$100 million in swindled assets found, but where is the art?

NEW YORK (AP) – An official appointed to recover the assets of a prominent Manhattan lawyer accused of defrauding hedge funds of at least $400 million says he has safeguarded more than $100 million in assets, including an $18.5 million yacht. Certain artworks, however, are still missing.

The court-appointed receiver, Mark Pomerantz, outlined his findings about lawyer Marc Dreier and his 150-lawyer firm, Dreier LLP, in a report recently heard last Wednesday in U.S. District Court in Manhattan.

Dreier, 58, was arrested in December on securities fraud charges. He remains under house arrest while his lawyer, Gerald Shargel, prepares what he says is likely to be a guilty plea for his client.

“The report speaks for itself and obviously reflects the fact my client cooperated with the receiver,” Shargel said during the court proceeding.

Pomerantz said Dreier received $670 million between 2004 and 2008 from the sale of fictitious securities, spending much of it on a lavish lifestyle that included millions of dollars in artwork, beachfront homes on both coasts and the yacht, Lady Seascape.

The receiver said Dreier’s law firm, despite appearances of profitability including rapid growth and new construction, was actually losing enormous amounts of money.
Pomerantz wrote that Dreier appeared to have little cash left when he was arrested in early December, having relied since September on the sale of fictitious notes to pay overdue bills, replenish stolen escrow funds and maintain his extravagant lifestyle.

“At the time of his arrest, Dreier was in arrears on everything from payments to the crew of his yacht to mundane firm expenses like car service and offsite storage,” Pomerantz said.

“The absence of available cash may explain Dreier’s desperate attempts to sell additional notes in Canada,” he said.

Dreier was first arrested on impersonation charges in Canada in early December before he flew to New York City, where U.S. authorities arrested him at the airport.

Pomerantz said Dreier maintained an extensive fine art collection worth about $39 million, including paintings, photographs, prints and sculptures.

Dreier used “enormous amounts of stolen funds” to purchase the art, most of which was kept in his homes, though some was displayed at his law firm, Pomerantz said.

Pomerantz said he couldn’t locate several pieces of art, including a Picasso sketch worth an estimated $35,000 that was last seen in Dreier’s Manhattan apartment in November 2008.

He said Dreier’s ex-wife, Elisa Dreier, filed a security interest in the sketch and her lawyer has told the receiver’s office that she has the sketch and claims title to it under the terms of her separation from her husband.

Pomerantz wrote that the sale of fictitious securities also enabled Dreier to buy several residences, including his $10 million Manhattan apartment and three properties in the Hamptons, two in East Quogue that together are worth more than $12 million and a Westhampton property bought for more than $700,000 in 1989.

The U.S. Marshals Service has already seized the East Quogue properties, Pomerantz said.

Dreier used money from a fake note he sold in 2007 to buy the yacht, which was equipped with flat screen televisions, a wine collection and was one of only 10 of its kind in the world, Pomerantz said. He said Dreier later mortgaged the vessel through Wachovia Bank for $10.6 million and apparently used that money to buy several pieces of art, including an untitled Keith Haring painting from 1982 and Andy Warhol’s four Jackie paintings.

Recovering the yacht was complicated because its captain and crew hadn’t been paid in two months, it was low on fuel and owed a substantial amount in docking fees at Port de Plaisance in Cole Bay, St. Maarten, Pomerantz said.

With federal prosecutors’ help, Pomerantz said he arranged for Wachovia to provide money to reinsure the yacht, pay the captain and crew, pay for supplies, fuel, docking fees and airplane tickets home for crew members once they reached Fort Lauderdale.

Pomerantz said he also discovered that Dreier had been renting a 1,200-square-foot beachfront apartment in Santa Monica, Calif., for $21,000 per month.

Pomerantz filed the report to detail his findings and request that his receivership be dissolved. He said bankruptcy trustees can carry out any remaining work.

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AP-ES-03-25-09 2050EDT