Wednesday, 24 August 2016
Last updated 53 min ago
Dec 22 2009 | 12:53pm ET
Alternative investments giant Fortress Investment Group was one of the biggest victims of the Ponzi scheme run by once-prominent New York lawyer Marc Dreier. Now, it’s suing another law firm, alleging that Dechert LLP failed in its due diligence while evaluating a $50 million loan Fortress was considering to Dreier.
The New York-based firm alleges the Dechert gave it a “false” legal opinion, “in clear and reckless violation of the recognized standards of professional duties.” According to Fortress, Dreier used Dechert’s opinion to defraud it, convincing Fortress to make the loan, allegedly to New York developer Sheldon Solow. Part of Dreier’s scam was selling bogus promissory notes he claimed were issued by Solow.
According to the lawsuit, however, Dechert failed to even call Solow to confirm it was seeking the loan through Dreier.
“Dechert issued the legal opion without doing even the most basic diligence concering the clients whom it purported to represent,” the lawsuit, filed yesterday in New York state court, alleges. “In fact, the 2008 loan was an utter sham, the proceeds of which Dreier misappropriated for his own use.”
Dechert has called Fortress’ claim “completely baseless.”
Dreier pleaded guilty to running a $700 million fraud in May and was sentenced to 20 years in prison. More than $400 million of the money he stole came from hedge funds, including $125 million from Fortress. Dreier’s scheme actually collapsed after he was arrested in Toronto and accused of impersonating a lawyer for the Ontario Teachers Pension Plan at a meeting with Fortress.