Marc Dreier, the founder of the New York law firm Dreier, has allegedly defrauded investment firms of $113 million after selling bogus promissory notes, according to a US Securities and Exchange Commission filing.
Dreier has already admitted to key aspects of an extensive scam, including selling to unnamed hedge funds securities that he knew were false. A hedge fund controlled by Fortress Investment Group was among the potential buyers targeted by Dreier, although it is unclear if the lawyer’s interactions with Fortress are included in the SEC charges.
Dreier, who was arrested and released on bail last week in Toronto on separate charges of impersonating
an official from the Ontario Teachers’ Pension Plan, was allegedly engaged in an “elaborate charade” whereby he sold promissory notes to hedge funds and private investment funds and closed three sales. The law firm Dreier was unavailable for comment at press time.
The SEC said the notes were backed up with “phony financial statements and audit opinion letters”. Dreier also allegedly recruited “confederates” to play the roles of representatives of legitimate companies involved in the transactions.
One investment firm that uncovered the fraud received its investment back, the filing stated, but $100 million “in known proceeds” remains unaccounted for.
The filing says that Dreier has admitted the notes were fictitious and the development company never authorised their issuance or sale. He also reportedly admitted to fabricating evidence to back-up the notes' sale, including the financial statement and audit reports.
Two investment funds agreed to purchase the notes and wired Dreier $113 million, to what appeared to be “his law firm’s escrow account”. A third fund declined to participate in the deal, the filing said.
The SEC is now seeking to freeze Marc Dreier’s assets and appoint a receiver and temporary restraining order and injunction on the 58-year-old founder.
According to a report in Canada’s Globe and Mail, Dreier had been in talks with a division of Fortress about a $50 million investment in an unnamed company. He reportedly held the meeting with Fortress executive Howard Steinberg at the headquarters of Ontario Teachers', passing himself off as Teachers' counsel Michael Padfield, and noting the pension would guarantee the company’s assets and the safety of the investment.
Steinberg, however, was said to have become suspicious during the meeting and Teachers’ staff later notified the police. Dreier was arrested the same afternoon and later released on bail.