Fortress Sues Law Firm Over Dreier Losses

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.


In Depth

Dillon Eustace: The Advantages of ICAVs

Feb 11 2016 | 7:51pm ET

As the growth of alternative investment vehicles continues, global asset managers...

Lifestyle

Citadel's Ken Griffin Donates $40M To New York's Museum of Modern Art

Dec 22 2015 | 9:23pm ET

Citadel founder Ken Griffin has donated $40 million to New York’s Museum of Modern...

Guest Contributor

Hedging Against Reputational Risk in the 21st Century

Feb 12 2016 | 7:18pm ET

For investors, the first step in researching a new fund or manager is to google...