December 12, 2008 4:43 PM
Weekend Update: Where do Things Stand With Marc Dreier?
Posted by Zach Lowe
Here are your latest updates on the case of Marc Dreier, the former managing partner of Dreier LLP (and the firm's only equity partner) charged with swindling clients out of as much as $380 million since 2006.
• The firm's court-appointed receiver, Mark Pomerantz of Paul, Weiss, Rifkind, Wharton & Garrison, submitted court papers (available below) sometime yesterday or today outlining the firm's economic situation, and it's not pretty. The firm won't be able to make its payroll on Dec. 15, and, even worse, the firm might not have any malpractice insurance. That's according to Barry Slotnick of Buchanan Ingersoll & Rooney, the firm representing Dreier partner Norman Kinel. "It's a very real possibility that the firm's insurance has lapsed," Slotnick says. Obviously, that would be a disaster for the 240 or so lawyers who worked under Dreier and may face some liability for the frauds despite Dreier's near total control over the firm's money. Slotnick says he and partner Cynthia Monaco are advising Kinel to buy malpractice insurance that protects lawyers after they've left firms.
• Pomerantz's court filing contains a copy of the subpoena that reveals, for the first time, the names of the 23 Dreier clients that may have been victims of his alleged frauds. The list contains some big names, including Bell Canada, investment funds such as Paulson & Co., Perella Weinberg, and Fortress Investment Group and other companies. A grand jury sitting in U.S. District Court for the Southern District of New York wants copies of all Dreier records related to those clients.
• Meanwhile, Dreier lawyers continue to flood recruiters with resumes, and groups within the firm are deciding whether to open up their own boutiques. As the New York Law Journal reported earlier this week, Seth Ostrow, the former chair of Dreier's patent group, has taken seven Dreier lawyers and six staff members and formed his own firm. Ostrow says he's been frantically searching for office space and trying his best to get his staff paid as soon as possible. One nice note: the staffing placement firm Yorkson Legal has given Ostrow's group space in their offices until the end of December. Ostrow and Yorkson founder Michael Reichwald have a professional relationship going back several years, and Reichwald has placed temp attorneys at Dreier before, both men say.
• Reichwald would not say whether Dreier owes him money, but court records show he owes Segue Search nearly $15,000 for temp attorneys the company provided Dreier in May and June. Rachel Lee Dreher, the lawyer for Segue, says attorneys at Dreier called her after learning of Dreier's arrest last week and asked for more time to respond to the suit. Segue filed suit in state court last month.
• One last tidbit: The Arizona Bar Association and the Arizona Supreme Court both say they have no record of Dreier ever being admitted to practice in Arizona. That's an issue because both Dreier's official biography (still available here, though it was taken off the firm's main site earlier this week) and his Martindale profile list him as admitted in Arizona in 1998. Both organizations checked various spellings of Dreier's first and last names and found no record of him. A spokeswoman for the Arizona Supreme Court says a clerical error would be "unprecedented." Several Dreier lawyers say they didn't know about the matter, and Dreier's attorney, Gerald Shargel, says it may be a clerical error and that he had heard nothing about it before a call from The Am Law Daily. Our colleague Nate Raymond (who first discovered the discrepancy) searched for any case Dreier might have appeared on pro hac vice in Arizona but came up empty.
Shargel says at this point Dreier is cooperating with Pomerantz in getting the firm's finances straight. Shargel himself is focused on proving Dreier is not a flight risk so that he can make bail. Shargel notes that alleged con artist extraordinaire Bernard Madoff was released on $10 million bail Thursday despite being charged with the largest Ponzi scheme in history. "That hasn't escaped my notice," Shargel says.Make a comment