Font Size: 
Receiver's Report Offers Details of Dreier's Once-Lavish Lifestyle
New York Law Journal
March 26, 2009
By the time indicted attorney Marc S. Dreier was arrested in December, his days of living the high life already had come to an end, according to court papers made public Wednesday.
The "facts suggest that as of September or October 2008, Dreier had largely run through the cash under his control and was relying on additional sales of fictitious notes to pay overdue bills, replenish stolen escrow funds, and maintain the extravagant lifestyle that his crimes had made possible," according to a report submitted by Mark F. Pomerantz, receiver for Dreier's assets in Securities and Exchange Commission v. Dreier, 08 Civ. 10617.
When finally caught in Toronto on Dec. 2 and charged with impersonating an employee of the Ontario Teachers' Pension Plan, Dreier was in arrears "on everything from payments to the crew" of his 37-meter Heesen motor yacht, Lady Seascape, to "mundane firm expenses like car service and off-site storage," the report says.
"The absence of cash may explain Dreier's desperate attempts to sell additional notes in Canada," Pomerantz, a partner at Paul, Weiss, Rifkind, Wharton & Garrison, wrote in his 49-page report.
The document, submitted by Pomerantz on Feb. 17 and released this week by Southern District of New York Judge Miriam Goldman Cedarbaum, provides a detailed glimpse into the four-year scheme carried out by Dreier and the lavish lifestyle the attorney led before his Dec. 7 arrest at LaGuardia Airport.
Last week, a new indictment against Dreier was released, which adds a charge of money laundering to the array of charges faced by the sole equity partner of the now-defunct 250-member Dreier LLP. It accuses Dreier, who is free on bail, of bilking investors out of some $400 million by selling more than $700 million in phony real estate development notes and fake pension plan notes. According to the superseding indictment, 13 different funds and three individuals fell prey to his scam.
The purpose of Pomerantz's report is two-fold -- to describe the receiver's findings and to request termination of the receivership now that the "most immediate and most pressing tasks have been completed."
According to Pomerantz, his primary mission as receiver has been to "locate, recover and safeguard assets belonging to Marc Dreier and Dreier LLP." This undertaking, which involved culling through more than 27 "large boxes of documents reflecting Dreier's sales of fictitious notes" and working with the U.S. Attorney's Office and dozens of Dreier LLP lawyers and employees, resulted in "the safeguarding of more than $100 million in assets."
The recovered assets include:
• an attorney trust account and other bank accounts;
• more than 300 pieces of artwork worth nearly $39 million;
• real estate, including a Manhattan apartment purchased in 2007 for $10.4 million; two homes in Southampton whose sale could generate $12.5 million or more; a development property in Antigua; and a 2,200-square-foot beachfront residence in Santa Monica, Calif.;
• a yacht worth more than $18 million, which has five cabins and is "luxuriously equipped with flat screen televisions and a wine collection";
• an automobile collection consisting of three Mercedes, a BMW 650i coupe and an Aston Martin DB9;
• a majority interest in a defunct and largely worthless Asian fusion/sushi restaurant;
• investments and brokerage accounts that appear to consist of largely illiquid stocks;
• other tangible assets, including $1.2 million in home furnishings and two watches valued at around $11,000;
• and law firm accounts receivables and work-in-progress from Dreier LLP.
Pomerantz noted that "there are several indicators that large amounts" of accounts receivable and work-in-progress for Dreier LLP might not be collectible. This includes funds "previously written off by Dreier partners and time accrued on contingency or other cases in which fees may never be recovered or may be recovered only in part," the report says.
And since Dreier's arrest, the receiver has been deluged by inquiries regarding millions of dollars in missing escrow funds and stolen settlement funds. These requests "are only illustrative of the extent to which Dreier's conduct has created a 'Gordian knot' involving employees, clients, victims, vendors, law enforcement officials, and ultimately the courts."
Pomerantz expects that the "need to provide information" to Dreier's victims, clients and regulators will continue. However, he said he believes his role as receiver has come to an end.
In asking Judge Cederbaum to terminate the receivership, Pomerantz explained that the "immediate shock and disruption caused by Dreier's crime and arrest have been absorbed."
Moreover, in addition to legal and professional obligations, Pomerantz said it would be "unseemly" for him and his team to continue to bill at "expensive hourly rates in circumstances involving so much pain." He also noted that trustees have been appointed for Dreier LLP and Dreier personally.
The report does not specify the amount Pomerantz has charged for his services.
Pomerantz said that a fee application would become public in the near future. Given the quasi-public nature of the services performed and the circumstances surrounding the case, including the "financial distress" suffered by many as a result of Dreier's alleged fraud, Paul Weiss has offered to substantially discount its regular rates.
Southern District of New York Judge Jed S. Rakoff has set a June 15 date for Dreier's criminal trial.
