ABC News’ Richard Esposito and Lindsay Goldwert report: High-profile New York lawyer Marc Dreier was indicted Thursday by a federal grand jury on charges related to allegedly scamming investors by pawning off worthless debt instruments as real.
Dreier, 58, was indicted in Manhattan on charges of securities fraud that allegedly cost investors more than $400 million in losses, prosecutors said.
The indictment charges that from 2004 through December 2008, Dreier conspired to sell fake notes supposedly issued by a New York real estate developer and by a Canadian pension plan. It seeks forfeiture of the proceeds of the fraud, as well as property, including real estate, a yacht and art works.
Dreier was the founder and managing partner of the Dreier LLP law firm. He has been jailed since his Dec. 7 arrest.
If convicted, Dreier faces up to 20 years in prison as well as stiff fines. But he has been unable to meet bail conditions that include $20 million and four co-signers.
Here is how he allegedly worked one substantial portion of his conspiracy fraud scheme to defraud, according to the multiple count indictment on securities fraud and wire fraud charges: The Harvard-educated Dreier lived life in the fast lane, fueling his expensive tastes allegedly, in part, with the proceeds from his scheme, and hobnobbing with millionaires.
Dreier and his co-conspirators allegedly falsely represented to hedge funds that they had the right to sell securities in the form of one- and two-year promissory notes issued by a real estate developer in New York that paid attractive interest rates of 8 and 12 percent. The proceeds, the investors were allegedly told, would be used to fund developments in the United States and abroad, the indictment states.
To convince investors the notes were real, Dreier presented them with financial statements that he claimed were audited by an accountant. (The government charges that these documents were faked.) When hedge fund managers sought to perform due diligence by meeting executives at the developer, Dreier allegedly hired impersonators to pose as representatives of the developer, including its CEO. When he could, it seems he convinced investors to conduct their investigation of the offering by telephone.
In another part of the scheme, Dreier allegedly offered investors false pension notes issued by a pension plan in Canada.
In at least one instance, Dreier allegedly managed to gain access to the developer’s office and use it as the location for an investor meeting with his impersonator. He allegedly managed the same sleight of hand in the pension scheme. With the proceeds of his schemes, Dreier paid interest and principal to early investors, the government alleges.
And after satisfying that Ponzi scheme element of his alleged fraud, he funded luxuries, including "numerous homes, a yacht, several vehicles and expensive art work," the indictment states.
Those homes are in resorts, including East Hampton, Long Island and Anguilla in the West Indies. The cars included top of the line Mercedes and at least one Aston Martin. The yacht was serviced by a tender and there was a fleet of "wave runner" personal watercraft for the enjoyment of Dreier and his guests.
Among his most famous clients is former NFL star Michael Strahan with whom he hosted a celebrity charity golf tournament as well as former publishing powerhouse Judith Regan who hired his firm to sue News Corp. over the axeing of O.J. Simpson’s book "If I Did It." The firm later sued her, claiming she stiffed them on fees.
Dreier’s taste in art was expansive. His collections included lithographs and etchings by Jasper Johns and David Hockney, and works by Picasso and other artists, including Robert Indiana and Roy Lichtenstein, Jim Dine and Andy Warhol. More than 150 artworks are listed in the indictment as part of the government’s catalogue of the cash, securities, real estate and other holdings it believed to be proceeds of the conspiracy, and would demand Dreier forfeit.
Dreier was indicted on charges "stemming from an alleged fraud against various investment funds and misappropriation of law firm client funds," acting U.S. attorney for the Southern District of New York Lev Dassin said in a statement.
"The indictment was not unexpected and there were no surprises," Dreier’s attorney Gerald Shargel told Reuters News.