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N.Y. lawyer charged in fraud

SEC says $113m in fake notes sold

Associated Press / December 9, 2008
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NEW YORK - The head of a prominent Manhattan law firm was charged with securities and wire fraud yesterday for what authorities called a "stunning, brazen fraud" that tricked hedge funds into investing more than $100 million in bogus financial instruments.

Marc Dreier, 58, of Manhattan was charged in a criminal complaint unsealed in US District Court in Manhattan. He also was charged by the Securities and Exchange Commission in an elaborate scheme that raised at least $113 million from the sale of fraudulent promissory notes, authorities said.

"Our complaint alleges a stunning, brazen fraud that targeted some very sophisticated institutional investors," said Linda Chatman Thomsen, director of the SEC's Division of Enforcement. "Investors big and small should take heed, especially in these difficult economic times, that con artists are out there and may go to elaborate lengths to commit fraud."

Dreier appeared in court yesterday and had his bail hearing set for Thursday.

"This is a very complicated matter and the facts are beyond reach . . . of a sound bite," said defense lawyer Gerald Shargel.

In a related case, Dreier was charged last week in Toronto with impersonation in connection with the attempted sale of $45 million of notes to a hedge fund.

The scandal has stunned Dreier LLP, a midsize law firm that has represented celebrities including retired football star Michael Strahan. The 12-year-old law firm has 238 lawyers, including 139 in Manhattan.

The New York Law Journal reported that the firm operated more like a corporation than a partnership, with Dreier controlling expenses and liabilities as the sole equity partner.

Prosecutors said the charges rose from actions Dreier took beginning in October. The SEC said Dreier created an elaborate charade to convince purchasers that the fake investments were real.

The agency said he distributed phony financial statements and audit opinion letters of a reputable account firm, recruited confederates to pose as representatives of legitimate companies involved in the transactions, and created dummy e-mail addresses and telephone numbers.

At least one note purchaser discovered the fraud and demanded and received back its investment, the SEC said. But about $100 million in proceeds from the bogus notes remain unaccounted for, it said.

The SEC says New York lawyer Marc Dreier participated in an elaborate scheme that raised at least $113 million.

Fraud complaint

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