New Indictment Adds to Dreier Victim Tally
$700 million in phony transactions alleged
New York Law Journal
March 18, 2009
Indicted attorney Marc S. Dreier sold more than $700 million in phony real estate development notes and fake pension plan notes during his four-year scam, according to a superseding indictment released Tuesday.
The new indictment, which adds a count of money laundering, also alleges a greater number of victims than initially thought. It accuses Dreier of selling notes to at least 13 different funds and three individuals between 2004 and 2008, with the purchase price wired to an attorney trust fund maintained by his firm.
The overall loss to investors in Dreier's schemes remains roughly $400 million, but the realization that he sold as much as $700 million in bogus notes allowed the government to increase the amount it is now seeking in forfeiture.
In addition to the new money laundering charge, the former sole equity partner in the now defunct 250-member Dreier LLP faces charges of conspiracy to commit securities fraud and wire fraud, one substantive count of securities fraud and five substantive counts of wire fraud.
The superseding indictment sheds some new light on the scope of Dreier's efforts.
The money laundering count covers transfers he allegedly made "into and out of various Dreier LLP bank accounts in order to promote fraud in the sale of securities and wire fraud."
In addition to the 13 different funds and three individuals who are now alleged victims of his scams, the indictment states that Dreier "enlisted financial professionals to assist him in finding purchasers of the fictitious promissory notes and paid those individuals a percentage of the proceeds received."
It also states that Dreier "attempted to sell the notes to numerous additional potential investors and funds."
Dreier also represented himself as the lawyer for the issuers or holders of the promissory notes.
"In order to carry out the fraud and to lend credibility to these representations, Dreier directed purchasers of the notes to wire the purchase price into the attorney trust account held in the name of Dreier LLP," the indictment states.
Dreier has been free on bail since Feb. 13 following a two-month bail fight by Assistant U.S. Attorney Jonathan Streeter and Gerald Shargel, Dreier's lawyer.
Southern District Judge Jed S. Rakoff approved a bail package on Feb. 5 that allowed Dreier, 58, to put up a $10 million personal recognizance bond and to pay $70,000 for round-the-clock armed guards at his Manhattan apartment.
Dreier was arrested on Dec. 7 upon his return from Toronto, where he had been taken into custody for pretending to be an executive with the Ontario Teachers' Pension Plan who was pitching pension plan notes to a hedge fund.
The incident in Canada occurred as Southern District investigators were closing in on Dreier for selling in excess of $200 million in phony developer notes to hedge funds in New York City and Connecticut. That estimate of the out-of-pocket-loss for the hedge funds was later increased to $400 million,
The indictment alleges a conspiracy that stretches from 2004 through Dreier's arrest in December. One alleged confederate in the conspiracy, Kosta Kovachev, was arrested Dec. 23 for posing as the controller of the Solow Realty and Development Co., the company Dreier pretended was issuing promissory notes that offered a good deal for the hedge funds. Others yet to be named are mentioned in the indictment also played the role of impersonator to help Dreier pull off the sales.
Shargel said Tuesday that the superceding indictment has not changed his view of the case.
"The money laundering charge was not unexpected," he said. "This has been raised in discussions with the U.S. Attorney's Office."
Shargel and Dreier are scheduled to appear before Rakoff for a status conference Thursday at 10 a.m.