, in violation of the securities laws....
and wire fraud
Wire fraud
Mail and wire fraud is a federal crime in the United States. Together, 18 U.S.C. §§ 1341, 1343, and 1346 reach any fraudulent scheme or artifice to intentionally deprive another of property or honest services with a nexus to mail or wire communication....
, adding a forfeiture allegation seeking to obtain money placed by Kovachev in four different bank accounts. Kovachev had waived indictment and entered a plea of not guilty.
Kovachev was paid $115,000 from the Dreier firm’s operating account and $100,000 from its attorney trust account.
On December 4, 2008, while Dreier was in a Canadian jail attempting to move cash out of the law firm’s accounts, Kovachev appeared at the law firm to pick up three paintings. There were only two paintings, and Mr. Kovachev took them and left.
In 2006, he lost his broker's license from the National Association of Securities Dealers after being implicated in a $28 million Ponzi scheme. He refused to cooperate with investigators then and eventually paid more than $350,000 penalties and interest to settle the matter, without admitting wrongdoing.
The Case Number, dated December 18, 2008 is: USA v. Kosta S. Kovachev, 08 MAG 2792
Robert Miller
On November 9, 2009 Robert Miller, 52, of Englewood, New JerseyEnglewood, New Jersey
Englewood is a city located in Bergen County, New Jersey. As of the 2010 United States Census, the city had a total population of 27,147.Englewood was incorporated as a city by an Act of the New Jersey Legislature on March 17, 1899, from portions of Ridgefield Township and the remaining portions of...
pleaded guilty to conspiracy
Conspiracy (crime)
In the criminal law, a conspiracy is an agreement between two or more persons to break the law at some time in the future, and, in some cases, with at least one overt act in furtherance of that agreement...
to commit securities fraud and wire fraud, as well as securities fraud, at a hearing before U.S. Magistrate Judge Ronald L. Ellis in Manhattan. He has agreed to forfeit the compensation of $100,000 from Dreier in November, 2008 to impersonate both a person at a Canadian pension plan and a few days later a representative of an Icelandic hedge fund by telephone, in order to sell about $44.7 million in fictitious promissory notes. Sentencing is scheduled for February 5, 2010, of up to 20 years of incarceration.
From 1983 to 1986, he was a staff attorney in the Securities and Exchange Commission's Enforcement Division, and from 1987–2008, he was an analyst and money manager. Between 1999 and 2008, he and Dreier managed an investment fund together.
SEC Civil charge
On December 8, 2008 the Securities and Exchange Commission charged Dreier with fraudFraud
In criminal law, a fraud is an intentional deception made for personal gain or to damage another individual; the related adjective is fraudulent. The specific legal definition varies by legal jurisdiction. Fraud is a crime, and also a civil law violation...
in connection with an elaborate scheme that raised at least $113 million from the sale of bogus promissory note
Promissory note
A promissory note is a negotiable instrument, wherein one party makes an unconditional promise in writing to pay a determinate sum of money to the other , either at a fixed or determinable future time or on demand of the payee, under specific terms.Referred to as a note payable in accounting, or...
s.
The complaint alleges that since at least October 2008, Dreier had been marketing illegitimate promissory notes, including bogus notes of a New York–based real estate development company, to hedge funds and other private investment funds. He had closed at least three sales. Dreier convinced purchasers that the notes were genuine. He allegedly distributed fake financial statements and audit opinion letters of a reputable accounting firm, and recruited assistance to represent legitimate companies involved in the transactions, including false e-mail addresses and telephone numbers. Dreier directed that two purchasers of the bogus notes wire payment to what his law firm's escrow account. At least one purchaser discovered the fraud, and received the return of its investment. There is an unaccounting of approximately $100 million in known proceeds from the sale of the bogus notes. Dreier had been offering fictitious promissory notes in the name of former client, Solow Realty, a New York real estate development company. Since at least October, 2008 Dreier had approached at least three different investment funds with an offer to sell, at a deep discount, various short-term, unsecured promissory notes, ostensibly issued by Solow. Two of the investment funds agreed to purchase the notes (one fund purchased notes in two separate transactions) and forwarded the payments of approximately $113 million to an account in the name of "Dreier LLP Attorney Trust Account". A third fund was offered the notes, but declined to participate. All of the offers were accompanied by documents that Dreier subsequently admitted he knew were fabricated. Dreier offered the notes for sale even though he knew Solow had never issued them, had not authorized Dreier to market them, and knew nothing of their existence. Dreier had provided the hedge funds with fabricated documents including a "form" note and related agreements, "audited financial statements," and purported audit letters, which bore the forged signature of Solow's auditor, but which were printed on purported stationery of Solow's auditing firm. Dreier never told the representatives from the hedge funds that the entire marketing and sales plan was fictitious.
On December 8, 2008, the SEC filed declarations from firm controller John Provenzano and Dreier lawyer Norman N. Kinel. Provenzano detailed how millions of dollars were missing from client accounts. He stated that he was aware since he took his position in August 2005 of the disbursement of between $30 million and $40 million in Dreier accounts to pay for works of art. Dreier LLP maintained eight escrow accounts where client funds were commingled and eight other accounts for individual clients. Kinel e-mailed Dreier on Dec. 1 requesting disbursal of $38.5 million out of an escrow account on behalf of 360networks (USA) Inc., a client that had emerged from bankruptcy in 2002. Dreier had remained counsel for the official committee of unsecured creditors in connection with 360's Chapter 11 bankruptcy and Kinel asked for the money for distribution to unsecured creditors, but only $19 million remained in the accounts. Provenzano recounted that in phone conversations with other firm partners, Joel A. Chernov and Steven R. Gursky on Dec. 3 and Dec. 4. Dreier said that, had he not been in custody, he would have been able to return to New York and sell some of his art so the money could be returned. On both days, Provenzano was asked by Dreier, who was incarcerated in Canada on a charge of impersonation, related to his dealings with the hedge funds, to transfer $8 million and then $10 million from the escrow accounts into Dreier's own accounts, but Provenzano refused.
The case is SEC v. Dreier, 08-cv-10617 U.S. District Court for the Southern District of New York (Manhattan).
Assets
The assets of Dreier LLP and its affiliates have been frozen by court order. A Statement of Financial Affairs, filed on February 16, 2009, with the Southern District of New York U.S.Bankruptcy Court, disclosed that Dreier LLP has $59 million in assets and $42 million in liabilities, some $30 million of which is owed to creditors holding secured claims. In 2008, salaries for contract partners ranged as high as $1 million or more. Dreier, the firm's sole equity partner, received more than $4 million, and $27,000 was paid to his 19-year-old son, Spencer. The figures are based on an unaudited copy of the firm's books and records.A 10 page list of property filed with the Court some of which includes: 5 bank
Bank
A bank is a financial institution that serves as a financial intermediary. The term "bank" may refer to one of several related types of entities:...
/investment
Investment
Investment has different meanings in finance and economics. Finance investment is putting money into something with the expectation of gain, that upon thorough analysis, has a high degree of security for the principal amount, as well as security of return, within an expected period of time...
accounts; Boats: “Seascape,” 2005 Hessen Motor Yacht, 2008 Novorunia Equator Yacht Tender, Yamaha Waverunners (4); Cars: 2007 Aston Martin, DB9 Volante, 2006 BMW 650i convertible, 2000 Mercedes Benz S500 Sedan, 1997 Mercedes Benz SL500 Roadster; More than 100 works of Art: “Chair with Book on Red Carpet," David Hockney
David Hockney
David Hockney, CH, RA, is an English painter, draughtsman, printmaker, stage designer and photographer, who is based in Bridlington, Yorkshire and Kensington, London....
; “First Painting with Bottle,” Roy Lichtenstein
Roy Lichtenstein
Roy Lichtenstein was a prominent American pop artist. During the 1960s his paintings were exhibited at the Leo Castelli Gallery in New York City and along with Andy Warhol, Jasper Johns, James Rosenquist and others he became a leading figure in the new art movement...
; “Blue Jackie,” “White Jackie,” “Jackie Profile Looking Down,” Andy Warhol
Andy Warhol
Andrew Warhola , known as Andy Warhol, was an American painter, printmaker, and filmmaker who was a leading figure in the visual art movement known as pop art...
; “Portrait of a Girl,” Pablo Picasso
Pablo Picasso
Pablo Diego José Francisco de Paula Juan Nepomuceno María de los Remedios Cipriano de la Santísima Trinidad Ruiz y Picasso known as Pablo Ruiz Picasso was a Spanish expatriate painter, sculptor, printmaker, ceramicist, and stage designer, one of the greatest and most influential artists of the...
; “Grand Masque,” Henri Matisse
Henri Matisse
Henri Matisse was a French artist, known for his use of colour and his fluid and original draughtsmanship. He was a draughtsman, printmaker, and sculptor, but is known primarily as a painter...
; “Big Thief,” Tom Otterness
Tom Otterness
Tom Otterness is an American sculptor whose works adorn parks, plazas, subway stations, libraries, courthouses and museums in New York---most notably in Rockefeller Park in Battery Park City and in the 14th Street/8th Avenue subway station---and other cities around the world...
, and a 2006 high-definition
High-definition video
High-definition video or HD video refers to any video system of higher resolution than standard-definition video, and most commonly involves display resolutions of 1,280×720 pixels or 1,920×1,080 pixels...
, Salma Hayek
Salma Hayek
Salma Valgarma Hayek Jiménez de Pinault is a Mexican film actress, director and producer. She received an Oscar nomination for Best Actress for her role as Frida Kahlo in the film Frida.-Early life:...
video
Video
Video is the technology of electronically capturing, recording, processing, storing, transmitting, and reconstructing a sequence of still images representing scenes in motion.- History :...
by Soho
Soho
Soho is an area of the City of Westminster and part of the West End of London. Long established as an entertainment district, for much of the 20th century Soho had a reputation for sex shops as well as night life and film industry. Since the early 1980s, the area has undergone considerable...
photographer Robert Wilson; Real Estate: New York City
New York City
New York is the most populous city in the United States and the center of the New York Metropolitan Area, one of the most populous metropolitan areas in the world. New York exerts a significant impact upon global commerce, finance, media, art, fashion, research, technology, education, and...
condominium
Condominium
A condominium, or condo, is the form of housing tenure and other real property where a specified part of a piece of real estate is individually owned while use of and access to common facilities in the piece such as hallways, heating system, elevators, exterior areas is executed under legal rights...
151 E. 58th street; Hamptons
Hamptons
The Hamptons may refer to several villages and hamlets in the towns of Southampton and East Hampton on the far east end of Suffolk County in Long Island, New York. These townships occupy the South Fork of Long Island, stretching into the Atlantic Ocean. The Hamptons form a popular seaside resort,...
homes: East Quogue (2), Sag Harbor; Anguilla
Anguilla
Anguilla is a British overseas territory and overseas territory of the European Union in the Caribbean. It is one of the most northerly of the Leeward Islands in the Lesser Antilles, lying east of Puerto Rico and the Virgin Islands and directly north of Saint Martin...
, West Indies condominium (2).
After his arrest, Dreier attempted to transfer the two properties in the Hamptons
Hamptons
The Hamptons may refer to several villages and hamlets in the towns of Southampton and East Hampton on the far east end of Suffolk County in Long Island, New York. These townships occupy the South Fork of Long Island, stretching into the Atlantic Ocean. The Hamptons form a popular seaside resort,...
worth a total of US$12.5 million to his son, Spencer. Spencer asked the caretaker of the properties to file papers claiming the father in October signed over interest in the properties as a reward, because the son agreed to spend the summer with him. The caretaker declined to do so.
Chapter 11 bankruptcy
Mark Pomerantz of the law firm Paul, Weiss, Rifkind, Wharton & GarrisonPaul, Weiss, Rifkind, Wharton & Garrison
Paul, Weiss, Rifkind, Wharton & Garrison LLP is a law firm headquartered on Sixth Avenue in New York City. The firm has well-noted expertise in its corporate, personal representation, entertainment law and litigation practices, having long been a leader among national litigation firms...
is the court-appointed receiver for Dreier LLP. On December 16, Pomerantz filed for Chapter 11 bankruptcy on behalf of the firm, declaring that "no effective management" exists at the firm in the wake of Dreier's arrest. Dreier was the sole equity partner of the firm. The firm owes malpractice insurance carrier Chubb Group of Insurance Companies more than $213,000 in unpaid bills by December 31, 2008, otherwise the $10 million insurance policy would expire and leave Dreier's 240 or so lawyers without coverage.
On March 26, 2009, Pomerantz disclosed he has recovered more than $100 million in assets, including $39 million in art; an $18 million, 121 feet (36.9 m) yacht; homes in Manhattan; three properties in the Hamptons east of New York; parcels in Anguilla
Anguilla
Anguilla is a British overseas territory and overseas territory of the European Union in the Caribbean. It is one of the most northerly of the Leeward Islands in the Lesser Antilles, lying east of Puerto Rico and the Virgin Islands and directly north of Saint Martin...
owned by Dreier or his family members; and five cars. The yacht, Seascape which liquidation price was reduced from $13.5 million to $12.5 million, was bought through the sale of fake notes. Dreier held stock certificates in an office safe and stakes in a company called People Capital and a startup bio-diesel firm in Argentina
Argentina
Argentina , officially the Argentine Republic , is the second largest country in South America by land area, after Brazil. It is constituted as a federation of 23 provinces and an autonomous city, Buenos Aires...
. He also controlled an investment vehicle called Armada Partners. However, “large amounts” may not be collectible. Pomerantz's firm will be billing $1.4 million for its services.
On March 26, 2009, an auction held at the law office sold most of the firm's furnishings and accoutrements at rock bottom prices, with the exception for Mr. Dreier's furniture and paintings.
On June 17, 2009, his two neighboring oceanfront homes in Southampton/ East Quogue, New York will be auctioned for possibly up to $12.5 million.
On July 21, 2009, his 34th floor, 3000 square feet (278.7 m²) four-bedroom, five-bathrooms Manhattan apartment with massive outdoor terrace was sold at auction for $8.2 million, about $2 million less than the $10.43 million he paid in 2007.
Chapter 7 involuntary bankruptcy
Sheila Gowan, the trustee overseeing the liquidation of the law firm, filed a Chapter 7Chapter 7, Title 11, United States Code
Chapter 7 of the Title 11 of the United States Code governs the process of liquidation under the bankruptcy laws of the United States...
involuntary bankruptcy
Bankruptcy
Bankruptcy is a legal status of an insolvent person or an organisation, that is, one that cannot repay the debts owed to creditors. In most jurisdictions bankruptcy is imposed by a court order, often initiated by the debtor....
petition
Petition
A petition is a request to do something, most commonly addressed to a government official or public entity. Petitions to a deity are a form of prayer....
for Dreier on January 26, 2009. Wachovia Bank National Association and the bankruptcy estate of 360networks Inc also joined Gowan in the involuntary petition
Petition
A petition is a request to do something, most commonly addressed to a government official or public entity. Petitions to a deity are a form of prayer....
as creditors. The three said they are owed about $88.5 million.
Fortress Investment Group LLC, a private-equity and hedge-fund manager, lost $125.7 million buying phony promissory notes issued by Solow Realty & Development Co.. Elliott Management Corp., a hedge-fund firm lost $101.1 million. Eton Park Capital Management LP, lost $84.4 million; Perella Weinberg Partners, $46 million; Concordia Advisors LLC, $22.3 million; Novator, $20 million; and Meyer Ventures LLC, $13.4 million.
Dreier owes more than $40-million to various creditors, including many of its own lawyers.
Chapter 7 Trustee Salvatore LaMonica, who’s in charge of Dreier’s bankruptcy case in the personal liquidation proceeding initiated by several creditors, is seeking bankruptcy court permission to hire an auctioneer to sell off Dreier's three properties, the Upper East Side apartment, and the two neighboring properties in the Hamptons.
Event timeline
- May 12, 1950 - Date of Birth
- 1972 - Graduates with B.A. from Yale UniversityYale UniversityYale University is a private, Ivy League university located in New Haven, Connecticut, United States. Founded in 1701 in the Colony of Connecticut, the university is the third-oldest institution of higher education in the United States...
. - 1975 - Graduates with J.D. from Harvard Law SchoolHarvard Law SchoolHarvard Law School is one of the professional graduate schools of Harvard University. Located in Cambridge, Massachusetts, it is the oldest continually-operating law school in the United States and is home to the largest academic law library in the world. The school is routinely ranked by the U.S...
. - 1984 - Joins Rosenman, Colin, Freund, Lewis & Cohen.
- 1989 - Moves to Fulbright & Jaworski.
- 1995 - Joins Duker & Barrett.
- 1996 - Forms Dreier & Baritz with Neil Baritz of Boca Raton, FloridaFloridaFlorida is a state in the southeastern United States, located on the nation's Atlantic and Gulf coasts. It is bordered to the west by the Gulf of Mexico, to the north by Alabama and Georgia and to the east by the Atlantic Ocean. With a population of 18,801,310 as measured by the 2010 census, it...
. - 1998 - Takes on as a client Sheldon Solow, a New York real estate developer.
- 1999 - Firm is renamed Dreier, Baritz & Federman with addition of William Federman of Oklahoma.
- 2001 - Federman and Dreier dissolve their relationship.
- 2002 - Baritz leaves the firm. Federman sues Dreier over client escrow funds the matter ultimately settles.
- 2003 - Dreier LLP grows to some 30 lawyers, with Dreier functioning as the sole equity partner. He pays the bills but also has control over at least 12 client escrow funds.
Dreier moves aggressively over the next few years to bring a number of affiliates under his umbrella, opening offices in Stamford, Conn., Albany, New York, Pittsburgh, Los Angeles and Santa Monica, Calif.
- 2004 - Dreier LLP increases to 50 lawyers.
Dreier begins marketing promissory notes supposedly issued by Solow Realty & Development Co. to various hedge funds and investment funds. The "notes" pay between 8 percent and 12 percent interest with terms of between one and two years. In several instances, Dreier provides fake financial statements, backed up with forged letters purportedly issued by the accounting firm Berdon LLP.
- 2006 - Dreier LLP increases to 100 lawyers.
- September, 2006 - Traub, Bonacquist & Fox joins Dreier. Paul Traub becomes partner, and co-chair of the bankruptcy practice.
- 2007 - Dreier LLP grows to 175 attorneys.
- 2008 - Firm peaks at 250 lawyers.
- October 15, 2008 - Dreier walks into the offices of Solow Realty at 9 West 57th St. with Kosta Kovachev. The pair use a conference room to present Kovachev as a top Solow official and reassure two hedge fund managers about their investment in the promissory notes.
- Oct. 23, 2008 - Kovachev and Dreier use a law firm conference room in Stamford, where Kovachev impersonates a Solow executive on the phone and helps to seal the sale of $100 million in notes to a hedge fund.
- November, 2008 - Thomas Manisero, a partner at Wilson Elser Moskowitz Edelman & DickerWilson Elser Moskowitz Edelman & DickerWilson Elser is a full-service law firm with over 800 attorneys in 22 offices throughout the United States. Wilson Elser ranks among the top law firms identified by The American Lawyer and is listed in the “Top 50” by The National Law Journal...
, representing Berdon LLP, confronts Dreier in a phone call, saying he believed Dreier forged an audit report in an effort to dupe a hedge fund into buying more fictitious Solow notes. - Dec. 1, 2008 - A bankruptcy partner tells Dreier, who is in Canada, and the firm's controller that a $38.5 million payment is due a client, 360networks Corp. The controller finds the escrow accounts have only $19 million.
- Dec. 2, 2008 - Dreier is arrested in Toronto by Canadian authorities for criminal impersonation after he pretends to be a lawyer with the Ontario Teachers' Pension Fund, which he claims was guaranteeing the notes he was trying to peddle to another hedge fund.
News of his arrest sparks emergency partnership meetings and attorneys affiliated with the firm begin jumping ship.
- Dec. 7, 2008 - Dreier is arrested after returning to the United States and hires veteran defense attorney Gerald ShargelGerald ShargelGerald Shargel is a high-profile defense attorney based in New York City who has been a member of the New York Bar since 1969. He has garnered attention as both a trial and appellate lawyer, representing white-collar clients and ordinary criminal defendants, but is most famous for, along with...
. - Dec. 8, 2008 - Dreier makes his initial appearance in the Southern District on one count each of securities fraud and wire fraud. Shargel makes it clear the case will not go to trial, intimating that his client will plead guilty within months.
The Securities and Exchange Commission files a civil suit against Dreier.
- Dec. 11, 2008 - Assistant U.S. Attorney Jonathan Streeter says the size of Dreier's fraud is $380 million and growing. Citing "an enormous risk of flight," Magistrate Judge Douglas F. Eaton refuses to authorize bail.
- Dec. 16, 2008 - Citing "an accelerating onslaught" of demands from creditors, clients and attorneys, court-appointed receiver Mark F. Pomerantz files for Chapter 11 bankruptcy protection for Dreier LLP.
- Dec. 22, 2008 - Kovachev is arrested and charged with conspiracyConspiracy (crime)In the criminal law, a conspiracy is an agreement between two or more persons to break the law at some time in the future, and, in some cases, with at least one overt act in furtherance of that agreement...
to commit wire fraudWire fraudMail and wire fraud is a federal crime in the United States. Together, 18 U.S.C. §§ 1341, 1343, and 1346 reach any fraudulent scheme or artifice to intentionally deprive another of property or honest services with a nexus to mail or wire communication....
for his impersonation. - Dec. 23, 2008 - The Appellate Division, First Department, suspends Dreier from the practice of law "on the basis of uncontroverted evidence of serious professional misconduct.
- Jan. 22, 2009 - Magistrate Judge Eaton agrees to set bail conditions, but they are so tough that Shargel says his client has been "effectively" denied bail.
- Jan. 29, 2009 - Dreier is indicted for defrauding investors of more than $400 million. The case is assigned to Judge Jed. S. Rakoff.
- Feb. 5, 2009 - Judge Rakoff sets bail conditions that include confinement monitored by a 24-hour armed guard at Dreier's penthouse at 151 E. 58th St.
- Feb. 13, 2009 - Dreier is released from the Metropolitan Correctional Center, New York CityMetropolitan Correctional Center, New York CityThe Metropolitan Correctional Center, New York City is a Federal Bureau of Prisons remand center in downtown Manhattan in New York City, located on Park Row behind the Thurgood Marshall United States Courthouse at Foley Square....
. - March 17, 2009 - A superseding indictment includes new charges against Dreier. An accompanying forfeiture allegation seeks to recover $700 million - the amount of fake notes the government says Dreier sold to investors.
- April 22, 2009 - Streeter and fellow prosecutor Raymond LohierRaymond LohierRaymond Joseph Lohier, Jr. is a judge on the United States Court of Appeals for the Second Circuit and formerly an American prosecutor and an Assistant United States Attorney for the Southern District of New York. He was the chief of the securities and commodities fraud task force in the criminal...
file a new criminal information against Kovachev alleging he was paid $215,000 from Dreier LLP accounts to impersonate the Solow executive and perform other tasks. Kovachev pleads not guilty. - April 27, 2009 - Shargel announces at a hearing that Dreier intends to plead guilty to all eight counts in the indictment.
- May 11, 2009 - On the eve of his 59th birthday, Dreier pleads guilty.
- July 7, 2009 - Dreier pens a letter to Judge Rakoff confessing the details of his life of crime.
- July 8, 2009 - Dreier's Attorney Shargel asks the judge for a 'rational and proportionate' sentence of some 10 to 12 years. Prosecutors seek 145 years sentence.
- July 13, 2009 - Judge Rakoff sentences Dreier to 20 years in prison.
- July 21, 2009 - Dreier apartment at 151 E. 58th St. was sold at auction for $8.2 million, about $2 million less than the $10.43 million he paid in 2007.
- October 4, 2009 "Marc Dreier, The Mind of a Swindler, " CBS, 60 Minutes60 Minutes60 Minutes is an American television news magazine, which has run on CBS since 1968. The program was created by producer Don Hewitt who set it apart by using a unique style of reporter-centered investigation....
news magazine - October 8, 2009 Dreier is disbarred by the State of New York.
- November 2, 2009 Kosta S. Kovachev pleads guilty to impersonation, fraud etc..
- November 9, 2009 Robert Miller pleads guilty to conspiracy, fraud, impersonation, etc.
- March 31, 2010 Kosta S. Kovachev is sentenced to 46 months and a $215,000 fine.
- October 26, 2026 - scheduled prison release date
- partially compiled by Mark Hamblett, The American Lawyer
The American Lawyer
The American Lawyer is a monthly law magazine published by ALM. It was founded in 1979 by Steven Brill. Features include the annual AmLaw 100 Survey and AmLaw 200 Survey , "The View From the Top", their annual poll of law firm chairpersons, and their "Corporate Scorecard"...
External links
- Marc Dreier, The Mind of a Swindler,CBS, 60 Minutes, (October 4, 2009)
- Marc Dreier's Crime of Destiny, Vanity Fair, (November, 2009)
- Dreier pleads Guilty, Press Release, U.S. Attorney, Southern District of New York, (May 11, 2009)
- Dreier, LLP Chapter 11 Bankruptcy Filing
- Dreier, LLP Assets and Liabilties Statement, Schedules E,F,G,H
- Dreier Amended Criminal Complaint, (March 17, 2009)
- SEC Civil Complaint, (December 8, 2008)
- 'Fortune' Magazine, Profile of Marc Dreier, (March 31, 2009)
- "Lawyer Seen as Bold Enough to Cheat the Best", New York Times (December 14, 2008)
- Update on Dreier from AmLaw Daily
- Martha Graybow, "Dreier Law Firm in Turmoil After Founder's Arrest", Reuters (December 10, 2008)
- Wall Street Journal, "Etoys Investors Claim Conflict at Law Firm" (July 25, 2005)
May 2, 2010 Documentary film about Marc Dreier, "Unraveled," directed by Marc Simon, has world premiere at Toronto Hot Docs Festival