Dreier Gets 20 Years for 'Betrayal of Trust'

Dreier Gets 20 Years for 'Betrayal of Trust'
The New York Law Journal by Mark Hamblett - July 14, 2009

Seven months after he was arrested for defrauding investors of hundreds of millions of dollars and stealing from clients, disgraced attorney Marc S. Dreier was ordered to serve 20 years in prison Monday. "At this point all I can do is express my shame and remorse," Mr. Dreier told Southern District Judge Jed S. Rakoff. "I'm sorry to all the people I stole from. I'm sorry to the clients I betrayed. I'm sorry to the lawyers at my law firm for dishonoring their profession." Judge Rakoff rejected an initial request by Assistant U.S. Attorney Jonathan R. Streeter for 145 years in prison as well as Mr. Streeter's fall back request that 30 years in prison that would be the equivalent of a life sentence for the 59-year-old former head of Dreier LLP. But the part of Mr. Streeter's argument that resonated with the judge, and worked in part on his refusal to grant the request of defense attorney Gerald L. Shargel for a sentence in the 10-to-12 year range, was Mr. Dreier's abuse of trust.

"The real heart of these crimes, the most appalling fact is the betrayal of trust," Judge Rakoff said. "Mr. Dreier betrayed the trust of investors," colleagues, clients, friends and "to some extent even betrayed the trust of his family. This goes beyond the fact that he did this in part cloaked in the aura of a lawyer." Mr. Dreier pleaded guilty May 11 to one count of conspiracy to commit securities fraud and wire fraud, one count of money laundering, one count of securities fraud and five counts of wire fraud. (NYLJ, May 12) In broad outlines at his guilty plea, and in greater detail in a letter to the judge last week, Mr. Dreier admitted he began stealing from a client settlement account in 2002, moved on to pitch bogus investments and then hit on the ideas of fleecing hedge funds with promissory notes that did not exist. Judge Rakoff, no fan of the sentencing enhancements that drive guidelines ranges sky high based on the amount of the loss, asked Mr. Streeter if he was "serious" in asking for 145 years. But Mr. Streeter argued forcefully to the judge that, while the guidelines "may have run amok" in some cases "they haven't run amok here." Mr. Streeter also referred to one of the most striking aspects of Mr. Dreier's fraud, the hijacking of the identity of Solow Realty Development Corp., his biggest client, to market phony promissory notes in Solow's name to hedge funds. Mr. Shargel had a sympathetic ear in Judge Rakoff when he argued against the "absurd" results from loss calculations under the guidelines, but he could not persuade the judge to drop the sentence into the low teens. "This offense was crazy. It was crazy for Mr. Dreier to think this is something he could get away with," Mr. Shargel said. "It was by some perverse stroke of luck that he wasn't caught years earlier." The U.S. Probation Department had recommended a sentence of 25 years.

Madoff Comparisons

The names of other white-collar offenders who received long sentences were raised repeatedly during the one hour and 20 minute hearing—including that of WorldCom's Bernard Ebbers, who was given 25 years. But Mr. Dreier's sentencing hearing had to set some kind of record for the frequency with which another defendant's name was mentioned, that of Bernard L. Madoff. The case of Mr. Dreier closely tracked to that of Mr. Madoff, who was ordered to serve 150 years in prison by Judge Denny Chin on June 29, setting by far the high-water mark for a white-collar sentence in the Southern District. The two cases have unfolded together. Both men were arrested within one week of each other in December, and it soon became clear that neither had any possible defense and would soon plead guilty. Both sides, in both cases, spent an inordinate amount of time litigating the question of bail, and both ultimately prevailed on a federal judge to allow house arrest with security guards and electronic monitoring. Lawyers for both men trumpeted their cooperation with court-appointed trustees and receivers charged with locating, seizing and preserving assets that are ultimately intended to compensate victims in their cases. But the comparisons stop there. Assurances by Ira L. Sorkin of Dickstein Shapiro that his client, Mr. Madoff, was cooperating were dismissed in a letter to Judge Chin by the lawyer for Madoff bankruptcy trustee Irving H. Picard. David J. Sheehan of Baker Hostetler wrote that Mr. Madoff "has not provided any meaningful cooperation or assistance" since his arrest. By comparison, Mr. Dreier was able to appear before Judge Rakoff with persuasive evidence that he cooperated with trustees for both his own bankruptcy and that of Dreier LLP as well as a receiver appointed in the SEC civil case against him. This may have helped shape Judge Rakoff's view that Mr. Dreier had accepted responsibility, but only in small measure. The judge said that the size and scope of Mr. Madoff's multi-billion Ponzi scheme, as well as the number of victims, far outpaced that of Mr. Dreier's crimes.

Judge Rakoff said he was more persuaded by the tone of the letter Mr. Dreier sent him last week. He started by recognizing Mr. Streeter's argument that Mr. Dreier was not merely trying to prop up his fledgling law firm when he committed frauds that exceeded $400 million in losses. He was also pursuing a selfish, lavish lifestyle. "The government says he was narcissistic. His colleagues who wrote me said he could be arrogant, condescending and cruel," Judge Rakoff said. "But the letter showed a maturity I was surprised to see." The judge said the letter "showed a greater understanding of how he got there and I am reluctant to say of any defendant that they are beyond redemption, beyond salvation, beyond all hope. I do not say that about Mr. Dreier." While the defendant would get "no sympathy from this court," Judge Rakoff said, "he is not Mr. Madoff under any analysis." In addition to the 20-year sentence, the judge also ordered Mr. Dreier to pay $387,675,303 in restitution—money he does not have. Mr. Dreier was then handcuffed and led away through a side door by U.S. marshals. One marshal then re-emerged with Mr. Dreier's jacket, his belt and his tie and handed them to his defense attorneys. Afterward, Mr. Shargel said, "In light of the history of white-collar sentences in crimes of this magnitude, this is within the realm of reason."Noeleen G. Walder contributed to this article. |Mark.Hamblett@incisivemedia.com