Freed in Canada, U.S. lawyer charged with 'stunning' fraud at home

The Globe and Mail
By Josh Wingrove
December 9, 2008

Moments after New York lawyer Marc Dreier stepped back onto U.S. soil last weekend - returning from three days in a Canadian jail over an alleged $50-million fraud - he was arrested once more, charged with a "stunning, brazen" $140-million fraud in the United States.

Mr. Dreier, 58, was arrested on Sunday night at New York's LaGuardia Airport. U.S. officials charged him with wire and securities fraud for allegedly spearheading a scam that sold false promissory notes on real estate developments to hedge funds.

The U.S. arrest came two days after Mr. Dreier - founder of Dreier LLP, which has offices in four cities and lists stars such as former New York Giants lineman Michael Strahan as clients - was released from custody in Toronto, where he's alleged to have undertaken a similar scheme.

U.S. officials yesterday detailed what they say was a scam headed by Mr. Dreier, a Yale and Harvard graduate.

Mr. Dreier approached at least three hedge funds since October and claimed to be acting on behalf of both a New York real estate company and its investors, who were trying to sell heavily discounted promissory notes "because they needed cash due to the recent financial crisis," the U.S. attorney's office alleges.

One Connecticut hedge fund wired Mr. Dreier nearly $17-million for a promissory note that he said was worth $31-million, authorities allege.

Mr. Dreier secured at least $140-million from two firms using fake phone numbers, e-mails, and financial statements to support the charade, authorities allege.

One of the two firms discovered the notes were worthless, threatened legal action, and got its money back, the Securities and Exchange Commission said yesterday. About $125-million remains missing.

In addition to the criminal charges, the SEC also moved to freeze all of Mr. Dreier's assets.

"Our complaint alleges a stunning, brazen fraud that targeted some very sophisticated institutional investors," said Linda Chatman Thomsen, an SEC enforcement official.

"This is a very complicated matter and the facts are beyond reach ... of a sound bite," Mr. Dreier's American defence lawyer, Gerald Shargel, told the Associated Press outside court yesterday.

It's not clear whether the Canadian charge was based on the same real estate scheme.

Nevertheless, Mr. Dreier is said by police and investment industry sources to have apparently pitched a phony deal to the Ontario Teachers' Pension Plan in Toronto last Tuesday that was rejected. According to sources, he then asked to use an OTPP office briefly, met an official from New York-based hedge fund giant Fortress Investments, presented himself as OTPP lawyer Michael Padfield - who gave Mr. Dreier his business card at an earlier meeting - and then attempted to secure a $50-million investment from Fortress.

The Fortress official became suspicious, notified OTPP staff, and police were called, sources told The Globe.

Mr. Dreier's lawyer for the Canadian charge, Edward Greenspan, has denied the Canadian allegations against his client.

Mr. Dreier is due back in Canadian court on Jan. 23 on a charge of personation with intent.

The U.S. charges, if proved in court, each carry a maximum sentence of 20 years, and millions of dollars in fines. His bail hearing in the United States is set for Thursday.

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