Law Practice Management
Dire Situation at Dreier: Bills Unpaid, Client Funds Allegedly Missing
Posted Dec 10, 2008 5:06 PM CDT
By Martha Neil
Just when it seemed that the alleged situation involving the founder of Dreier and his disintegrating 238-attorney law firm could hardly get much worse, even more bad news is being reported.
After he was arrested and jailed in Toronto last week, Marc Dreier allegedly managed to transfer $10 million in client escrow funds, by telephone, to his own personal accounts, although the firm's controller refused to cooperate with his request for access to escrow funds, Forbes recounts. And tens of millions more is also missing and apparently has been transferred into Dreier's personal accounts, too, court records claim.
Meanwhile, court documents filed Monday state that the firm hasn't paid its December rent and health insurance premiums, and is a month behind on its malpractice insurance, the article in the business magazine continues.
Dreier, 58, who is the only equity partner, is jailed, at least for now, in connection with securities and wire fraud charges filed by federal prosecutors in Manhattan (he was released on $100,000 bail last week concerning a criminal impersonation case in Canada), and hence can't do much to try to sort out the firm's finances.
Although an art collection displayed at the law firm's Park Avenue office in New York is reportedly worth nearly $40 million, the Securities and Exchange Commission is seeking to freeze both Dreier's personal assets and the firm's assets, as part of civil litigation filed Monday. It seeks to recover some $113 million that Dreier allegedly stole from sophisticated investors based on faked documents.
Partner Mark Pomerantz of Paul Weiss Rifkind, Wharton & Garrison has been appointed as a temporary receiver to oversee Dreier’s assets, including the law firm, Bloomberg notes.
At the same time that the one-equity-partner structure apparently may have given Dreier too much control of the firm's affairs, it also may not shield other lawyers from potential personal liability concerning the ongoing debt debacle. As discussed in an earlier ABAJournal.com post, nonequity partners face potential liability, depending on their contracts with the law firm and their roles in handling client matters.