Marc S. Dreier will remain behind bars until he can get another judge to take a look at possible bail conditions as he awaits trial for alleged frauds totaling more than $380 million.
Magistrate Judge Douglas Eaton on Thursday declined to order Dreier, 58, detained outright, but he set such tough conditions for his pretrial release that defense attorney Gerald Shargel said his client was "effectively" denied bail.
Shargel said after the hearing he would appeal the ruling to a Southern District judge.
Shargel did not hesitate to play the Madoff card Thursday, contrasting his client's continued confinement with the pretrial release of Bernard Madoff, who is accused of orchestrating a $50 billion Ponzi scheme. Madoff has been confined to his Upper East Side penthouse.
Shargel, his voice rising as he referred to Madoff, said, "$50 billion and counting!" Referring to the government's emphasis on Dreier's traveling and foreign connections, he said of Madoff, "Hotels over $7,000 a night! Money all over the place! [Visiting] Countries we've never heard of."
But Eaton said there were critical differences between Dreier and Madoff, including how Dreier was apprehended and his inability to find the money or backers who can secure his appearance in court.
Eaton set bail at $20 million, with $10 million to be secured by at least four financially responsible persons, in addition to conditions agreed to by Shargel -- 24-hour armed guards in Dreier's apartment on East 58th Street and electronic monitoring.
The magistrate judge also cited Dreier's erratic and impulsive behavior as contributing to the risk that he could flee, and added the condition that he see a psychiatrist twice a week, who may prescribe medication as needed.
Dreier, wearing the prison blues of the Metropolitan Correctional Center, looked far more composed Thursday than he did at his initial court appearance on Dec. 8, when he appeared haggard and exhausted. He was animated Thursday, speaking several times to Shargel during the 90-minute hearing.
At a bail argument on Dec. 11, Assistant U.S. Attorney Jonathan Streeter called Dreier a "Houdini of impersonation," and said he suspected that the former head of the 250-lawyer Dreier LLP had a pile of cash stashed somewhere overseas.
Eaton on Dec. 11 agreed on the risk of flight but invited Shargel to come back once he could obtain evidence that Dreier did not have assets hidden abroad. That evidence, he said, would come in the form of full disclosure to Mark Pomerantz of Paul, Weiss, Rifkind, Wharton & Garrison, the receiver appointed to discover and hold Dreier's assets in a related case brought by the Securities and Exchange Commission.
Shargel thought he had the evidence he needed -- a favorable report from Pomerantz with a laundry list of now-frozen assets and no foreign bank accounts or property Dreier could use to lead a life of leisure if he jumped bail and fled the United States.
Eaton was not convinced by Shargel's argument that his client voluntarily returned to the United States on more than one occasion in October and November despite "clear storm warnings" that he would face criminal charges.
Dreier is accused of pretending to represent Solow Realty and peddling more than $100 million in bogus promissory notes in the company's name to three hedge funds in New York and Connecticut. Streeter also said that Dreier looted his law firm's client escrow accounts and spent the money on bad investments, expensive artworks, high-priced vehicles, real estate and other items.
CLEAR DISTINCTIONS
Magistrate Judge Eaton said there were "extraordinary facts" that distinguished the Madoff and Dreier cases. For one, it did not impress him that Dreier returned to the United States in the fall despite "clear storm warnings," because he went to Canada, where he was arrested on Dec. 2 trying to peddle millions more in phony notes. The judge called that behavior "reckless and clever."
"Frankly, it suggests a mental disorder," Eaton said. "He did something extremely reckless, and that behavior was after he knew he was facing the prospect of a criminal charge. That makes this case very different from the Madoff case."
Another factor was that Eaton was presiding in magistrate's court on the evening of Dec. 11, when Madoff was brought before him for an initial appearance.
Madoff was released with the consent of the prosecution. Although the prosecution would later reverse course when it discovered Madoff had mailed more than $1 million in jewelry to family and friends in direct violation of a court order in a related SEC case, Magistrate Judge Ronald Ellis and then Judge Lawrence McKenna ruled that Madoff could remain under house arrest.
In Madoff's case, Eaton said Thursday, "You had no complaint from any investors. The government just opened up a file" based on information offered by Madoff's two sons.
"Whatever you have to say about him, he told his sons and he expected to be arrested and he took no extraordinary measures," Eaton said. "He just sat there waiting to be arrested. The government came in here with a bare bones complaint" and they consented to bail.
"I think the risk of flight is greater in Mr. Dreier's case than in Mr. Madoff's case," he said.
In contrast to Madoff, the prosecution has sought to have Dreier detained from the outset.
In a letter brief filed Wednesday, Streeter pointed to connections Dreier had in Turkey and the attempts of his 19-year-old son, Spencer, to try and have cell phones in Dreier's offices destroyed; keep Dreier's yacht in St. Martin rather than have it returned to the United States; and have Dreier's caretaker sign documents that would purport to transfer real property from the father to the son.
Eaton said he was willing to accept some of Shargel's conditions, but would not approve a bail package without some cash or property as security.
But although he made reference to Dreier's various connections in the legal and financial world, where presumably people with means could be found to pledge security for the disgraced attorney, Shargel indicated such people were unlikely to come forward, saying some of those relationships have been "squandered" based on "the allegations in the complaint."
He called the bail package "excessive."
Unless the defense consents to an extension, Streeter must obtain an indictment by Feb. 7. An indictment would result in the random assignment of the case to a judge and the chance for Shargel to make a fresh bail argument.
But Shargel said he plans to appeal the decision to the Part I judge in the Southern District next week. Absent a recusal or some other scheduling conflict, that judge would be Alvin Hellerstein.
Shargel, speaking to reporters after the hearing, said without further comment that he expected the case to be "resolved" within the year, but declined further comment.
TORONTO CASE
Also Thursday, Dreier received another hearing date in Toronto.
Dreier was not present in a Toronto courtroom Thursday morning, the first scheduled hearing date since he was arrested there in December for allegedly impersonating a lawyer from the Ontario Teachers' Pension Plan. Another hearing date has been scheduled for March 5 in Toronto.
Todd White, one of Dreier's lawyers in Toronto, said he has not yet received the disclosure document from the government, which lays out the allegations and the evidence in the case.
"Once we have that information, we'll deal with it then," said White, a partner in Toronto's Greenspan, White.
White said he has not been in touch with Dreier, only his other lawyers. The charge in Canada is being handled separately from his charges in the United States, he said.
