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Marc Dreier

Marc Dreier profiled

by Walter Olson on October 14, 2009

By Bryan Burrough, at Vanity Fair:

This wasn’t the case of a man who had everything going bad, Dreier makes clear. What no one understood is that everything Dreier owned — the cars, the mansions, the yacht, the sushi restaurant, even the law firm itself — was made possible by his crimes. This was a man who went bad to have everything.

Our earlier coverage here.

For frauds that fleeced investors of somewhere between $400 million and $700 million, depending on whom you listen to. [NYDN] “Prosecutors have also said that Mr. Dreier, 59, a graduate of Yale University and Harvard Law School, stole more than $46 million from his clients. … [In a letter to the judge Dreier] said that he began stealing in 2002, taking money from the settlement proceeds that were owed to a client.” [NYT]

Blawg Review #220

by Walter Olson on July 13, 2009

Welcome to Blawg Review #220, rounding up some highlights of the past week from around the legal blogosphere. It’s my second time hosting it here at Overlawyered, a blog that as its name implies maintains a certain critical distance from many of the doings of the legal profession. Despite (or because of?) that, lawyers make up a large share of our most loyal and valued readers. Overlawyered just celebrated its tenth anniversary, which so far as I know (though someone may come along to prove me wrong) makes it the oldest blog about law.

In addition to being a blogger, I’m an author of books (The Litigation Explosion, The Excuse Factory, The Rule of Lawyers) as well as many articles and shorter pieces, and a senior fellow at the Manhattan Institute, the think tank in New York City. Joining me in occasional posts is American Enterprise Institute resident fellow Ted Frank (who’s just launched a promising new venture called the Center for Class Action Fairness; his objection in a Bluetooth class action settlement won coverage in the NLJ on Friday) and even more occasionally by David Nieporent. Ted contributes a portion of this Blawg Review which is indented below.

Torts, Liability and Trial Practice

The week’s most widely blogged story, well documented by Above the Law, is a South Florida lawyer’s “Motion to Compel Defense Counsel To Wear Appropriate Shoes” at a personal injury trial, from fear that his opponent would employ a certain pair of hole-worn loafers to practice the arts of aw-shucksery on the jury. A mistrial resulted after press coverage of the motion came to the attention of jurors.

In other news, the Wall Street Journal law blog reported on the New York Yankees’ settlement with a fan who sued over not being allowed to get up and move about during the performance of “God Bless America”. Kevin Underhill at Lowering the Bar has the story of a Pomona juror who was really eager for deliberations to finish up so he could attend the Michael Jackson memorial, and wonders if the case was resolved unusually speedily that day.

On the plaintiff’s side, Steve Gursten of Michigan Auto Lawyers charges that the city of Detroit discourages the issuance of traffic tickets to its bus drivers as one way of dodging liability in subsequent accident cases where the driver’s record of violations could be used against the city. John Hochfelder at New York Injury Cases Blog says a lawsuit against the city subway system on behalf of a grossly drunk patron who tried to board between train cars is the sort of action that brings litigation into public disapprobation and might even fuel interest in relatively far-reaching reforms, like loser-pays. And Tennessee’s John Day catches a noteworthy automotive preemption case: “The Supreme Court of Appeals of West Virginia has ruled that a products liability claim was preempted by FMVSS 205, a safety standard that it says permits vehicle manufacturers to make a choice between tempered glass and laminated glass in side windows. … The United States Court of Appeals for the Fifth Circuit reached the opposite result in O’Hara v. General Motors Corp., 508 F.3d 753 (5th Cir. 2007).”

At Citizen Media Law, Andrew Moshirnia reports on a defamation lawsuit filed by a northern Illinois newspaper against a blogger: “That’s right, a newspaper (the Jeffersonian protectors of democracy) and a blogger (saving the world one lolcat at a time) are duking it out, each trying to out chill the other’s speech.”

The defense-side post of the week comes from the Beck & Herrmann team at Drug & Device Law. Mark Herrmann takes a big-picture look at how pharmaceutical product liability law has evolved over the past quarter century, and in particular how well it has done in pursuing the goal of appropriately screening out meritless cases. He gives the law a grade of “A” or thereabouts in tackling dubious expert testimony (with the Daubert revolution), in preventing the unwarranted extension of class action concepts from financial-injury cases to the realm of personal injury, and — a much newer development — in introducing serious scrutiny of claims at the pleading stage through the Supreme Court’s recent Twombly and Iqbal decisions. He is also relatively pleased with trends on preemption (despite the widespread view that defendants have suffered a decisive rebuke on that front) and on resistance to novel theories of action. On the other hand, he gives the courts a “D” on their handling of discovery and its burdens, and a grade of “F” when it comes to their overall inability to reduce the amount of litigation.

Emergency room doc/blogger White Coat has been serializing a first-person account of his malpractice trial; you can read parts eleven and twelve, bearing in mind that you’re coming in partway through the story. (The trial has concluded, but he’s not yet revealing how it ended.)

Stephanie West Allen at Idealawg, picking up on a discussion in Plaintiff magazine, says to watch out for how the other side is likely to retell your story: that way you won’t be surprised when the other side’s lawyer gets up at trial to claim the wolf was framed while portraying the scarlet-clad Miss Hood as the most heartless femme fatale since Barbara Stanwyck in Double Indemnity. And if you’re headed for alternative dispute resolution, Nancy Hudgins can tell you “A secret about mediators“.

In the News

Alas, in today’s wounded economy bankruptcy law is a standout practice area. In the case of General Motors, however, the process has gone far more quickly than most expected. John Wallbillich at Wired GC reflects on the giant automaker’s egg-timer reorganization: “The joke around Detroit is that GM went through bankruptcy in less time than it took outsiders pre-filing to get a response to voicemails and schedule a meeting.” On the consumer side, BankruptcyProf Blog (via Carolyn Elefant, Legal Blog Watch) reports that bankruptcy filings in the Central District of California have risen sharply over the year, up more than fifty percent from 5,999 in January to 9,578 in June. The year-over-year increase since the first half of 2008 is 45 percent.

Disgraced lawyer Marc Dreier is due to be sentenced this week for some of the worst defalcations laid to the account of an American lawyer in many a year; Peter Henning has commentary at the WSJ Law Blog. At a newly launched blog called Unsilent Partners, two well-known figures in the blogosphere, Colin Samuels of Infamy and Praise and Mike Semple Pigott of Charon QC, discuss recent white-collar criminal sentencing, the point of departure being federal judge Denny Chin’s sentencing of Bernard Madoff to a 150-year term.

The week’s biggest upcoming legal story is likely to be the confirmation hearing of Supreme Court nominee Sonia Sotomayor, and I’ll turn the floor over to colleague Ted Frank for some remarks on that:

The Sotomayor nomination continued to be a notable topic in the legal blogosphere this week. Jennifer Rubin noted that former Secretary of State Colin Powell, sharing Judge Sotomayor’s position favoring race-based preferences, had thrown his support behind her nomination. Meanwhile, Eric Turkewitz’s previous investigation of the judge’s “Sotomayor and Associates” law practice and the ethical implications of her choice of firm name was picked up by the New York Times, albeit (as he and Scott Greenfield both noted) without any recognition of Turkewitz’ key role in bringing this issue to light. Greenfield criticized the Times: “make no mistake about it. [Turkewitz] is the source of the New York Times story, and the absence of his name, and his blawg, in the piece is a shoddy reflection of its journalistic integrity. Don’t ask the blawgosphere to love you when you won’t love us back, boys.” But Windy Pundit defended the Times. Turkewitz found the Administration’s explanations and justifications of Sotomayor’s choice to be unpersuasive; some members of the Senate Judiciary Committee may as well, and they’ve been in contact with Turkewitz. Beldar’s reaction to the Associates flap: Meh. The WSJ Law Blog looks at the “meticulousness” characterization of Sotomayor. Stuart Taylor has a must-read blog post on how the Sotomayor panel almost succeeded in burying the Ricci case through its summary order; having failed to bury the case, Sotomayor’s supporters are making personal attacks on Ricci, who will be testifying at Sotomayor’s hearing, himself. Heather Mac Donald calls for tough questioning of Sotomayor about Ricci. If you plan on attending the hearing, watch what you wear. The Federalist Society is sponsoring an on-line debate on the nomination that includes lawyer-bloggers Tom Goldstein and Ed Whelan. And Jonathan Adler asks questions about that 1100-professor-petition in favor of Sotomayor’s nomination.

The D.C. Circuit ruled that police checkpoints in Washington, D.C., along “State Your Business, Citizen” lines, violate the Fourth Amendment. Ken at Popehat is glad. More: Volokh, Greenfield.

Allegations of egregious racial discrimination at the swimming pool of a northeast Philadelphia club are making news and seem likely to break out before long as a national story. Max Kennerly of The Beasley Firm tells the story and analyzes its legal implications here and here, while Jon Hyman recalls memories of growing up near the club.

Finally, the Scruggs judicial scandals may have faded from the national headlines in the past year but in Mississippi they’re still very much an unfolding story. Tom Freeland at North Mississippi Commentor continues to track developments.

Advice for clients

Week in and week out, one of the functions legal blogs fulfill is to advise clients and prospective clients on when to use lawyers and what to expect when using them. Thus Hingham-based Danielle Van Ess explains what estate planning does and who needs it at her blog on Massachusetts wills, trusts and estates law. At South Carolina Family Law, Ben Stevens offers a list of Facebook “don’ts” for divorcing couples, which might usefully be read in conjunction with Lawyerist’s advice on how to subpoena Facebook pages. Of course cutting through the hype is important, which is why potential clients susceptible to being impressed by “Super-Duper-Lawyer” awards and commendations might want to check out Brian Tannebaum’s amusing discovery that “in Gainesville, Florida, apparently two Super criminal defense lawyers are prosecutors”. Whoops!

Employment law

Perhaps the week’s most buzzed-about employment law case came from Hartford where veteran political reporter Shelly Sindland filed a sex and age bias complaint against Tribune Co.’s Fox 61, charging that execs at the TV station rewarded female on-air talent on the basis of bodily attractiveness rather than conventional journalistic criteria. Daniel Schwartz at his Connecticut employment law blog took a relatively sober look (and followup), but given its mature content this was a story destined to wind up at Above the Law, which gave it the full treatment.

Employees’ sometimes-imprudent talk both on the job and off continues to provide steady fodder for employment law decisions and controversies. Doug Cornelius discussed a New Jersey decision on whether and when an employer can read an employee’s email to her lawyer sent from a company-owned laptop. At Employee Rights Post, Ellen Simon discussed a recent Ninth Circuit case in which a school employee got in trouble for inflammatory online remarks. And Jon Hyman at Ohio Employer’s Law wonders how employers are supposed to avoid what has been called a “sexualized work environment” offensive to some employees when the popular culture seeping in to the workplace from all sides is often itself highly sexualized, a topic that has come up in these columns as well.

Commercial, business and tax law

Unincorporated Business Law Blog brings word of a bill being introduced by Sen. Carl Levin (D-Mich.) to crack down on state-incorporated “shell” corporations. Corporate law specialist Larry Ribstein of the University of Illinois writes, “The motivation for this piece of legislative detritus seems to be that since a tiny percentage of LLCs are being used for criminal activity let’s wreck LLCs for all firms. Hey, sounds sensible to me.”

In other news, Peter Pappas awarded his “Rick Moranis Awards” for the best tax nerd blogs. Kevin LaCroix at D & O Diary has an update on the rising tide of Foreign Corrupt Practices Act (FCPA) enforcement activity. Charon QC conveys a bit of gossip about the questionable contract terms prescribed by a well-known U.K.-based real estate firm. And Ken Adams at Adams Drafting advises that if contract-drafting seems like a boring and unrewarding part of your work day, you’re probably not doing it right.

Finally, this unsettling observation from Dan Harris at China Law Blog: “If you owe money to a Chinese company for product and you cannot pay all of your creditors, skip out on the Chinese company. Near as I can tell, there is nearly a 100% chance they will never sue you to recover.”

Intellectual property law

The Pope issued an encyclical earlier this month which, notes Cal Law Legal Pad, included the following statement: “On the part of rich countries there is excessive zeal for protecting knowledge through an unduly rigid assertion of the right to intellectual property, especially in the field of health care.” If the pontiff wasn’t upset by the story of the Mexican yellow bean patent recounted by Patently-O, it’s probably because he hadn’t heard of it. Speaking of moral authority, The Prior Art takes GOOD magazine to task for according a glowing profile to a systematic asserter of patent license rights whom some might belittle as Totally Reliant On Litigation Leverage, and suggests the magazine missed a chance to evaluate the gap between what might be remunerative legal-business strategy and what is beneficial to society. For a more upbeat view of the value of patents in spurring innovation since colonial days, Gary Odom at Patent Hawk offers a short history of patents in America.

Finally, I blogged last week about the lawsuit filed by Pez against a Pez museum that some fans had set up in California’s San Mateo County, but Ron Coleman at Likelihood of Confusion was funnier about it.

Legal issues of new media

Remember the unsuccessful suits by companies upset to discover that when Google users searched on their firm’s name, AdWords would serve them an ad for some competitor? Ryan Gile at Vegas Trademark Attorney thinks Mary Kay Cosmetics faces an “uphill battle” in a new suit against Yahoo (over mouseover search popups in email) that raises some similar issues. And Venkat Balasubramani raises the question whether Twitter has been lax, or clever, or both, in letting various other entities use Twitter-related words and phrases in their own names and promotions.

At gamelaw blog Law of the Level, Shawn Foust discussed how online games can protect the integrity of their online currencies from thefts, at least until a corps of “Space Prosecutors” can be formed. And Eugene Volokh brings news from Michigan of one of the first, if not the first, libel lawsuits arising from Wikipedia edits. It seems to raise garden-variety rather than novel issues, though, and is not filed against Wikipedia itself.

Family law

In the U.K., Justice Minister Jack Straw has announced a second round of family-court reforms. Lucy Reed at Pink Tape is anything but enthusiastic about some of the “de-lawyerizing” aspects of the proposals. John Bolch at Family Lore comments as well, and separately notes “that Conservative think tank the Centre for Social Justice will recommend that there be a compulsory three-month ‘cooling off’ period before divorce proceedings can be commenced, one of a number of proposals contained in a report Every Family Matters, to be published [July 13].” Presumably coincidentally, here in the U.S., Solangel Maldonado at Concurring Opinions considers whether current divorce laws unduly steer couples toward ending marriages rather than working through difficulties: “Given society’s interest in marriage and all of the negative consequences of divorce, should law incentivize couples to repair the marriage after infidelity? … many couples do reconcile after separation. Maybe they would not have done so had they been able to seek a divorce immediately.”

“Father Shall Not Use Profanity or Racial Epithets in the Boys’ Presence or Within Their Earshot”. Eugene Volokh wonders about the free speech implications.

Law schools

It being July, law schools are relatively quiet on the student front, but certainly not on the faculty front. Hackles have been rising over the NYU law school’s selection of Li-Ann Thio for a visiting spot in human rights law, given that in her native Singapore Thio crusaded against rights for gays. [Above the Law]. Jane Genova at Law and More covers a judge’s threatened sanctions against Harvard lawprof Charles Nesson for posting deposition excerpts online from a case in progress in which he is helping defend music downloaders. And although Ave Maria Law School is not a part of the Roman Catholic Church, it is asserting church autonomy as a defense to a suit filed by several former faculty members; Howard Wasserman at Prawfsblawg and Rick Garnett at Mirror of Justice discuss.

Many would have nominated law schools as a nearly recession-proof sector of the economy, but that’s turned out to be wrong, what with bleak prospects for many new graduates and sometimes plunging endowments at parent institutions. Famed UCLA lawprof Stephen Bainbridge asks “Is Law a Mature Industry?” and examines the implications for legal education (do we really need at least ten new law schools, as are on the drawing board now?), while the Canadian site Law21.ca wonders whether the demographics of an aging world mean that we can “say goodbye to a lot of law schools“.

State of the blawgosphere

There’s nothing like a discussion of the state of blogs to get people going. At Crime and Federalism, Mike Cernovich thinks legal blogs have gone downhill since he got online: things have grown cliquish, and the “biggest – and worst – change to the legal blogosphere has been the Rise of the Marketers,” the ones who are intent on promoting their firms and practices but don’t have anything in particular to say. If bloggers get cliquish, notes Robert Ambrogi, it’s only human nature: “With too many blogs to choose from, we tend to stick with those we know and find comfort with.”

Have you ever considered turning the best bits of your blog into a book? Join the club. Evan Schaeffer at Legal Underground shows how to make a convincing case for that kind of transformation.

Finally, if you’re looking for an old-fashioned blogger dustup complete with asperity and risk of hurt feelings, Scott Greenfield is feeling snappish toward Adrian Dayton and several others on a variety of topics that include Generation Y, social media and work/life balance (Greenfield’s basically against the latter: “When the going gets tough, no one needs a lawyer who leaves the office whenever they have something more fun to do.”) Diane Levin suggests room for accommodation, which however is not forthcoming.

Need a break from contentiousness? Check out Scott Kreppein’s pictures of the Bronx County courthouse, a building that boasts marmoreal, heroic bas-relief sculptures in what I believe is the early-FDR-period style referred to as “Greco-Deco“.

International

For a view of American law from Central and Eastern Europe, Bruce MacEwen at Adam Smith Esq. interviews Tomasz Wardynski of a large Warsaw law firm. At Arbitration Forum, Kenneth Cloke tells “Why We Need to Mediate [International] Environmental Conflicts“. Cynthia Alkon at ADR Prof brings word that the Truth and Reconciliation Commission (TRC) in the African nation of Liberia released its report this week. Chris Borgen at Opinio Juris reports on the possible disintegration of Belgium (Flanders is thinking of pulling out). Is the EU actually going to hasten the breakup of some of its ethnically diverse member states? Charon QC decides to find out how easy it is to pry information out of private British law schools. And proving that the U.S. is not always in the forefront of colorful litigation, a Polish mother has sued saying that her 13-year-old daughter came back pregnant from an Egyptian resort because of, er, male-related contamination of the hotel’s swimming pool. Michael Krauss has the story at the Manhattan Institute law blog Point of Law (disclosure: I’m its editor and also blog there).

Many thanks to Colin Samuels and Victoria Pynchon for their helpful suggestions on links to use. H. Scott Leviant will be hosting Blawg Review #221 at The Complex Litigator next week. Blawg Review has information about that, and instructions how to get your blawg posts reviewed in upcoming issues. [Edited 1 pm Monday to remove one link at the request of its site]

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June 5 roundup

by Walter Olson on June 5, 2009

  • See you in court, ma: “Man awarded $115K after suing mom for lost pinky finger” [Obscure Store, Bergen County (N.J.) Record]
  • Please reassure us Canada’s not going to follow U.S. down abusive road of asset seizure in law enforcement [Moin Yahya and Janet Neilson, Western Standard]
  • What sorts of intellectual property norms prevail in the world of stand-up comedy? [ConcurOp]
  • “Marc Dreier’s Son Sues College Roommate for $1M” [ABA Journal]
  • Intersection of state divorce law with peripatetic military life can lead to harsh results [Bader, CEI]
  • Grape-Nuts contain neither grapes nor nuts! Cap’n Crunch isn’t a real captain! It’s not fair! [comments on our popular "Crunchberries" item]
  • “Lawyer’s ‘Contentious’ Claims Against Landlord Are Rejected” [NYLJ]
  • “Adult” won’t cut it any more, we need a new legal category, more responsible, of “grownup” [Ken at Popehat]

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The Marc Dreier scam

by Walter Olson on April 5, 2009

In a year of frauds, Roger Parloff at Fortune finds that for “brazen theatricality” the New York lawyer’s may qualify as the gaudiest of all. More: Metafilter.

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Microblog 2008-12-27

by SSFC on December 27, 2008

Con artists, lawyers, and people who deserve a punch in the face:

  • The best stings, cons, and capers of 2008, as chosen by Wired.  Particularly clever: the FBI’s reverse con of dozens of identity thieves.  And who knew that phone phreaks still exist in the age of the internet?
  • Rod Blagojevich’s attorney seeks to compel testimony from high officials in the incoming administration to resist impeachment, while Patrick Fitzgerald asks Illinois lawmakers to hold back to avoid jeopardizing his criminal case.  Question: assuming Blagojevich is guilty, which is more important, that his impeachment proceed promptly, or that his criminal case proceed without political interference?  Alternative question: Which is more important, good (or at least less corrupt) government in Illinois, or another notch on Fitzgerald’s belt? Final alternative question: if the Obama team was more involved than its own report suggests, why not let things drag out and get the whole story?
  • A blog devoted to people who deserve a punch in the face (potentially offensive images, not-work-safe language). Special favorites: “B**** who talks on cellphone at Holocaust Museum” (yes, I have seen this), and “Passive aggressive emoticon user”;
  • The heroism and defiance of the crew of the USS Pueblo, released from North Korean captivity a little over forty years ago today.  If you click on a link anywhere in this post, make it this one (edit: bad link fixed);
  • Contrary to suggestions from Esquire, Barack Obama is unlikely to end the war on some drugs;
  • Is OSHA unconstitutional? Is seizing privately owned steel mills unconstitutional?  Legal Theory calls this paper “very highly recommended” and I agree;
  • Should Jewish (and for that matter Muslim, Hindu, or Buddhist) military chaplains be required to wear a cross? The Navy says yes.  I say that if we’re going to bail out Chrysler we can afford a few pins which depict commandment tablets or crescents See below for a more interesting discussion from Ron Coleman and others, on something I completely misread;
  • The right to have children is fundamental, but we remove dogs from conditions that aren’t as overcrowded as those of the Duggar family of Arkansas;
  • Extraordinary Popular Delusions and the Madness of Crowds:  It’s not just the best book on economic bubbles and downturns ever written. It could be the title of this article on how a leading author on scientific skepticism was fleeced by Bernard Madoff. (Via Crime and Federalism);
  • Speaking of delusions, more details on the methods through which attorney Marc Dreier allegedly stole millions emerge in this Bloomberg story.

Walter Olson will be back soon enough, but I’ll note that I have come to appreciate just how good a blogger he is, and how hard Walter works in keeping this site going over the past few days.  Perhaps you might show him your appreciation? Vote early, and vote often.

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Reuters:  No deluge of lawsuits – yet- in Madoff case.  Reuters is surprised that an army of plaintiffs hasn’t sprung from the ground to destroy whatever is left of Madoff Securities and anything else in its vicinity.  Reuters reports this as though it’s news.

This story is a classic example of why journalists shouldn’t report on serious legal matters without some training, perhaps to 2L, or at least long experience as a crime beat reporter.  Of course Madoff hasn’t been sued.  Most of the likely law firms that could sue it are wondering whether they’re potential defendants, or which of the potential defendants they already represent.

Madoff was a heavily capitalized hedge fund with sophisticated investors, perhaps fifty billion dollars worth of investors.  Each and every one of those sophisticated investors had, or has, heavy legal talent among the New York, Chicago, London, and Los Angeles bigfoot law firms that would be best qualified to bring a suit against Madoff, its auditors or accountants, and the brokers who steered business its way.  The investors themselves, and the auditors, accountants, and brokers, who were generally investing other people’s money, are looking at their lawyers asking, “How did I let myself do this?”  For that matter, some of the law firms are looking at themselves and asking, “Why did I let my client do this?”  Or they’re reaching out to their banking and hedge fund clients and asking, “Wouldn’t you like to know that you’re not responsible for doing this?  I can tell you why.”  Or they’re so conflicted among their various clients that they’re asking themselves, “What do we do?”

And then there are the insurers.  And the reinsurers.  And their lawyers.  Finally, don’t forget that most of these firms have a few very sharp white collar criminal defense attorneys, who are also getting calls.  The white collar crime-only boutique firms will have a field day.

The conflict checking alone among the bigfirms probably isn’t finished.  As for firms specializing in class actions and securities litigation for plaintiffs, well, some of their best, such as Dreier and Associates and what’s left of Milberg Weiss, have been having troubles of their own.

The Madoff lawsuits will come, and the schadenfreude will flow.  As a wise man once said, “Patience, grasshopper.”

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Marc Dreier profiled

by Walter Olson on December 19, 2008

In the WSJ.

Even after being jailed in Toronto, the litigator managed to grift $10 million from an escrow into his personal account. And he let the malpractice insurance on his law practice lapse, as his horrified colleagues are now finding out. (Alison Leigh Cowan, Charles V. Bagli and William K. Rashbaum, “Lawyer Seen as Bold Enough to Cheat the Best of Investors”, New York Times, Dec. 13).

P.S. Eric Turkewitz (Dec. 14) has a sobering analysis of possible liability exposure for the non-equity partners of Dreier LLP.

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That’s what federal prosecutors claim. And he didn’t even do it legally, like a tobacco lawyer. More: NYLJ, Forbes.

Patrick @ Popehat provides a suitable point of comparison: earlier this month the biggest jewel theft in French history, described as a landmark in the history of crime, resulted in a loss of $108 million. “One Lawyer With His Briefcase Can Steal More Than A Hundred Men With Guns”.

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Dreier LLP scandal

by Walter Olson on December 10, 2008

From bad to worse: “According to a declaration by the firm’s Controller John Provenzano, millions of dollars owed to clients appeared to be missing from the firm’s accounts.” (Dan Slater, WSJ law blog; American Lawyer; earlier).

In general clients who suffer by a law firm’s defalcations, and cannot be made whole by suits against the law firm, are at risk of losing all or most of the money they’d entrusted; however, New York, where the Dreier firm is headquartered, at last report afforded broader provisions for clients than did most states. I took note four years ago of the not-especially-generous state of lawyerdom’s collective “client security” funds.

P.S. More on client security funds in comments. Larry Ribstein has thoughts on the Dreier firm’s unusual organizational structure. As for all the “dating Maxim models” stuff about the extravagance of Dreier’s personal life, that is pure tabloid-style sensationalism and will under no account be exploited in this space.

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[Originally published in the early hours of Dec. 7. Bumped Monday afternoon to reflect new developments and reader interest; updated Tuesday morning.]

News accounts are still piecing together the strange story of high-powered New York litigator Marc Dreier and his arrest by Canadian officials on charges of “impersonation”. Allegedly, Dreier posed as an official of the Ontario Teachers’ Pension Plan to support his pretense that he had a guarantee for a $50 million investment he was seeking from a hedge fund. (Sinclair Stewart, Paul Waldie and Timothy Appleby, “From $50-million deal to $100,000 bail – in a N.Y. minute”, Toronto Globe and Mail, Dec. 6). The blog Above the Law broke the story and has been on top of later developments (Dec. 4, more posts). Dreier LLP, a 250-person law firm that is said to have been owned outright by Dreier rather than run as a partnership, was “one of several firms that hired refugees from Milberg Weiss after that firm was indicted”. (Nate Raymond, “Arrest of Dreier Founder Clouds Firm’s Future”, American Lawyer, Dec. 5; NYLJ, Dec. 8; NYT, Dec. 5).

More: Huge developments on Monday:

Marc Dreier, the owner of a prominent New York law firm who was arrested last week, was hit Monday with criminal charges and civil complaints alleging he defrauded investors of about $100 million by selling them phony financial instruments.

Federal prosecutors on Monday unsealed charges of one count each of securities and wire fraud, describing a bizarre scheme to bilk hedge funds. [U.S. Complaint at ClusterStock] The Securities and Exchange Commission filed a civil suit making largely the same allegations against the 58-year-old Mr. Dreier….

The criminal and civil complaints released Monday offer the following account of events: Mr. Dreier fabricated promissory notes by an unnamed New York real-estate developer — identified as Solow Realty by a person with knowledge of the situation — and sold them to hedge funds, when in fact such notes were never issued. He fabricated supporting financial statements, and letters from an accounting firm using the firm’s logo, that purported to audit the statements. The SEC complaint says $113 million in phony notes was deposited to an account in the name of the law firm.

Scott Greenfield has more on reports circulating of missing escrow accounts and is stunned at the magnitude of the allegations: if true, “the firm is now at the epicenter of perhaps the greatest instance of lawyer dishonesty ever.” [Updated Tuesday morning to replace breaking-news WSJ account with paper's most recent version; see comments section regarding an apparent inaccuracy in earlier version.]

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