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December 10, 2008 9:47 AM

Dreier Update: Client Funds Missing, Details on Dreier's Art Collection, Attorneys Fleeing

Posted by Zach Lowe

Yesterday we told you that the 250 or so attorneys at Marc Dreier's former firm, Dreier LLP, might not be safe from liability even though Dreier controlled all the firm's equity--especially if it turned out that client funds are missing in connection with Dreier's financial scams.

Well, it appears very likely that client funds are indeed missing, according to a sworn statement Dreier partner Joel Chernov gave the SEC (all statements are available below; the Wall Street Journal first reported on the filings). In the statement, Chernov said Dreier spoke to him and fellow Dreier partner Steven Gursky from a Toronto jail after his arrest there for impersonating a lawyer in an attempt to scam an investment group into wiring him more than $30 million. In those conversations, Chernov told the SEC, Dreier admitted improperly using client funds. Dreier also said that he could have refilled the escrow accounts if only he could return to New York. How? Apparently by selling part of an art collection valued at between $30 and $40 million, according to a separate statement from John Provenzano, the firm's Controller.

In his statement, Provenzano claimed Dreier called him twice from the Toronto jail asking him in separate requests to wire $8 million and $10 million from the firm's escrow accounts into Dreier's personal accounts. Provenzano (wisely) refused. He also told Dreier the firm owed clients $38 million in connection with its representation of 360Networks. That's when Dreier mentioned the money he could make selling his art.

Dreier LLP was apparently falling apart. The firm hasn't paid its December rent, its health premiums or its BlackBerry bills, according to Chernov's statement.

The SEC is marshaling all of this evidence to support its requests, made at the U.S. District Court for the Southern District of New York, to freeze Dreier's assets.

Dreier's attorney, Gerald Shargel, did not return a call from the Am Law Daily seeking comment.

Download chernov.pdf

Download provenzano.pdf

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