Westhampton Beach resident charged in hedge fund scam

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A Manhattan lawyer who owns a home in Westhampton Beach and three houses on Dune Road in East Quogue has been charged with two counts of fraud—each carrying a maximum sentence of 20 years in prison and hefty fines—for what prosecutors say is his role in scamming hedge fund investors out of at least $100 million.

Marc Dreier, 58, who owns a home on Meadow Lane in Westhampton Beach, was arrested on December 7 at LaGuardia Airport in Queens as he was returning to the United States from Canada. A day later, he was charged by the U.S. Attorney’s office with securities and wire fraud, both felonies, according to authorities.

Mr. Dreier owns Manhattan-based Dreier LLP, a law firm that employs more than 250 attorneys and has satellite offices in California, Pennsylvania and Connecticut.

According to a press release from the U.S. Attorney’s office, Mr. Dreier went to two different hedge funds in Connecticut and New York and pretended to represent a New York City real estate development office. Mr. Dreier allegedly told investors at the hedge funds that the real estate company had a $500 million “note program” in which investors could purchase promissory notes at a steep discount. Authorities are not releasing the name of the real estate firm that Mr. Dreier pretended to represent.

One hedge fund wired Mr. Dreier $13.5 million in order to purchase what it believed would be a promissory note for $25 million. Another hedge fund wired Mr. Dreier $100 million to purchase promissory notes, according to prosecutors.

According to the U.S. Attorney’s office, Mr. Dreier was arrested in Canada on December 2 after trying to pull a similar scam at a hedge fund in Toronto. There, a hedge fund was planning to wire Mr. Dreier $33 million for $44.7 million worth of promissory notes before employees of the company realized that Mr. Dreier was running a scam.

According to published reports on the court proceedings, Mr. Dreier had been scamming investors for at least two years, and might have acquired nearly $400 million through the sale of false promissory notes.

According to other published reports, Mr. Dreier flaunted his money and enjoyed a lavish lifestyle. In Westhampton Beach, Mr. Dreier’s home is appraised at nearly $2 million, according to tax assessment documents.

None of the owners or tenants of the homes near Mr. Dreier’s Westhampton Beach house were home to comment on their neighbor’s arrest.

Westhampton Beach Village Clerk Kathy McGinnis explained that Mr. Dreier’s home in the village is located in an area considered to be the “estate section” of Westhampton Beach. Shrubs and trees obscure a clear view of Mr. Dreier’s Westhampton Beach home, which is dark blue and features contemporary architecture.

Mr. Dreier also owns a home at 109 Dune Road in East Quogue that is valued at about $1.3 million, and two additional homes at 111 Dune Road in the hamlet that, together, are appraised at $5.15 million.

According to information provided by the U.S. Attorney’s press office, Mr. Dreier’s attorney, Manhattan-based Gerald L. Shargel, tried to convince Magistrate Judge Douglas F. Eaton, who is presiding over the case, to allow Mr. Dreier to post bail. Once free, according to court documents, Mr. Shargel said his client would submit to “home incarceration with 24-hour guards.” Published reports stated the Mr. Shargel offered to have Mr. Dreier stay at his home in Westhampton Beach.

According to court information, Mr. Eaton denied Mr. Dreier’s request to post bail. Court documents state that “Mr. Dreier has displayed an amazing ability to deceive sophisticated people,” and presents a high risk of flight.

Mr. Shargel did not return calls and e-mails about his client.

“Marc Dreier alledgedly used his law license and his access to institutional investors to perpetrate a brazen fraud,” said Acting U.S. Attorney Lev L. Dassin, who is involved in the case, in a prepared statement.

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