N.Y. lawyer arraigned in alleged $700M fraud

Marc Dreier, charged with bilking various hedge funds, pleads not guilty.

EMAIL  |   PRINT  |   SHARE  |   RSS
google my aol my msn my yahoo! netvibes
Paste this link into your favorite RSS desktop reader
See all CNNMoney.com RSS FEEDS (close)

What progress is the Obama administration making toward ending the recession?
  • It's succeeding
  • The recovery is too slow
  • It's not helping at all
The Fixers
7 people are in charge of rescuing the economy. Here's who they are and how they plan to do it.

NEW YORK (CNN) -- The managing partner of a New York law firm pleaded not guilty Thursday to charges in an alleged $700 million fraud against various hedge funds, the U.S. attorney's office here said.

Marc Dreier, 58, was arraigned Thursday morning.

In a superseding indictment filed Tuesday, prosecutors allege that from 2004 through December 2008, Dreier sold approximately $700 million worth of fictitious promissory notes. The indictment adds that in order to carry out the fraud, Dreier directed victims to wire those funds into a Dreier LLP attorney trust bank account, from which he later disbursed the funds to reap the benefits of the fraud and to continue its operation.

The superseding indictment charges Dreier with one count of conspiracy to commit securities and wire fraud; one count of securities fraud; five counts of wire fraud; and one count of money laundering.

The superseding indictment also seeks forfeiture of the proceeds of the fraud offenses and property derived from it, including real estate, a yacht, and works of art.

The money laundering count carries a maximum sentence of 20 years in prison and a fine of $500,000 or twice the value of the property involved in the money laundering.

Dreier faces a maximum term of 145 years on all eight counts of the indictment.

A trial date has been scheduled for June 15.

Attempts to reach Dreier's attorney Gerald Shargel were unsuccessful.

Dreier is the founder and managing partner of Dreier LLP, a law firm of more than 250 attorneys with its principal office in New York City and additional offices in Los Angeles and elsewhere in the country, federal officials said.

According to the U.S. attorney's office, Dreier told a Connecticut hedge fund in early October 2008 that a New York City real estate development company had a "note program" by which the developer sold promissory notes to investors. Dreier purportedly said some investors who had bought notes wanted to sell them because they needed money due to the current financial crisis. Authorities say Dreier also told the hedge fund that he represented the selling investors and the developer and that the Connecticut hedge fund could buy those notes at a significant discount.

Dreier sent the hedge fund purportedly audited financial statements, authorities say, and the hedge fund wired approximately $13.5 million in late October to an account controlled by Dreier to pay for a note with a face value of $25 million.

Dreier also negotiated in October with a New York-based hedge fund that agreed to buy notes purportedly issued by the developer, the authorities said. That hedge fund ultimately wired about $100 million to the Dreier account, the U.S. attorney's office alleges in a seven-page complaint unsealed in December.

During the course of the negotiations with the New York hedge fund, officials said, Dreier arranged a conference call with hedge fund personnel and an individual he said was the developer's chief executive officer. However, the developer's CEO told authorities he did not issue any of the notes, that his signature on certain of the purported promissory notes was a forgery and that he did not participate in a conference call with the New York hedge fund.

Police in Toronto, Canada, arrested Dreier on December 2 on suspicion that he impersonated a Canadian company employee in connection with the sale of notes with a face value of more than $40 million to a third hedge fund, the U.S. attorney's office said.

By Chris Kokenes  To top of page

They're hiring!These Fortune 100 employers have at least 350 openings each. What are they looking for in a new hire? More
If the Fortune 500 were a country...It would be the world's second-biggest economy. See how big companies' sales stack up against GDP over the past decade. More
Sponsored By:
More Galleries
10 of the most luxurious airline amenity kits When it comes to in-flight pampering, the amenity kits offered by these 10 airlines are the ultimate in luxury More
7 startups that want to improve your mental health From a text therapy platform to apps that push you reminders to breathe, these self-care startups offer help on a daily basis or in times of need. More
5 radical technologies that will change how you get to work From Uber's flying cars to the Hyperloop, these are some of the neatest transportation concepts in the works today. More
Worry about the hackers you don't know 
Crime syndicates and government organizations pose a much greater cyber threat than renegade hacker groups like Anonymous. Play
GE CEO: Bringing jobs back to the U.S. 
Jeff Immelt says the U.S. is a cost competitive market for advanced manufacturing and that GE is bringing jobs back from Mexico. Play
Hamster wheel and wedgie-powered transit 
Red Bull Creation challenges hackers and engineers to invent new modes of transportation. Play

Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer. Morningstar: © 2018 Morningstar, Inc. All Rights Reserved. Factset: FactSet Research Systems Inc. 2018. All rights reserved. Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor's Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2018 and/or its affiliates.