How Former Dreier Client Became a Co-Defendant in Claimed $200M Scheme
Posted Jan 5, 2009 12:10 PM CST
By Martha Neil
In 2006, Kosta Kovachev consented, without admitting wrongdoing, to a $358,146 judgment in a civil Securities and Exchange Commission case. It concerned an alleged timeshare-sales Ponzi scheme involving 10 defendants and claimed profits of $28 million.
His attorney at the time was Marc Dreier.
By 2008, Kovachev, a 57-year-old Harvard Business School alumnus and former stockbroker, was using an electronic pass to come and go from the 250-attorney New York law firm founded by Dreier. He was also using its computers and Park Avenue offices, reports the Dealbook blog of the New York Times. However, it appears that Kovachev may not have been an employee of the law firm.
Now both he and Dreier, 58, are in jail, accused by federal prosecutors of working together to bilk hedge funds out of more than $200 million, by persuading them to "invest" in fraudulent promissory notes, according to the blog post.
Allegedly, Kovachev helped Dreier pull off the fraud by posing as a high-level executive of another law firm client, a real estate developer. Marc Dreier is accused of selling fake debt purportedly connected to the developer to hedge funds, according to Dealbook.
At one point, according to a criminal complaint in the Kovachev case, the two were recorded on a security videotape as they took over a glass-walled conference room at the developer's offices, the blog reports. There, Kovachev allegedly posed as the developer's chief financial officer, seeking to assuage the concerns of an investor who had purchased phony notes that weren't being repaid on time.
At a bail hearing last week, a federal prosecutor in New York "indicated that there were others involved as well, noting that the investigation has shown that 'Mr. Dreier has paid other people up to $100,000 to engage in one impersonation on a phone call,' ” the Dealbook post recounts.
An attorney for Kovachev, Andrew Rendeiro, disputes some of the allegations against his client and contends that Dreier is largely responsible for any crimes committed. Kovachev is reportedly being held in lieu of $300,000 bail.
As discussed in earlier ABAJournal.com posts, Dreier, 58, is accused of having stolen some $380 million in a manner similar to what is discussed in the complaint against Kovachev. At last report, he was being held without bail.
Gerald Shargel represents Dreier but has said little about the case against him, other than to state that his client is cooperating with a receiver overseeing the Dreier firm and hopes to resolve the case fairly and reasonably.
"Under any analysis, this is a tragedy of epic proportions," Shargel told the Wall Street Journal (sub. req.) last month. "He was so able as a lawyer. He had the benefit of a fantastic education. He worked very, very hard."
ABAJournal.com: "Feds: Attorney Marc Dreier Stole $380M; a ‘Houdini of Impersonation’"
ABAJournal.com: "Dreier’s Extravagant Lifestyle: ‘Dazzling’ Homes and $200K Secretaries "
ABAJournal.com: "Another Person is Charged in Alleged $100M Dreier Fraud "
New York Law Journal: "Trustee Named in Dreier Firm's Bankruptcy Case"