Dreier Nailed By US Feds For $113 Million Loan Scam

Marc Dreier’s troubles just got a whole lot bigger. Now it’s not just a criminal impersonation charge he faces in Canada (for pretending to be an official with Ontario Teachers Pension system), but charges by the SEC and US Attorney’s office as well.  Dreier’s bust in Canada was apparently an attempt to save a much larger scam.

Over the course of several months, Dreier allegedly falsely claimed to be selling secondary loans on behalf of a client (Solow Realty, according to the WSJ). He allegedly supplied fake financials to two hedge funds and arranged a conference call with the “CEO” of the firm with one. One hedge fund wired $100 million into Dreier’s escrow account; another wired in $13 million. Dreier was also apparently observed by the real CEO of the company he claimed to be representing meeting with three men in the company’s offices (the same thing he was busted for in Toronto). The indictment is, in a word, damning.

The US complaint is embedded below (use the full-screen icon in the lower right-hand corner of the player to make it easier to read).  The backstory is below the complaint.

Marc Dreier Complaint 2008

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For those who haven’t heard the story:

WSJ: According to people familiar with the matter, Mr. Dreier was attempting to secure tens of millions of dollars from Fortress Investment Group LLC, a New York asset-management firm, by impersonating an Ontario Teachers’ Pension Plan attorney in a sham business transaction. Fortress asked for certain guarantees from the pension plan, which Mr. Dreier represented to be involved in the deal when it wasn’t, these people allege. These people say problems arose for Mr. Dreier when Fortress representatives wanted to meet with pension-plan managers in person.

On Tuesday, Mr. Dreier arranged a meeting in Toronto with Ontario Teachers’ on an unrelated matter, gaining him access to their offices, the people familiar with the matter said. They said that instead of leaving after the meeting, Mr. Dreier waited in the office for the arrival of Howard Steinberg, a Fortress executive, who thought he was meeting with an Ontario Teachers’ lawyer.

The people familiar with the matter allege that Mr. Dreier intercepted the Fortress executive, took him to a conference room, and began a meeting in which he pretended to be Michael Padfield, an in-house lawyer with the pension plan. According to the people familiar with the situation, Mr. Dreier handed out a business card with Mr. Padfield’s name and signed documents as Mr. Padfield. Mr. Padfield couldn’t be reached for comment.

Mr. Steinberg found Mr. Dreier’s behaviour unusual, and Mr. Steinberg began asking questions about Mr. Padfield, which led to Mr. Dreier’s ruse being uncovered, according to the people familiar with the matter. Ontario Teachers’ then notified the police, according to a statement from the pension plan. Fortress said it is cooperating with law enforcement.

Dreier’s firm, Dreier LLP, is disintegrating. Partners are rushing to found new firms and waiting for their Blackberries to be shut off. Federal agents, meanwhile, are trying to track down the larger scam:

Several partners said federal prosecutors are looking into Mr. Dreier’s business dealings and that money is missing from client escrow accounts.

Individuals at Solow Realty, a former client of the firm, reported recently to federal prosecutors that Mr. Dreier allegedly was selling to hedge funds fraudulent documents falsely purporting to be debt instruments of Solow without Solow’s authority, according to a lawyer familiar with the situation. The lawyer added that U.S. prosecutors are looking into the matter.


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