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April 5, 2009 5:44 PM   Subscribe

More brazen than Madoff? Former NYC hotshot attorney Marc Dreier (he of the now-defunct vanity firm), was arrested in Canada in late 2008, charged with spearheading an occasionally daring series of frauds.

Read the bankruptcy filing, ponder the fate of former Dreier associates, and maybe pick up some flashy furniture at a deep discount.
posted by Inspector.Gadget (16 comments total) 1 user marked this as a favorite

 
I dunno, Maddoff's scam was two orders of magnitude bigger, and went on for decades.
posted by delmoi at 5:58 PM on April 5, 2009


Yeah, I think the focus of the CNN article is more on the way in which Dreier conducted his fraud.
posted by Inspector.Gadget at 6:00 PM on April 5, 2009


This is a really awesome story. I've been following it for a while as a possible movie. It's mind boggling on many levels, not just Dreier's incalculable chutzpah, but also the staggering lack of due diligence.
posted by unSane at 7:12 PM on April 5, 2009


>Maddoff's scam was two orders of magnitude bigger, and went on for decades

>not just Dreier's incalculable chutzpah, but also the staggering lack of due diligence

Madoff v. Drier - which is more brazen? Depends how you define brazen, I guess. Is it the meat or the motion?
posted by dchase at 7:18 PM on April 5, 2009


Drier's case has much better theatrics, which is really what matters for a movie.
posted by unSane at 7:29 PM on April 5, 2009


Drier's case has much better theatrics

The amazing part to me is that he was able to wire a lot of money (something like $15 million) into an unknown account presumably under his control while he was at an immigration detention center awaiting deportation.
posted by oaf at 7:50 PM on April 5, 2009


No offense, but Dreier LLP was not a vanity firm. It had close to 250 attorneys, many of whom had noting to do with any of his crimes. This operation wasn't a fly-by-night like Madoff's. It was shuttered due to its insane liabilities and lack of management, but not because it didn't do any real work.
posted by allen.spaulding at 8:02 PM on April 5, 2009


It was shuttered due to its insane liabilities and lack of management, but not because it didn't do any real work.

I refer to it as a "vanity firm" only because of the ridiculous "partnership" structure Dreier devised, not because I'm unaware of the work the firm did. It's my impression that Dreier constructed the firm to function as a front for his frauds - and that keeping the other attorneys in the dark was the most efficient way to avoid law enforcement scrutiny, as far as he was concerned.
posted by Inspector.Gadget at 8:05 PM on April 5, 2009


The partnership structure was ridiculous, I'll give you that. I'm not sure about the rest, only because I haven't read that anywhere. My understanding is that an overwhelmingly substantial part of the work was legit, but I don't know more.
posted by allen.spaulding at 8:07 PM on April 5, 2009


I dunno, Maddoff's scam was two orders of magnitude bigger, and went on for decades.

From the CNN article:
He and his accomplices talked their way past receptionists of companies they weren't affiliated with; plopped themselves down in empty conference rooms; and then hosted meetings at which they pretended to be people they weren't.
and
Dreier would furnish them with phone numbers where they could purportedly reach Solow's CEO or controller. The numbers actually rang up accomplices of Dreier's, however, whom Dreier paid to impersonate the Solow agents.
and
The Fortress agent insisted on meeting with pension-plan representatives in person. Gamely, Dreier devised a pretense for meeting the plan's general counsel, Michael Padfield, at its Toronto headquarters [...] There the two men exchanged business cards. Afterward Dreier waited near the reception area until the Fortress representative arrived. Dreier quickly ushered him into a back conference room, introduced himself as Padfield, and handed him Padfield's card - the same one Padfield had just handed Dreier minutes earlier.
Pure gold.posted by mhum at 10:38 PM on April 5, 2009 [1 favorite]


No offense, but Dreier LLP was not a vanity firm. It had close to 250 attorneys, many of whom had noting to do with any of his crimes. This operation wasn't a fly-by-night like Madoff's. It was shuttered due to its insane liabilities and lack of management, but not because it didn't do any real work.

Well, certainly this guy pulled a lot of crazy stunts, but Madoff's trading firm was real as well. It took up three full floors and was in operation for years and years. And the people Madoff was ripping off.
posted by delmoi at 11:23 PM on April 5, 2009


I'll grant the brazen. It takes brass balls to pull some of the stuff he did.

This operation wasn't a fly-by-night like Madoff's.

Huh? Madoff operated a legitimate securities firm side-by-side with his fraud. There are actually major similarities in that sense. The aboveboard work granted both players some credence they wouldn't have had otherwise. Heck, Madoff was even Chairman of the Board of the NASD, and his firm was in part the original basis of the NASDAQ.

Anyway, the thing that amazes me about both of these in their scope and audacity is how much work it must be to manage a scam like this. I find simply managing a small family real-estate business a scramble most days. I can't conceive of a set of parallel books for which I constantly must disgorge liquidity without affecting the balance sheet.
posted by dhartung at 11:30 PM on April 5, 2009


. . . the staggering lack of due diligence.

The Dreier thing is amazing and awful and in some ways hilarious, but I disagree about the purported lack of due diligence by the people buying the bonds. At some point in your due diligence checklist, you reach a point of diminishing returns. So let's say you have:

- Examine the issuing entity
- Examine the underwriter
- Examine the underlying assets and asset holders
- Review the legal instruments in detail
- Secure legal opinions regarding the instruments
- Secure auditing opinions regarding the underlying financials of all parties
- Meet with the underwriters
- Meet with the issuers

Not bad, but let's say you're really careful:

- Demand a face-to-face meeting with the general counsel of the underlying asset holder at the offices of the underlying asset holder to discuss the asset and the issue.
- Collect the business card of the general counsel

Do you really need to add:

- Demand the driver's license of the general counsel to make sure it's really him and not some insane outside lawyer who snuck past reception and is just pretending to be him.

At what point to we get to accept that things are what they appear to be. Dreier was caught because someone smelled a rat and left the conference room to ask someone in the hallway if Dreier was, in fact, the general counsel. Is that REALLY supposed to be part of the standard due diligence now?
posted by The Bellman at 7:17 AM on April 6, 2009 [4 favorites]


Madoff's trading firm was real as well. It took up three full floors and was in operation for years and years.

My understanding of that situation is that the asset management aspect of Madoff Investment Securities had been a Ponzi scheme since the early 1990s, that no trades were made, and that he faked SEC filings to cover up. His earlier work had been legitimate and in order to promise high returns, he leveraged that history into a reputation that allowed him to operate a Ponzi scheme for so long. He continued to run a wholesale trading operation that acted as a market maker, but used Ponzi money to keep this afloat. To keep this quiet, he hired mostly incompetent staff and faked documents. There was no part of his business that wasn't tied into the scheme and it had been going on for almost 20 years.

Dreier, as far as I can tell, had his whole craziness parallel to but not as deeply intertwined with his firm.
posted by allen.spaulding at 7:18 AM on April 6, 2009


What a fabulous story. I love that the fraud, at its core, is so incredibly simple. He just made some fake bonds up and sold them. The art is surrounding it with the trappings: $18 million paintings in the lobby, your flag on a prestige building in Manhattan, your yacht with attractive young girls on your arm.

I'd like to think proper due diligence could have prevented falling victim to the fraud, but I take Bellman's point. Basically Dreier was working a lot of identity theft, in a community that never thinks to question the identity of the name on the papers.
posted by Nelson at 8:38 AM on April 6, 2009


I checked this out a while back with my father-in-law, who is knee deep in corporate finance. Due diligence on some corporate bond issues does indeed involve verifying that the signatures on the legal documents actually belonged to the people they were supposed to, especially where a question has been raised. Talking to someone on the phone who claims to be that person does not count. Nor does calling a number someone gave you.
posted by unSane at 1:03 PM on April 6, 2009


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