Dreier LLP, a law firm with a significant securities litigation practice, is reportedly in danger of collapsing after the bizarre arrest last week in Canada of its founder, Marc Dreier, for allegedly impersonating an Ontario Teachers’ Pension Plan attorney in a sham business transaction. The WSJ reports that several partners interviewed say they have doubts Dreier LLP will survive.
At least one other Dreier lawyer, interviewed by Above the Law (here), was less confident, stating that:
“There’s no way to save the firm given the amount of missing money,” said our source. “Dissolution is definite. The firm can’t make the next payroll. Most partners are packing up — staying here is not an option.”
We had previously heard reports of Dreier dragging his feet on paying bills, which our source confirmed: “He stiffed a lot of our creditors and vendors. Some have not been paid for a year. He’s way behind on the rent.”
The WSJ reports that 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 representatives wanted to meet with pension-plan managers in person, and Mr. Dreier met with a Fortress executive pretending 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 behavior 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.
One litigation partner told the WSJ he spent Saturday packing up his personal effects. “Bank accounts have been frozen; they’re shutting our BlackBerrys down on Monday,” he said. While he was packing, federal agents from the U.S. were reportedly canvassing the firm’s Manhattan headquarters.
Notably, Dreier is the only equity partner in the 250-lawyer firm. According to the National Post, Dreier wrote in a law journal last year that:
“Perhaps the most glaring shortcoming of the conventional law firm model is its inability to capitalize on unconventional opportunities. There are many ways to make money in the practice of law other than by living on a clock,” he wrote.
“Under this alternative model, all policy decisions ultimately reside with the single equity partner. The success of the system, of course, depends in large part on the faith of the partnership in the fairness and judgment of that partner.
“This is a system for lawyers who believe democracy is overrated — or at least that it is in business.”