Marc Dreier - Law-Firm Founder Sentenced To 20 Yrs In Prison
07/13/09
By Chad Bray
NEW YORK (Dow Jones)--Disgraced lawyer Marc Dreier was sentenced to 20 years in prison Monday after admitting in May to a scheme to sell $700 million in fake promissory notes and steal client funds.
At a hearing Monday, U.S. District Judge Jed Rakoff in Manhattan sentenced Dreier, one-time managing partner of Dreier LLP, to spend 20 years behind bars - one year shy of his life expectancy of 80 years, according to the judge.
The judge also ordered Dreier to pay $387.7 million in restitution and indicated he would approve the government's request for $746 million in forfeiture.
"I am sorry, deeply sorry for the harm and sadness I have caused so many people," said Dreier, dressed in a dark blue suit and maroon tie. "At this point, all I can do is express my shame and remorse."
Dreier, 59 years old, pleaded guilty to conspiracy, securities fraud, money laundering and five counts of wire fraud in May in a scheme that duped hedge funds and other investors into making investments in hundreds of millions of dollars in fake promissory notes, or loans.
Prosecutors from the U.S. Attorney's office in Manhattan had asked Dreier be sentenced to 145 years in prison, while Gerald Shargel, Dreier's lawyer, had asked for a sentence of 10 years to 12 years in prison.
Dreier, who had been confined to his Manhattan apartment on 24-hour home detention while awaiting sentencing, was immediately remanded into custody after the hearing.
The sentencing marks the end of a stunning fall for Dreier, who started his own law firm in 1996 and grew the firm to about 270 lawyers with offices in New York, Los Angeles and Pittsburgh in the months before the scheme collapsed last year.
The fraud came apart last December when Dreier was arrested in Canada after he tried to impersonate a lawyer for a Canadian pension plan.
The sentence was significantly less than the 150-year sentence received by convicted Ponzi-scheme operator Bernard Madoff last month, but in line with stiff sentences given to Adelphia Communications Corp. founder John Rigas, former Worldcom Inc. Chief Executive Bernard J. Ebbers and ex-Refco Inc. Chief Executive Phillip R. Bennett.
Rigas, 84, is serving a 12-year sentence, Ebbers is serving 25 years in prison and Bennett is serving a 16-year prison term.
Judge Rakoff noted that Dreier's crimes pale in comparison to Madoff's and said sentencing Dreier to 145 years in prison would "demean" the sentence given to Madoff. However, the judge did say he found Dreier's crimes "despicable."
"When you turn to the facts of the crimes Mr. Dreier did commit, one must still be appalled," the judge said. "The amount of loss is still huge."
In a revealing letter to the court last week, Dreier, a graduate of Yale College and Harvard Law School, said his crimes in part grew out of Dreier finding himself in great debt several years after starting the law firm, the collapse of his 15-year marriage and a crushing sense of underachievement.
"All of this left me feeling overwhelmed - by my debt, by a disappointing career, by a failed marriage. And so, incomprehensibly, in 2002 I started stealing," Dreier said. "First, I invaded some settlement proceeds due a client. Then I arranged a few bogus investments with some individuals. And soon I stumbled upon the brazen idea of arranging fictitious loans from hedge funds, ostensibly to my principal client - the real-estate developer referenced in the indictment - and diverting the loan proceeds to myself."
Prosecutors had alleged Dreier sold about $700 million in fake promissory notes and misappropriated client funds from his law firm over a seven-year period. The out-of-pocket loss to investors and clients when the fraud was discovered in December was more than $400 million, the government said. The overall scheme allegedly ran from 2004 to 2008.
"He abused his clients for seven solid years in every way imaginable," said Assistant U.S. Attorney Jonathan Streeter at the hearing.
The government said Dreier used money obtained from the scheme to support a lavish lifestyle, including purchasing two beach-front homes in the Hamptons valued at about $12.5 million, a $10.4 million Manhattan apartment, a $18.3 million yacht, a 2007 Aston Martin DB9 Volante, more than $30 million in art work and funding the operations of his law firm. The properties, artwork, the yacht and other assets are subject to forfeiture proceedings.
His law firm, Dreier LLP, filed for bankruptcy protection on Dec. 16.
In his letter, Dreier said he spend most of the money initially on increasing the size of the law firm and repaying earlier investors who had purchased the fictitious notes. Dreier said he hatched the scheme thinking he would be able to repay the loans with revenue from the law firm.
"But, as time went on, I was more and more self-indulgent," Dreier said. "I bought extravagant things - a beach house, an apartment, a boat, expensive art. Obviously, other men suffer through divorce and 'mid-life crisis' and manage not to steal. And, other people grow their business without resorting to crime. I just wasn't in control of myself."
Prosecutors had alleged Dreier sold fake promissory notes to at least 13 different funds and at least four different people.
Dreier told potential investors that he had the authority to sell promissory notes issued by real-estate development company Solow Realty & Development Co. in New York beginning in 2004 and promissory notes issued by Canadian pension plan Ontario Teachers' Pension Plan beginning in 2008, the government said.
Prosecutors said Dreier, or other co-conspirators acting at his direction, impersonated representatives of the real-estate developer and the pension plan. He also provided documents to investors with forged signatures from the developer's chief executive or its purported auditors, the government said.
The scheme began to unravel in November 2008 when the developer and the accounting firm confronted him with forged documents, prosecutors said.
It ultimately collapsed in December 2008 when Dreier was arrested in Toronto after he impersonated one of the Ontario pension plan's lawyers in a meeting with a U.S. hedge fund at the Canadian plan's offices.
Dreier was released on bail in Canada and arrested by U.S. authorities when he stepped off an airplane at New York's John F. Kennedy International Airport on Dec. 7.
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