Another Jewish Criminal: Fast Living, Bold Ambitions Drove Lawyer's Rise and Fall

[MikeWB]

Whole Wall Street and most of Manhattan is full of these criminals! It's all finally floating to the top.

Fast Living, Bold Ambitions Drove Lawyer's Rise and Fall
By NATHAN KOPPEL, JUSTIN SCHECK and STEVE STECKLOW

Marc Dreier had four dazzling homes on two coasts, drove an Aston Martin and sailed a 123-foot yacht. The law firm he owned displayed artwork worth at least $30 million. And he gave many of its 250 attorneys huge guaranteed compensation, no matter how much business they generated. His colleagues couldn't figure out how he afforded it all.

An answer began to trickle out in October, when a hedge fund that was considering buying some promissory notes was puzzled by the documents' fine print. Seeking more detail, the fund, Whippoorwill Associates Inc., got in touch with the auditor whose name was on the documents -- and learned they had been forged, say people familiar with the matter.

The auditor and the purported issuer of the notes in question informed federal authorities. They began examining the marketing of the notes. And Mr. Dreier's law firm, one with a national reputation and celebrity clientele, was on its way to collapse.

Mr. Dreier has since admitted to others that he sold bogus promissory notes, federal authorities say. They allege, in criminal and civil complaints and testimony in federal court in New York, that the Harvard-educated attorney bilked clients and investors of $380 million in a fraud that entailed impersonation of businessmen, faked documents and ruses staged at the hijacked conference rooms of unsuspecting companies. Arrested in Toronto Dec. 2, Mr. Dreier is now in custody in New York. His firm, Dreier LLP, filed for bankruptcy protection this week.

Some who know Mr. Dreier blame desperation to support an extravagant lifestyle and a law firm that he expanded too aggressively. Mr. Dreier acquired law practices on both coasts, signing up lawyers with big contracts and taking leases on space at the best addresses -- all the while throwing lavish parties, developing a swank restaurant in Santa Monica, Calif., and meeting the terms of a settlement with his now-former wife.

A headhunter who placed lawyers at Mr. Dreier's firm says that after it hired a large group in California in 2006, he told Mr. Dreier to slow down. "I said, 'Look at the size of your firm, take a deep breath,'" says the recruiter, Mark Rosen. "But he wanted to grow bigger, bigger, bigger. That was just his personality. He liked being the owner of a large law firm, and the status that goes along with it."

A lawyer for Mr. Dreier, Gerald Shargel, says his client "is cooperating with the receiver, and we hope to resolve this case in a fair and reasonable way." He adds, "Under any analysis, this is a tragedy of epic proportions. He was so able as a lawyer. He had the benefit of a fantastic education. He worked very, very hard."

If Mr. Dreier did what prosecutors allege, his precise motive -- and strategy -- are unclear. Among the questions: whether the alleged fraudulent note sales might have been just a means of temporary financing, and how the deals were eventually to be unwound. Prosecutors haven't offered a theory.

Mr. Dreier grew up on New York's Long Island, the son of a Polish immigrant who came to America in 1939 to work at the New York World's Fair and later built a small chain of movie theaters. He studied at Yale and then Harvard Law School. People who've dealt with him professionally describe him as a brilliant litigator, quick and witty, with a ferocious work ethic but a temper, too. As a young lawyer in the 1970s, says a colleague from that period, he was fond of saying, "You only live once -- you gotta go for it."

After making partner at one law firm, he moved to Fulbright & Jaworski LLP in the Texas firm's New York office. He left in 1995, worked briefly at another firm and in 1996 started his own, with a partner. When the partner left in 2003, Mr. Dreier was sole proprietor of an obscure 30-lawyer firm.

Typically, a law firm's partners share in revenue and expenses, have a say in strategy and can see the books. Here, Mr. Dreier had all of the equity and all of the risk. "Partners" were independent business units paid a salary.

Mr. Dreier signed every check and decided matters big and small. At its offices on Park Avenue in New York, one former partner says, Mr. Dreier chose everything from the wall colors to the fresh-cut flowers replaced daily on each floor. He also selected the artwork, which court filings described as being valued at $30 million to $40 million.

Among other lawyers there, "the topic came up fairly regularly about how does Marc do it from a financial perspective, when you looked at the expenses of expansion," says a former partner, Daniel Coughlin, who adds that occasionally partners would ask if they could examine the books. Mr. Dreier would rebuff them by asking them whether their paychecks were still coming, says Mr. Coughlin, who left in 2007.

By then, Mr. Dreier was accumulating a flashy array of personal assets. He had a spectacular three-story apartment in midtown Manhattan with floor-to-ceiling windows. Already the owner of a home in the Hamptons on Long Island, he added a second one, currently assessed at $1.26 million, and held parties on a $15 million yacht, Seascape.

"We were told he came from family money," says Timothy Bechen, a patent-law specialist, who adds that he was a week away from making partner when the firm imploded.

Some secretaries at the firm earned more than $200,000 annually, according to Douglas Hamilton, a former secretary and computer specialist there who says he was paid $112,000 last year.

In 2006, Mr. Dreier began a rapid expansion in California in which he lured lawyers with promises of autonomy, seven-figure salaries and hefty bonuses. Mr. Dreier joined the Brentwood Country Club, says a club manager, who adds that the fee is $180,000. He took over the lease on an oceanfront penthouse from Larry Feldman, a Los Angeles litigator he was trying to recruit, says Mr. Feldman (who didn't sign on).

Two blocks from his new penthouse, Mr. Dreier opened a branch of Tengu, a fancy sushi restaurant. Mr. Dreier, who is 58 years old, often brought attorneys there for late dinners, frequently joined by younger women, says Tengu's events manager, Raphaela Bazalgette. "He just had a lot of friends and was always having a good time."

Mr. Dreier "liked exotic things," she adds, especially live California scorpion fish, a bulbous-headed, venomous species. He would eat one "on a stick, with its heart still beating," she says.

Stanton "Larry" Stein, an attorney who specializes in representing celebrities such as the Olsen twins and Rob Lowe, joined with Dreier LLP in early 2007, bringing along 35 or so other lawyers. Mr. Dreier assumed the costs of the group's offices in Santa Monica's Water Garden, one of the costliest commercial spaces in Los Angeles County. He agreed to pay Mr. Stein more than $2 million a year for the first three years, say three people familiar with the matter. Mr. Stein declined to comment on his compensation from Dreier.

Marshall Grossman, a former partner of Mr. Stein's who didn't come along, was surprised at Mr. Dreier's willingness to shoulder such costs. "I understood the economics of what he was buying, and the cost...made no sense," says Mr. Grossman, who describes his split from Mr. Stein's group as acrimonious.

Mr. Dreier leased space in a Century City building used in the movie "Die Hard." By the end of 2007, he was paying more than $300,000 a month for Los Angeles office rent, says a person with knowledge of the firm's finances.

Early this year, Mr. Dreier brought in a prominent Los Angeles litigation group that included attorney Eric George, whose father is the chief justice of the state supreme court. Several lawyers in the group were guaranteed more than $1 million a year, says a person with knowledge of the arrangement. Mr. George says he and other California attorneys have ended their relationship with Mr. Dreier since his arrest and now operate independently.

Mr. Dreier assembled a California branch with a broad range of practices, including sports and entertainment law. The unifying theme of the growing firm was its roster of bold-face clients, people like comedian Jay Leno, pitcher Andy Pettitte, musical artist Diana Krall and rock band Wilco.

Celebrating the growth, Mr. Dreier threw parties that got increasingly lavish. In 2007, he hosted a charity golf tournament with former New York Giants defensive end Michael Strahan. Diana Ross sang at the pre-party, and actor William Shatner was M.C. At this year's event, held in June, the headliner was pop singer Alicia Keys.

At a Christmas party last year at the Waldorf Astoria, he ascended a platform and danced wildly to the party anthem "Shout," as employees surrounded him waving their arms. He donned a Viking helmet at a party at the Hiro Ballroom in New York this year.

But by November, Mr. Dreier was being investigated by the U.S. attorney for the Southern District of New York, thanks in part to the suspicions aroused at the Whippoorwill hedge fund when it was considering buying some notes. The authorities had heard both from the purported auditor of the paperwork, Berdon LLP, and from the firm portrayed as having issued the notes -- Solow Realty & Development Co. in New York.

According to a criminal complaint since filed in federal court in Manhattan, prosecutors instructed a cooperating witness who was associated with Berdon to confront Mr. Dreier about the documents -- in recorded phone calls. During the calls, the complaint says, Mr. Dreier admitted fabricating documents he'd provided to a buyer in connection with a note sale. "Dreier further stated that he was 'ashamed' of his role in fabricating the documents and that it was 'very serious what's happened here,'" prosecutors said in the complaint.

Then around the start of this month, Mr. Dreier was attempting to sell some notes to Fortress Investment Group LLC, according to people familiar with the matter. Fortress asked for certain guarantees from a pension plan Mr. Dreier represented as being involved in the deal, and wanted to meet in person with a manager from the plan, Ontario Teachers' Pension Plan.

As the people familiar with the events tell it, Mr. Dreier set up a meeting in Toronto with Ontario Teachers on an unrelated matter; stayed on in its offices afterward; then intercepted a Fortress executive when he arrived and took him to a conference room. They say Mr. Dreier posed as a lawyer who actually works for the pension plan, Michael Padfield, and signed documents as him.

But the Fortress executive began asking questions about Mr. Padfield. Mr. Dreier's alleged ruse came undone. An Ontario Teachers employee notified the police, and Mr. Dreier was arrested.

He intends to plead not guilty to an expected impersonation charge, his lawyer in Canada says. The charge can be either a misdemeanor or a felony, at prosecutors' discretion.

Fortress says it is cooperating with law enforcement. Mr. Padfield couldn't be reached for comment.

Freed from jail, Mr. Dreier returned to the U.S., where he was re-arrested. Filings by U.S. authorities in federal court in Manhattan allege he sold fake promissory notes purportedly issued by a New York real-estate developer; according to people familiar with the situation, this was Solow Realty, once one of his firm's biggest clients. Prosecutors say Mr. Dreier claimed to be offering them on behalf of hedge funds that needed to sell because of the financial crisis. To do so, he is alleged to have commandeered conference rooms at both Solow and one of its accounting firms, besides the room in Toronto.

U.S. prosecutors include, in the tally of $380 million of losses they allege he caused, $100 million in fake Solow notes sold to a New York investment fund in October. As part of that sale, according to court filings, Mr. Dreier arranged a conference call between analysts at the unidentified investment fund and an accomplice who posed as a Solow executive. Prosecutors haven't named the alleged accomplice.

As far back as early 2006, Mr. Dreier sold $100 million in purported Solow Realty notes to another New York asset manager -- GSO Capital Partners LP, now owned by Blackstone Group LP -- according to a person familiar with the transaction. This person says the debt was repaid with interest, and Blackstone has no exposure.

A spokesman for Solow said, "The company never authorized Marc Dreier to negotiate any financing or issue any promissory notes on its behalf."

Mr. Dreier's law practice began to unravel the day after his arrest in Toronto. Top lawyers there assigned employees to check on the status of bank accounts, and then called a meeting to report their findings. To their surprise, according to two people who attended, Mr. Dreier's college-age son Spencer showed up, and said his father had told him that as soon as he got out of jail, he would come back and everything would be fine. Spencer Dreier couldn't be reached for comment.

The lawyers asked the son to leave and then debated, among other things, whether to cancel a Christmas party at the Waldorf set for the next evening. They agreed to go ahead with it, since it was paid for, but reconsidered the next day after learning that most of the money in a $38 million escrow fund held in a bankruptcy case was missing.

A firmwide email went out: The Christmas festivities were canceled. "People were angry and perplexed," says Brad Lowary, a secretary at the law firm.

To try to rally their spirits, he says, a paralegal ran out to a neighboring bar and gathered about $100 worth of beer. Pizza was ordered, and staffers partied in a partner's office. "The ship was going down," says Mr. Lowary, "so we wanted to bond for one last evening."

—Amir Efrati contributed to this article.