| NEW YORK
NEW YORK Dec 10 The arrest of high-profile New
York lawyer Marc Dreier for investment fraud has "had a neutron
bomb-like effect" on his 250-attorney firm, with lawyers
quitting and the law practice overdue on its rent and other
bills, according to court papers.
Dreier LLP also has discovered that millions of dollars
appear to be missing from client escrow accounts, firm
controller John Provenzano said in a sworn statement filed by
the U.S. Securities and Exchange Commission, which is seeking
to freeze the assets of Dreier and his firm.
Dreier is the only employee at the firm authorized to
direct transfers in and out of these accounts, the controller
wrote in the statement, filed on Monday.
Dreier faces both criminal and civil charges following his
arrest late Sunday on accusations of perpetrating a $100
million real-estate investment fraud. His defense lawyer,
Gerald Shargel, did not immediately respond to a request for
comment on Wednesday.
Dreier is in federal custody in New York and has a bail
hearing set for Thursday. He is the sole equity partner of
Dreier LLP, a corporate law firm specializing in litigation,
bankruptcy and employment law with headquarters on Manhattan's
His legal problems emerged last week when Canadian police
arrested him on charges of criminal impersonation. He was
released on bail, only to be arrested again by U.S. authorities
upon returning to New York.
"The news of Mr. Dreier's arrest has had a neutron
bomb-like effect on Dreier LLP," according to a sworn statement
filed on Monday from Vincent Pitta, a partner at Dreier
affiliate Pitta & Dreier LLP. Pitta said Dreier had no
day-to-day operating role at the affiliate, whose operations
are "continuing unabated."
Because Dreier was his firm's only equity partner, "no one
is in charge" there and premiums on health and malpractice
insurance have not been paid, Pitta wrote.
In another sworn statement, Dreier LLP partner Joel Chernov
wrote that the firm's December rent payment is now overdue and
that many attorneys and staff have left the firm.
Dreier, a 30-year legal veteran and a graduate of Harvard
Law School, is accused in a criminal complaint of enticing
hedge funds into buying fake promissory notes for a real estate
developer, and then creating an elaborate charade to convince
them that the notes were real.
After his initial court appearance on Monday, his lawyer
said that "this is a very complicated matter, and the facts are
beyond reach of a sound bite."
(Reporting by Martha Graybow; Editing by Brian Moss)