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Restraint on the part of the vulture.

December 9, 2008
Lawyer Is Accused in Massive Hedge Fund Fraud
By WILLIAM K. RASHBAUM and ALISON LEIGH COWAN
His legal lineage was impeccable. A Yale man with a law degree from Harvard, he was a litigation powerhouse, a leader at some of the more prominent firms at the New York bar who then started a top-shelf practice of his own.

But when the lawyer, Marc S. Dreier, stepped off a flight from Canada on Sunday night, federal authorities in New York arrested him in a $100 million fraud scheme, portraying his recent undertakings as more high-stakes grifting than high-end lawyering.

In brazen and carefully choreographed scams here and in Canada, Mr. Dreier, who in 1996 founded a 250-lawyer firm that bears his name, is said to have tried to take advantage of the current financial crisis by selling phony debt to hungry hedge funds looking for deals.

But in an era when high-tech frauds and inside information seem to dominate the world of white-collar crime, the square-jawed lawyer, known for his forceful personality and his penchant for high living, apparently did it the old-fashioned way.

Using little more than his position, poise and a kind of reckless bravado, he cajoled his way into accounting, real estate and pension fund offices where he had no real business, according to a criminal complaint unsealed on Monday.

Once there, seated in conference rooms that lent credibility to his charade, he peddled forged promissory notes — utterly worthless paper — linked in some way to his unwitting hosts, the complaint said. He backed up his claims with phony financial statements and bogus audit opinions from a reputable accounting firm, correspondence on the stationery of the New York real estate developer who supposedly issued the debt, and the help of a few confederates, the government said in court papers.

With these tools and little more, he allegedly took hedge fund executives for $100 million in one instance alone, money that the authorities say remains unaccounted for.

Mr. Dreier, 58, is charged with stealing $113 million since October, according to the complaint, although the case is continuing and a spokesman for the acting United States attorney in Manhattan, Lev. L. Dassin, whose office investigated the matter, would not say whether other alleged frauds are under scrutiny.

Indeed, Mr. Dreier was working on getting an additional $33 million last Tuesday, according to the complaint, when that scheme unraveled in a bizarre tableau played out in the offices of a Toronto pension fund, court records and officials said.

He was arrested in Canada and held by local authorities for several days on relatively minor charges. But the disclosure of that arrest eventually sent the law firm, Dreier L.L.P., reeling, and as details of the strange doings there began dribbling out, it became apparent he was also under investigation by federal authorities in Manhattan.

Suddenly, the law firm could not make its payroll, people there said; the Christmas party at the Waldorf-Astoria was canceled; the firm lacked the ability to pay the rent at its Park Avenue offices (once occupied by Bloomberg L.P.); lawyers started packing up; and what had once been a lucrative law practice — a conglomeration of several separate firms — began to collapse.

On Monday afternoon, a United States magistrate judge, Douglas F. Eaton, ordered Mr. Dreier detained until a bail hearing on Thursday. However, because the Securities and Exchange Commission has sought to freeze his assets and those of Dreier L.L.P. in a parallel civil action, it is unclear how he might post bond.

Mr. Dreier’s efforts to enrich himself apparently did not end with his arrest, according to authorities. In a hearing on the S.E.C. action, which immediately followed the arraignment, a lawyer for the commission told Judge Miriam G. Cedarbaum of Federal District Court that Mr. Dreier “did attempt and may have transferred assets” while he was jailed in Canada last week. But the lawyer, Nancy Brown, would not elaborate.

Raymond J. Lohier and Jonathan R. Streeter, the assistant United States attorneys who are prosecuting the criminal case, and Mr. Dreier’s lawyer, Gerald L. Shargel, said little during the arraignment that preceded Judge Cedarbaum’s hearing.

Afterward, Mr. Shargel noted, “This is a very complicated matter — the facts are beyond reach of a sound bite.”

Outside the courtroom, when reporters asked whether Mark F. Pomerantz, the receiver expected to be appointed to oversee Dreier L.L.P.’s finances, would also run the law firm, Mr. Shargel alluded to the swift departure of some members of the firm.

“The lawyers have apparently manned the lifeboats,” he said. “Given the reaction of the partners, I don’t think there is any law firm to run,” he said.

Questions in the case abound. Why — and perhaps more important, when — did Mr. Dreier begin the multimillion-dollar con game detailed in the criminal complaint? How did sophisticated investors, and his highly educated colleagues, get duped?

“Look, it’s a tragic story,” said a lawyer who worked with Mr. Dreier years ago, who spoke on the condition of anonymity because of the inquiry focused on the firm.

“I don’t know what happened to him,” added the lawyer. “I don’t know if he was always this way or not but it’s just an amazing story.”

Mr. Dreier’s résumé included high-level stints at Rosenman & Colin and at Fulbright & Jaworski, where he was head of the litigation department. His credentials and his no-nonsense demeanor helped him attract talent to his legal firm.

He has a triplex apartment on the East Side of Manhattan, along with a house near the beach in Southampton, N.Y., and a 120-foot yacht. The walls of his Park Avenue office drip with expensive modern art, and he kept three personal assistants busy.

The criminal complaint, sworn out by James J. Otten, an investigator with the U.S. attorney’s office, tells a remarkable story of hubris.

The seven-page document, which was filed under seal on Thursday and made public on Monday, details three schemes and charges Mr. Dreier with one count each of wire fraud and securities fraud.

In one scheme, it says, Mr. Dreier sought to sell a total of $146 million worth of bogus promissory notes that he created using the name of a real estate firm, unnamed in the complaint. He convinced a receptionist at the Manhattan offices of the firm (which people involved in the matter said was Solow Realty, a firm that had in the past retained Mr. Dreier) that the firm’s chief executive had authorized him and three other people to use a conference room for a meeting with the executive.

In fact, the chief executive had not scheduled such a meeting. But he later saw Mr. Dreier conducting a meeting in Solow’s conference room, where he was negotiating to sell the notes.

At some point in the investigation, according to the complaint, a cooperating witness secretly recorded Mr. Dreier admitting that he had “participated in the fabrication” of certain financial statements that he was to give to a hedge fund. On the tapes, the government contends, Mr. Dreier “further stated that he was ‘ashamed’ of his role in fabricating the documents and that it was “very serious what’s happened here.’ ”
 

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Harvard Law - hmmm, anybody else in the news lately we can name who came out of Harvard law?
 

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Dang robbed them all and didn't even need a gun!
A man with a gun might get your wallet or the cash in your drawer.

A talented grifter can take -or cause you to lose- everything you have while never losing his smile.

Demons like this attorney have stolen the livelihoods of of thousands of Americans they've never even met. Just start at his firm. For every attorney at the firm, there were at least two support staff that are now on the streets. Then go down to his "marks." As we all should recognize by this point in the new Depression, profits go up (to the executives) and only losses go down (to shareholders, pension holders, employees, and third parties stuck with worthless accounts receivables).

I'll cut to the chase........he should be executed....publicly :D
 

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Preferably by impalement, on a short, thick stake I'd say.

We had a similar case here, a purported commodities trader who was actually running a Ponzi scheme. Over $100 Million involved, looks like the receiver will recover about a third (and lucky to do that well). Bunch of people (including some that should ahve known better) took a real hit. Mr. Hudgens is gonna go to the slam, but that doesn't really do that much for the victims. No question recovery of a third is better than nothing at all, but....

Note - a $100 million is a lot less than $50 billion, but we are a smaller place than New York, too.
 

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A man with a gun might get your wallet or the cash in your drawer.

A talented grifter can take -or cause you to lose- everything you have while never losing his smile.

Demons like this attorney have stolen the livelihoods of of thousands of Americans they've never even met. Just start at his firm. For every attorney at the firm, there were at least two support staff that are now on the streets. Then go down to his "marks." As we all should recognize by this point in the new Depression, profits go up (to the executives) and only losses go down (to shareholders, pension holders, employees, and third parties stuck with worthless accounts receivables).

I'll cut to the chase........he should be executed....publicly :D

It's like the old joke:

What is the difference between a dead lawyer in the middle of the road and a dead skunk"?

The tire marks are in front of the skunk.
 

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It's like the old joke:

What is the difference between a dead lawyer in the middle of the road and a dead skunk"?

The tire marks are in front of the skunk.
Without lawyers there would be no Constitution and certainly as of late, no Heller decision confirming the Second Amendment. Be glad someone braked, otherwise you would have no rights and be at the mercy of insurance companies, big corporations, and those with more money and power than you ;)
 

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Without lawyers there would be no Constitution and certainly as of late, no Heller decision confirming the Second Amendment. Be glad someone braked, otherwise you would have no rights and be at the mercy of insurance companies, big corporations, and those with more money and power than you ;)


Not so. The Founders wanted statesmen to lead the nation, not lawyers.
"Be glad someone braked, otherwise you would have no rights and be at the mercy of insurance companies, big corporations, and those with more money and power than you."
Last time I looked, I already was.

JAK
 
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