The SEC announced today that it has filed a lawsuit against New York attorney Marc S. Dreier, charging him with with fraud in connection with an elaborate scheme that raised at least $113 million from the sale of bogus promissory notes. Dreier is the founder and managing partner of Dreier LLP, a 250-attorney law firm headquartered in New York. The SEC stated that it is also seeking an emergency court order to freeze Dreier’s assets and appoint a temporary receiver.
According to the SEC’s complaint, filed in the SDNY, since at least October 2008,
Dreier has been marketing fake promissory notes, including bogus notes of a New York-based real estate development company, to hedge funds and other private investment funds, and has closed at least three sales. According to the complaint, Dreier created an elaborate charade designed to convince purchasers that the notes were genuine. He allegedly distributed phony financial statements and audit opinion letters of a reputable accounting firm, and recruited confederates to play the parts of representatives of legitimate companies involved in the transactions, even creating dummy e-mail addresses and telephone numbers.
According to the SEC’s complaint, Dreier directed that two purchasers of the bogus notes wire payment to what appeared to be his law firm’s escrow account. At least one note purchaser discovered the fraud, and demanded and received the return of its investment. Approximately $100 million in known proceeds from the sale of the bogus notes remains unaccounted for.
The SEC’s complaint further alleges that:
- among other fake securities, Dreier has been offering fictitious promissory notes of a New York-based real estate development company (the developer), a former client of both Dreier and his law firm. Since at least October of this year, Dreier has approached at least three different investment funds with an offer to sell them, at a deep discount, various short-term, unsecured promissory notes supposedly issued by the developer.
- Two of the investment funds agreed to purchase the notes (one fund purchased notes in two separate transactions) and forwarded approximately $113 million to an account in the name of “Dreier LLP Attorney Trust Account” in payment. A third fund was offered the notes, but declined to participate.
- All of the offers were accompanied by documents that Dreier subsequently admitted he knew were fabricated. Dreier offered the notes for sale even though he knew that the developer had never issued the notes, had not authorized Dreier to market them, and indeed knew nothing of their existence or Dreier’s offers or sales.
- In marketing the notes, Dreier provided the hedge funds with fabricated documents including a “form” note and related agreements, “audited financial statements,” and purported audit letters, which bore the forged signature of the developer’s auditor, but which were printed on purported stationery of the developer’s auditing firm. Dreier did not tell representatives from the hedge funds that the notes were bogus, that the “audited financial statements” and audit opinion letters were fabricated, or that the developer had never issued the notes or authorized Dreier to market them, despite Dreier’s knowledge of these matters.
Finally, the complaint alleges that Dreier has confessed to many of the allegations above.
The SEC’s Linda Chatman Thomsen said that the complaint alleged “a stunning, brazen fraud.”