_____ From: Subject: Re: WHOOPEE NEWS: ... YET ANOTHER BIG SCAM ... Head of prominent NYC law firm accused of fraud
Head of prominent NYC law firm accused of fraud By LARRY NEUMEISTER (Associated Press Writer) >From Associated Press December 08, 2008 8:56 PM EST NEW YORK - The head of a prominent law firm was charged in a "stunning, brazen fraud" that reaped at least $113 million in profit by tricking hedge funds into making bogus investments, prosecutors said. Marc Dreier, 58, was charged in a criminal complaint and by the Securities and Exchange Commission in the alleged sale of fraudulent promissory notes. "Our complaint alleges a stunning, brazen fraud that targeted some very sophisticated institutional investors," said Linda Chatman Thomsen, director of the SEC's Division of Enforcement. "Investors big and small should take heed, especially in these difficult economic times, that con artists are out there and may go to elaborate lengths to commit fraud," she said. Assistant U.S. Attorney Jonathan R. Streeter said the government wants Dreier held without bail. During a brief court appearance, the Manhattan resident's bail hearing was set for Thursday. "This is a very complicated matter and the facts are beyond reach ... of a sound bite," said defense lawyer Gerald Shargel. In a related case, Dreier was charged last week in Toronto with impersonation in connection with the attempted sale of $45 million worth of notes to a hedge fund. The scandal has stunned Dreier LLP, a mid-size law firm that has represented celebrities including retired football star Michael Strahan and former News Corp. publishing executive Judith Regan. At least one partner has already quit the firm, taking clients with him. Other departures were expected, and the firm abruptly canceled a holiday party last week at the Waldorf-Astoria as word of the scandal began to spread. U.S. District Judge Miriam Goldman Cedarbaum said she will appoint former federal prosecutor Mark Pomerantz to oversee Dreier's assets. Outside court, Shargel said Dreier's firm already seemed decimated by the scandal. "Given the reaction of the partners, I don't think there's any firm to run," he said. "The lawyers in the firm have apparently manned the lifeboats." A message left with Dreier's firm for comment was not immediately returned. The 12-year-old law firm has offices in Los Angeles, Santa Monica, California, Pittsburgh, Stamford, Connecticut, and Albany, New York. The New York Law Journal reported that the firm operated more like a corporation than a partnership, with Dreier controlling expenses and liabilities as the sole equity partner. "This is a system for lawyers who believe democracy is overrated - or at least that it is in business," Dreier wrote in a 2007 opinion piece in The National Law Journal. Prosecutors said that in October, Dreier began posing as if he were peddling heavily discounted investments in a New York City real estate development company because original investors, damaged by the world's financial crisis, were backing out. The SEC said Dreier created an elaborate charade to convince three hedge funds that the investments were real. One hedge fund sent $13.5 million to Dreier while another wired $100 million, authorities said. The SEC said Dreier distributed phony financial statements and audit opinion letters of a reputable account firm, recruited help from people who posed as representatives of legitimate companies involved in the transactions, and created dummy e-mail addresses and telephone numbers. About $100 million in proceeds from the bogus notes remain unaccounted for, officials said. According to the criminal complaint, Dreier was caught on recorded telephone calls with a cooperating witness confessing that he knew that financial statements he gave to a hedge fund were false, that a letter purporting to be from the accounting firm was also fabricated, and that he participated in the fabrication of both documents. It is not immediately clear what could have motivated Dreier to launch the alleged scheme, but Wachovia Corp. has filed a lawsuit against him in Manhattan federal court over a financial matter. Copyright 2008 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed. *** exposing the hidden truth for further educational research only *** CAVEAT LECTOR *** In accordance with Title 17 U.S.C. Section 107, this material is distributed without profit to those who have expressed a prior interest in receiving the included information for research and educational purposes. 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