Dreier Firm in Turmoil

250-Lawyer NY Firm in Turmoil After Arrest of Sole Equity Partner
The New York Law Journal by Nate Raymond and Daniel Wise December 9, 2008

The New York City office of 250-lawyer Dreier LLP was in turmoil last week following the Tuesday arrest of its founder, Marc S. Dreier, in Toronto on an impersonation charge. "It's like an atom bomb went off in the building - people are stunned and dazed," a lawyer in the firm said Friday. After three days in jail, Mr. Dreier posted $100,000 bail Friday following a hearing at the Ontario Court of Justice earlier in the afternoon, according to a spokesman for the Canadian Ministry of the Attorney General. In an interview, Mr. Dreier's lawyer, Edward Greenspan, said Mr. Dreier was expected to return to the United States by Sunday. The news that Mr. Dreier would not arrive until Sunday upset efforts to arrange a Saturday meeting among Mr. Dreier, the firm's only equity partner, and its other lawyers. Two sources had reported efforts to arrange a Saturday meeting. Meanwhile, Robert Gold, of the New York office of Wilson Sonsini Goodrich & Rosati, confirmed that he and two other lawyers at his firm, Glenn C. Colton and Michael Sommer, will be representing a "substantial group of partners and associates at the firm." The trio had been retained, Mr, Gold said, to examine firm operations and finances, including escrow accounts. Mr. Gold added that, as far as he is aware, as of Friday afternoon, Mr. Dreier had yet to retain counsel in New York.

"Impersonation" under Canadian law is considered an "indictable offense" punishable by at least two years in prison, according to Constable Tonyo Vella, a Toronto Police Service spokesman. "Basically," Mr. Vella said, Mr. Dreier is being accused of "impersonat[ing] himself as someone else and not himself." A spokesman at the Ministry of the Attorney General said the charge is based on 403B of the criminal code, which makes it a crime to fraudulently impersonate someone with the "intent to obtain any property or an interest in any property." But Mr. Dreier's lawyer in Canada, Mr. Greenspan, said his client has been charged with a "relatively minor" offense. Under the applicable law, the charge could be upgraded to an indictable offense if the prosecutor elects to do so, said Mr. Greenspan of Toronto law firm Greenspan, White. The Toronto Globe and Mail, which sent a reporter to the bail hearing, reported that the charges against Mr. Dreier stem from a multimillion-dollar deal between the Ontario Teachers Pension Plan and Fortress Credit Opportunities. Mr. Dreier pretended to be Michael Padfield, senior legal counsel for investments at Ontario Teachers, according to legal documents. When Mr. Padfield arrived, police were called. When Mr. Greenspan was asked why Mr. Dreier was in Toronto, he did not give an explanation.

Mr. Dreier, 58, was the former head of litigation in the New York office of Fulbright & Jaworski and, more recently, a partner at Rosenman & Colin, according to his firm biography. In a statement, the pension fund said it "learned of fraudulent behavior by an individual visiting our premises" and immediately alerted police. "No Teachers' staff member was involved in the fraudulent behavior," the statement said. "We have reviewed our security procedures in relation to this situation and we believe that no Teachers' funds are involved." The Dreier firm's contract partners held an emergency meeting Thursday night to discuss the matter, according to a person familiar with the situation. In addition, the firm canceled a holiday party at the Waldorf-Astoria, a lawyer at the firm said. Dreier's employees received an e-mail stating "it is critically important that any queries from the press be dispatched to" two of the firm's spokespeople, neither of whom have provided comment. The legal blog Above the Law first broke the news of Mr. Dreier's arrest Thursday night. The arrest is likely to pose unique problems for Dreier LLP.

Founded in 1996, the New York-based firm operates more like a corporation than a partnership, with Mr. Dreier, the sole equity partner, controlling expenses and liabilities. All other partners get guaranteed base compensation for two- or three-year periods and a bonus based on fees generated. "This is a system for lawyers who believe democracy is overrated-or at least that it is in business," Mr. Dreier wrote in a 2007 opinion piece in The National Law Journal, a New York Law Journal affiliate. "Under this alternative model, all policy decisions ultimately reside with the single equity partner." Dreier LLP was one of several firms that hired refugees from Milberg Weiss after that firm was indicted. According to the NYLJ 100, published today, Dreier has 238 lawyers, 160 of them based in New York City.

Lawyers familiar with the firm described a maze of different contractual arrangements between various practice groups and Dreier LLP. For instance, Stanford J. Schlesinger in 2004 brought a group of four lawyers from Kaye Scholer under the Dreier umbrella as an affiliated firm, Schlesinger Gannon & Lazetera. The group, which advises high-net-worth individuals, has since expanded to 11 lawyers. Mr. Schlesinger said the group retains a traditional partner-associate structure with five partners, some of whom are equity partners, including himself, and six associates. The Schlesinger firm shares with Dreier the cost of rent, reception, mail room and other expenses. Nate.Rayond@incisivemedia.com, Daniel.Wise@incisivemedia.com (Vesselin Mitev, Zach Lowe and Vesna Jaksic contributed to this article. Messrs. Raymond and Lowe are reporters at The American Lawyer; Ms. Jaksic is a reporter at The National Law Journal.)