Official Finds Lawyer Accused of Fraud Had $100 Million in Swindled Assets

An official appointed to recover the assets of a prominent Manhattan lawyer accused of defrauding hedge funds of at least $400 million says he has safeguarded more than $100 million in assets.

The court-appointed receiver, Mark Pomerantz, outlined his findings about lawyer Marc Dreier and his 150-lawyer firm, Dreier LLP, in a report made public Wednesday in U.S. District Court in Manhattan.

Dreier, 58, was arrested in December on securities fraud charges. He remains under house arrest while his lawyer, Gerald Shargel, prepares what he says is likely to be a guilty plea for his client.

Pomerantz said Dreier received $670 million between 2004 and 2008 from the sale of fictitious securities, spending much of it on a lavish lifestyle that included millions of dollars in artwork, beachfront homes on both coasts and an $18.5 million yacht.

The receiver said Dreier's law firm, despite appearances of profitability including rapid growth and new construction, was actually losing enormous amounts of money.

Pomerantz wrote that Dreier appeared to have little cash left at the time of his arrest in early December, having relied since September on the sale of fictitious notes to pay overdue bills, replenish stolen escrow funds and maintain his extravagant lifestyle.

"At the time of his arrest, Dreier was in arrears on everything from payments to the crew of his yacht to mundane firm expenses like car service and offsite storage," Pomerantz said.

"The absence of available cash may explain Dreier's desperate attempts to sell additional notes in Canada," he said.

Dreier was first arrested on impersonation charges in Canada in early December before he flew to New York City, where he was arrested by U.S. authorities at the airport.

Pomerantz said Dreier maintained an extensive collection of fine art worth about $39 million, including paintings, photographs, prints and sculptures.

Dreier used "enormous amounts of stolen funds" to purchase the art, most of which was kept in his homes, though some was displayed at his law firm, Pomerantz said.

Pomerantz said he was unable to locate several pieces of art, including a Picasso sketch worth an estimated $35,000 that was last seen in Dreier's Manhattan apartment in November 2008.

He said Dreier's ex-wife, Elisa Dreier, filed a security interest in the sketch and her lawyer has told the receiver's office that Elisa Dreier is in possession of the sketch and that she claims title to it under the terms of her separation from her husband.

Pomerantz wrote that the sale of fictitious securities also enabled Dreier to buy several residences, including his $10 million Manhattan apartment and three properties in the Hamptons, two in East Quogue that together are worth more than $12 million and a Westhampton property bought for more than $700,000 in 1989.

The U.S. Marshals Service has already seized the East Quogue properties, Pomerantz said.

The report was filed by Pomerantz to report on his findings and to request that his receivership be dissolved. He said any remaining work can be carried out by bankruptcy trustees.