From $50 Million Deal to $100,000 Bail - in a N.Y. Minute

The Globe and Mail
By Sinclair Stewart, Paul Waldie and Timothy Appleby
December 6, 2008

New York, Toronto - On Tuesday afternoon, Marc Dreier, a high-powered New York lawyer with a roster of celebrity clients, arrived at the Toronto headquarters of the Ontario Teachers' Pension Plan to pitch an investment deal. Hours later, he was being led away by police, allegedly for impersonating one of the pension plan's executives in what sources described as a brash and bizarre scheme to divert $50-million from a U.S. hedge fund.

Mr. Dreier, 58, is charged with personation with intent. Released Friday on $100,000 bail after nearly three days in custody, he emerged from a Toronto courthouse bearded and dishevelled.

He embraced his son and his brother-in-law, both of whom attended the proceedings, and then hurried away, pursued by reporters.

His lawyer, Edward Greenspan, described the charge as “a relatively minor offence” under Canadian law.

“We were told in court that there are matters that are still under investigation, but it doesn't appear that there's anything further,” he said.

Mr. Dreier helms an eponymous law firm with more than 250 lawyers in the United States. The veteran litigator hosts an annual charity event with former New York Giants star Michael Strahan, and his New York office has represented professional baseball players including Sammy Sosa and Andy Pettitte. Dreier LLP's Los Angeles affiliate represents the Olson twins, Hilary Duff and film producer Lion's Gate Entertainment.

But even Hollywood's credulity would be strained by the elaborate caper Mr. Dreier is accused of attempting.

He was seeking a $50-million investment from New York-based hedge fund giant Fortress Investments on behalf of an unnamed company, according to investment industry sources in Toronto and New York, who spoke with The Globe and Mail on condition that their names not be published. These sources said Mr. Dreier assured Fortress that Teachers was providing a guarantee on the company's assets – a kind of insurance policy that would protect Fortress's investment.

Fortress asked for proof of the guarantee agreement, the sources said.

It was then, according to the theory advanced by police and industry sources, that Mr. Dreier concocted a complex ruse to gain access to Teachers' offices.

He arranged to meet with the pension fund on Tuesday afternoon – apparently to propose an unrelated deal. The pension fund wasn't interested, and the meeting ended after about 15 minutes.

According to sources, Mr. Dreier, allegedly posing as Teachers' senior legal counsel Michael Padfield, had arranged to meet a Fortress executive at the pension fund's headquarters that afternoon to provide him the fake guarantee for the $50-million investment.

One source familiar with the matter said that after his brief meeting with Teachers, Mr. Dreier asked if he could use one of the fund's small conference rooms while he was waiting for his private plane to prepare to take him back to New York.

He paced in the lobby for about an hour, the source said, until Howard Steinberg, a Canadian executive with Fortress, showed up for a meeting that he believed would be with Mr. Padfield of Teachers. Mr. Dreier then whisked him into one of the rooms.

It was then, according to industry and law-enforcement sources, that Mr. Dreier, pretending to be Mr. Padfield, presented him with a phony guarantee agreement.

Mr. Steinberg became suspicious, the sources said, and Mr. Dreier left the room, strolled to the third-floor elevator, and exited the building.

The receptionist immediately asked Mr. Steinberg what was going on.

“Was that Michael Padfield?' he asked.

No, it wasn't, she said.

A call went at once to police and Mr. Dreier was arrested at about 5:30 p.m.

A spokeswoman for Teachers declined to comment, but in a statement the pension fund said it “learned of fraudulent behaviour by an individual visiting our premises [and] immediately alerted the police.”

Fortress declined to identify Mr. Steinberg, but confirmed in a statement that one of its employees noted “suspicious behaviour” while visiting Teachers and immediately alerted the fund.

Mr. Dreier was well known in Canadian corporate law and litigation circles. People who worked alongside him on a number of cases and transactions described him as calm, methodical and forceful. “He's a big hitter and he would sweep in and expect to get his way,” said one Bay Street adviser who worked alongside him on a number of transactions.

The arrest is likely to pose unique problems for Dreier LLP. While the firm has more than 250 attorneys, Mr. Dreier is the only equity partner. The firm cancelled its holiday party Thursday night at the Waldorf Astoria, according to reports, and held emergency meetings on the matter.

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