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Ron Kuby

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A "Dryer" Version of Madoff

Posted: 07/21/09 08:13 AM ET

A lawyer and a duck walk into a bar.
The bartender says "What are you doing with that skunk?"
The lawyer says: "It's not a skunk, it's a duck"
The bartender replies: "I wasn't talking to you."

Hahahahaha. Get it? The lawyer is the skunk!!! One of my favorites.

Such humor was conspicuously absent at the July 13, 2009 sentencing of high-flying, high-powered, high-living attorney Marc Dreier (pronounced "dryer," as in taken to the cleaners), when he was sentenced to 20 years in prison for bilking investors and clients out of an estimated 388 million dollars. But for Bernie Madoff, Dreier would have been front page news since his indictment earlier this year. Dreier's law firm, entirely owned and managed by him, had been a powerhouse real estate firm in New York for decades. For lawyers, it was a lucrative and challenging employment. For clients, it was a "take-no-prisoners" litigation style. Dreier himself was a fixture at up-scale charity events, chatting up B-list celebrities and the assorted human detritus that swirls around the rich and powerful. He parlayed his wealth and power into the opportunity to boff lots of good looking young woman. And it was all a huge scam. But a really, really good one. And he could not have screwed a more deserving bunch of victims.

Dreier, unlike Bernie Madoff, did not want to spend hours every day slaving away in the office, cooking up thousands of phony statements and juggling accounts. Instead, he created interest-bearing promissory notes ostensibly issued by his real estate clients (but created by Dreier himself), and sold those to hedge funds. Get it? He prints glorified IOUs and sells them to some of the best and the brightest on Wall Street! And none of the hedge fund geniuses think to actually pick up the phone and call the ostensible issuer of the notes just to check and see that the notes are real and Dreier is authorized to peddle them. (Eventually, someone did--that is how he got caught). He swindled hedge fund managers, and for that, he should get a better prize than 20 years in prison. Maybe he could be one of Obama's economic advisers--they haven't figured out a way to outsmart Wall Street yet.

Of course, these investors were not the only ones scammed. Like all attorneys, Dreier maintained an escrow fund to handle clients' money; settlements awaiting disbursements, buyer deposits, and the like. Unfortunately, escrow funds can also serve as the desperate lawyer's personal piggy bank. So sound business practice generally requires two signatures to make withdrawals of large sums from such accounts. But Dreier's sheep were so willing to give up their fleece that at least one client had an astonishing $38 million in a Dreier escrow account, available for fun solely on Dreier's signature. That money, of course, was looted. So much for the real estate geniuses. Insert sounds of the world's smallest violin.

And there were still other victims. Dreier employed a vast stable of brilliant young lawyers from the top law schools. Dreier told them to not worry about the business side of the firm; they should just concentrate on what they loved--the law--and let him take care of the pesky administrative paperwork. And these legal geniuses did it, only to find they were out of work, out of luck, and out of health care insurance when Dreier went belly up.

Let's see--he ripped off hedge fund managers, real estate moguls, and real estate lawyers. The trifecta. Were there any normal people who got hurt? Sadly, the answer is yes--the same people who always get hurt; the secretaries, office managers, messengers, and janitors who also found themselves without jobs and promised benefits. So for that, and for that alone, he deserves serious time. For ripping off the uber-rich, who "have taken untold millions they have never toiled to earn," he deserves a Red Army commendation.

Post-script: In the July 20, 2009 New York Times, we learn that more lawyers continue to pick the fat carcasses of Dreier's "victims." Mark Pomerantz, partner at the luxe law firm Paul Weiss Rifkind Wharton & Garrison has been appointed as the receiver by the federal court and has been tracking down Dreier's assets. Because this is a "public interest" service, Pomerantz and his big-billing colleagues generously discounted their fees by "more than" 25% (down to, I'm guessing here, $400 an hour?) and have billed out $1.5 million American dollars, which will be paid out of the assets they recover.

Ah Bartleby!
Ah humanity!

 

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