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Hunting Remnants of a Fraudulent Life of Luxury

A call had come in: an anonymous voice, a foreign accent, a secret to be revealed. The caller said he knew how to find certain valuable assets belonging to Marc S. Dreier, a New York lawyer who had been arrested for defrauding investors of $700 million. Much of the money was still missing.

Marc S. Dreier
AP
Marc S. Dreier

The lawyer taking the call, Mark F. Pomerantz, listened with interest. He had been appointed by a federal judge in Manhattan to try to locate and recover Mr. Dreier’s assets — homes, artwork, cars and whatever else could be tracked down — so they could be liquidated to repay the victims of his crimes.

Some of it was old-fashioned detective work: reviewing hundreds of bank statements to see if Mr. Dreier had secreted money overseas or made large purchases that could be identified. But it also involved reconstructing the pieces of Mr. Dreier’s disjointed life, from homes in the Hamptons to luxury cars in New York City and Santa Monica, Calif.

This particular caller was being purposefully vague about what he knew. He would not even reveal what assets he was aware of, unless arrangements could be made for a “modest finder’s fee,” as Mr. Pomerantz recalled the conversation.

“I said, ‘Well, where are you calling from?’ He can’t tell me,” Mr. Pomerantz said. “I said, ‘Well, what is the nature of the assets you’re calling about?’ He said he can’t tell me. I said, ‘Well, how are we going to make progress here?’ ”

The man finally suggested that he knew about “a singular asset” of enormous value, and Mr. Pomerantz said he began to understand.

“I asked him whether this asset was floating,” Mr. Pomerantz said, and when the man replied affirmatively, Mr. Pomerantz said, “Oh, well, you’re calling about the yacht.”

He did not need the caller’s help — the yacht had already been found. The call was just one of many that Mr. Pomerantz fielded during the few months he served as the court-appointed receiver in the case of Mr. Dreier, a Harvard Law graduate who built a large Park Avenue firm, expanding his office and reputation into California and elsewhere.

It turned out that Mr. Dreier’s wealth was based on the sale of phony promissory notes and stealing from clients. His investors lost millions, his firms collapsed, and criminal, civil and bankruptcy proceedings ensued.

Last week, Mr. Dreier, 59, was sentenced to 20 years in prison and ordered to forfeit $746 million and pay $388 million in restitution to victims. But for any of that money to be paid back, it first had to be found. That job fell to Mr. Pomerantz.

Mr. Pomerantz, 58, who once ran the criminal division of the United States attorney’s office in Manhattan and is now a partner at the law firm Paul, Weiss, Rifkind, Wharton & Garrison, pulled together a small team of lawyers after his appointment on Dec. 10.

But as they began their task, they confronted an unexpected challenge: Mr. Dreier had been the firm’s sole owner — its “emperor,” as Mr. Pomerantz put it — and the only one who knew the operation was a sham.

So in addition to tracking down hard-to-find assets, Mr. Pomerantz and his team found themselves running Mr. Dreier’s collapsing law firm, even acting as a kind of human resources department: determining how to get health insurance to an employee whose wife was about to give birth, and what to tell another employee who lived paycheck to paycheck.

As Mr. Pomerantz’s team moved in, it discovered that there was not enough money to make the next payroll, and hundreds of Mr. Dreier’s lawyers and other employees would be losing their jobs, all as the holiday season arrived. “They thought they were working for a real law firm and an honest guy,” Mr. Pomerantz said, “and it turns out it’s a house of cards and they’re working for a thief.”

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By coincidence, Mr. Pomerantz had a personal perspective of the devastation Mr. Dreier had caused: One of the firm’s young lawyers was his own niece. “I saw her in tears,” Mr. Pomerantz said. “It gave me a very vivid understanding of the level of human misery.”

And in Mr. Dreier’s office in Manhattan, Sandra Sheldon, a lawyer with Paul, Weiss, found unopened mail from law students applying for jobs — clearly sent before Mr. Dreier’s arrest became public.

“It was kind of like, ‘Whoa, you dodged a bullet,’ ” she remembers thinking.

Some assets were easy to locate: Mr. Dreier had a $39 million art collection, with works by artists like Warhol and Rothko. Paintings hung in his Park Avenue office and his Upper East Side apartment. Fearing that a disaffected employee or angry creditor might walk in and remove a painting, Mr. Pomerantz and his team had the art stored safely.

"I'll never do this again."

They also rounded up several expensive cars belonging to Mr. Dreier, like the Mercedes SL500 and BMW 650i that were found parked at one of his houses in East Quogue, N.Y. The team confiscated the registrations, license plates and keys, and locked the cars in the garage until they could be turned over to the United States Marshals Service.

Mr. Dreier cooperated in the receiver’s investigation, Mr. Pomerantz said, even meeting with the lawyers in jail.

Because he was the head of a law firm, Mr. Dreier’s betrayal — of clients, partners and other employees — raised legal and ethical quandaries that do not typically surface in other financial fraud cases, said Roberto Finzi, a partner with Paul, Weiss who served as a chief of staff of sorts to Mr. Pomerantz. Clients, for example, still needed lawyers; retainers had been paid; hearings were coming up; and Mr. Dreier had stolen $46 million from client accounts.

“People trust you with their confidences,” Mr. Finzi said, “their preferences, their secrets and their money. And violating that confidence is just extraordinary.”

One problem was that in the months before his arrest, Mr. Dreier had drained his liquid assets, including his firm’s accounts, leaving only meager funds for the receiver to close the firm and carry out his duties.

Operating under a mandate to conserve assets, Mr. Pomerantz’s team paid only the most critical bills, like ordering heating oil for one of Mr. Dreier’s houses in the Hamptons, which had run out of fuel, to protect it from winter damage.

In February, Mr. Pomerantz told the court that his team had safeguarded more than $100 million in assets. (The firm billed $1.5 million for the work and expenses, which included a discount of more than 25 percent from its regular fee because of the public-interest nature of the assignment.)

Of all of the assets, Mr. Finzi said, perhaps the biggest challenge to recover was Mr. Dreier’s sleek $18 million yacht, the Seascape, which had been found in a Caribbean port.

The crew had not been paid in weeks, was confused and seemed almost mutinous, Mr. Finzi said. “What followed was a long series of negotiations, comfort calls, bickering, pressure — you name it,” he said.

The team retained an investigative firm, FTI Consulting, which had also helped to secure Mr. Dreier’s cars. Allen Applbaum, one of its senior executives, said he dispatched two investigators to the yacht, which was moored at Port de Plaisance in Cole Bay, St. Maarten.

First, the crew was compensated. “There was no way they were leaving the dock without being paid something,” said one investigator, Austin Tellam.

But there was a hitch, Mr. Finzi said: He had been told that Mr. Dreier’s teenage son called the captain and forbade him to bring the yacht back to the United States. Eventually, the problem was solved when Mr. Dreier’s lawyer had Mr. Dreier sign paperwork that released the boat to the receiver.

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The yacht set off, arriving in Fort Lauderdale a few days later.

Along the way, the investigators slept in guest rooms, leaving Mr. Dreier’s master suite empty. The chef prepared meals, and the crew reminisced. “They couldn’t believe the summers in the Hamptons and the winters in the British Virgin Islands,” Mr. Tellam said.

As for Mr. Pomerantz, he said his colleagues have kidded him about serving as receiver, asking what possessed him to take an assignment that was so fraught with anxiety, time pressure and “people who are really angry,” as he put it.

“I will never do this again,” Mr. Pomerantz said. “How many reasons would you like?”

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