More brazen than Madoff?

Of all the frauds that have come to light in this season of financial pain, none can match the brazen theatricality of the scam allegedly pulled off by superlawyer Marc Dreier.

By Roger Parloff, senior editor

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Marc Dreier leaves federal court after making bail and being released from jail in New York, on Feb. 13, 2009.

(Fortune Magazine) -- In a year of fabulous frauds, the one that glitzy Manhattan attorney Marc Dreier has been charged with is in some ways the most fabulous of all.

Not the biggest, of course. The biggest fraud of 2008 was metaphorical: the nation's economy itself, which had been built upon house-of-cards financial products. The most tragic fraud of the year was Bernie Madoff's decades-long Ponzi scheme, which gulled charities, widows, and orphans out of tens of billions of dollars while whistleblowers blew themselves hoarse before deaf and dumb regulators.

Yet Dreier's comparatively modest, alleged $700 million fraud, which left victims with $400 million in losses, was sui generis. What differentiated it from the pack was that it was just so much more - well, we don't want to use the precise word that comes to mind, but "brazen," "cheeky," and "cocky" begin to capture it.

While Madoff did his dirty work in seclusion behind locked doors, Dreier allegedly duped his victims with the theatrical, improvisational daring of a high-wire aerialist. Despite the pain his crimes have wrought, a dark side in each of us cannot but admire the sheer nerve of the man. (Think of Leonardo DiCaprio's heroic impostor in the film "Catch Me If You Can.")

According to prosecutors, for more than four years Dreier sold hundreds of millions of dollars' worth of bogus debt obligations to nearly 40 investment funds run by 13 of the nation's most sophisticated asset managers, including the likes of Fortress Investment Group, Elliott Associates, and hedge funds later acquired by Perella Weinberg Partners and Blackstone Group. Throughout its existence the scheme could have collapsed at any instant, if just one of dozens of duped hedge fund officials had ever run into real estate developer Sheldon Solow - the head of the duped company supposedly issuing most of the notes - at a cocktail party.

As Dreier dug himself ever deeper into criminality and debt, he resorted to ever more desperate measures to postpone the day of reckoning. 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. The scam succeeded for as long as it did because none of his victims could conceive that anyone of Dreier's stature would act with such monumental recklessness, selfishness, and self-destructiveness.

Almost as an afterthought, Dreier is alleged to have filched about $40 million from his clients' escrow accounts - including $10 million that he stole after his arrest before authorities could get a receiver appointed to seize control of his law firm and ambulance it into bankruptcy. To the 260 innocent attorneys who toiled for him at Dreier LLP's tony offices in Manhattan, Albany, N.Y., Los Angeles, Pittsburgh, Santa Monica, and Stamford, Conn., Dreier bequeathed unpaid salary checks, unreimbursed expenses, lapsed malpractice and health insurance policies, potential civil liability, and untold damage to reputations. An attorney's stock in trade is sound judgment and wise counsel. "To have hitched one's star to a thief," as a lawyer for one of Dreier's former partners puts it, is a stain that won't easily wash out. Most of Dreier's betrayed former colleagues did not return calls or e-mails, and all but one of those who did asked not to be identified.

Dreier is now under house arrest at his terraced condominium in Midtown Manhattan while awaiting disposition of federal wire fraud, securities fraud, and money-laundering charges that, according to federal prosecutors, merit a prison term of 30 years to life under sentencing guidelines. Though Dreier has pleaded not guilty, he has filed affidavits in court that admit major portions of the accusations against him. His heavy-duty criminal-defense attorney, Gerald Shargel - whose previous clients include bosses of four of New York's five Mafia families - has acknowledged in court that he expects Dreier's case to be "resolved" without trial within a month or two. Dreier's $40 million art collection; his sleek, 121-foot Heesen motor yacht; his waterfront Hamptons mansion; his Aston Martin, BMW, two Mercedes, four Yamaha WaveRunners, and every other gilded trophy he once flaunted are now frozen by court order, awaiting either forfeiture to the government or distribution among creditors.

Dreier appears to have only two remaining possessions of value, and it's unclear whether New York's Son of Sam laws let him exploit them: They are the book and movie rights to the unbelievable yarn that was his life until his arrest on Dec. 2.

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In March 2007 a Dreier LLP partner wanted to recruit matrimonial attorney Heidi Opinsky to join the firm. So he took her to meet Marc Dreier at the firm's New York City headquarters.

"You came into a very opulent, private entrance," Opinsky recalls. "Separate elevator bank, separate concierge. It was like walking into a museum of modern art. I've never been in a law office that was like this. It made you feel wonderful."

Then things went downhill. "All his little helpers escorted" her into Dreier's office, she says, but Dreier himself she found to be outlandishly distracted and self-absorbed. "He showed that kind of lack of interest where you can tell they're in another world. They're not really hearing what you're saying." When Opinsky got home, she says, she told her husband it had been like "going in to see the Wizard of Oz. I got a feeling of smoke and mirrors. I couldn't put a handle on it." Opinsky did not join the firm.

Though others reacted to Dreier more positively, their accounts set the same harmonic overtones vibrating.

"I liked him," says Joe Pastore, who headed Dreier's Stamford office. "He was kind and warm. A very affable, capable, intelligent, charming guy. Impeccably dressed." But Pastore adds sadly, "There was a distance I could never pierce through. He'd invite you to his house, but he would not come to your house and sit with your kids at a barbecue. He had little interest in my life."

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