Fighting to get his client released on bail while he awaits trial on accusations that he looted escrow accounts and sold or tried to sell more than $100 million in phony promissory notes to hedge funds, attorney Gerald Shargel said Dreier has no hidden assets here or abroad.
The argument came in court papers filed late Thursday in advance of a Jan. 22 bail hearing before Southern District Magistrate Judge Douglas F. Eaton.
Dreier, who was the only equity partner in 250-lawyer Dreier LLP, was charged in a criminal complaint with one count each of securities fraud and wire fraud following his return from Toronto on Dec. 4, where he was allegedly involved in another fraud and impersonation related to the Ontario Teachers Pension Fund.
He has been held in the Metropolitan Correctional Center without bail since the arrest, when Southern District Assistant U.S. Attorney Jonathan Streeter persuaded Magistrate Judge Eaton that Dreier should be remanded because there were too many questions about Dreier's assets and his potential risk to flee the country if released. Streeter also announced that the amount of money at stake in Dreier's alleged frauds had ballooned to $380 million.
Streeter also cited the elaborate devices allegedly employed by Dreier to execute his scheme, including having his confederate, since revealed to be Kosta Kovachev, impersonate the comptroller of Solow Realty to help sell the bogus notes. Kovachev has also been charged in the case.
However, Eaton invited Shargel to renew his application for bail once it was shown that Dreier was cooperative with Mark Pomerantz of Paul, Weiss, Rifkind Wharton & Garrison, the receiver appointed by Judge Miriam Goldman Cedarbaum in a related civil case brought by the Securities and Exchange Commission.
Shargel, in papers filed Thursday, said Dreier "never needed to be prodded nor pushed" to cooperate with Pomerantz.
"Based on this examination, the receiver found no indication that the defendant has available to him any substantial, unaccounted-for assets," Shargel said. "Further, the receiver found no indication that money was transferred to any offshore account controlled by the defendant, or converted to any asset that remains within defendant's control."
The laundry list of property submitted by Shargel Thursday includes a Mercedes Benz and an Aston Martin, several boats and bank accounts, a number of pieces of real estate and an extensive art collection, including works by Roy Lichtenstein, Henri Matisse and Andy Warhol.
The papers also provide a glimpse into what happened to all the money.
In his revelations to Pomerantz, Dreier "fully identified the disposition of the funds," Shargel said, detailing how the money was wired to hedge funds to make investments; transferred to Dreier LLP or its affiliates "to cover millions of dollars in deficits" from operating expenses, capital expenditures, construction costs and security deposits; invested in losing stocks; or used to buy property and artwork.
"Thus, the money at issue is in fact fully accounted for, and the government's inference that there must be a 'pile of money' hidden somewhere is simply unsupported," he said.
Shargel argued that, under the Bail Reform Act, 18 U.S.C. §3142(b), the court "must release the defendant, even without any surety or collateral, if he is not a flight risk or a danger to the community."
He reminded the court that Dreier, 58, elected to return from Toronto even though he knew he would be arrested upon arrival in New York.
"In fact, defendant had a private plane waiting for him at the airport in Toronto on Dec. 2, 2008, which could have taken him to any destination, but instead of fleeing" he "remained in Toronto to face questions from the Ontario Teachers Pension Fund even after representatives of the fund had told him on the phone they believed he was engaged in impersonation and fraud," Shargel said.
He added that there were several instances where Dreier could have stayed abroad in October and November when it became clear that his alleged victims, including Solow, were contacting the authorities or at least questioning his dealings.
Shargel made no mention of the success of Bernard Madoff, accused in a multibillion-dollar Ponzi scheme, in beating back two attempts by prosecutors to have him jailed pending a resolution in the case.
Unlike Madoff's case, where the government consented to bail at the outset, Streeter insisted that Dreier, a Harvard Law School graduate, be remanded from the beginning. To support his argument, Streeter told the court that Dreier kept a box of cell phones on his desk in his Park Avenue office and called him the "Houdini of impersonation."
But Shargel acknowledged in a phone interview that "the comparison is useful" and said he would mention Madoff at oral argument if it seems appropriate.
Shargel is proposing that Dreier post a $10 million bond, that, while unsecured, would be signed by Dreier's mother and his 19-year-old son. Dreier would be placed under house arrest with armed security guards paid for by the defendant's family.
He proposed that his client would wear an electronic monitoring device, be denied all computer access, and only be allowed pre-approved visitors.
Shargel also said on Wednesday that he had reached an agreement in principle with the SEC's attorneys to release $50,000 in frozen assets that Dreier can use to cover the costs of his defense.
The U.S. Attorney's Office declined comment.