Sick Of Madoff, Madoff, Madoff? Well, Here Are Details About The Dreier Fraud

The other day, we reported that a second person had pleaded guilty in the Marc Dreier fraud. See http://www.financialfraudlaw.com/lawblog/marc-dreier-co-conspirator-kosta-kovachev-pleads-guilty-fraud-charges/446.The dominoes continue to fall, and a third co-conspirator, Robert Miller, has also now pleaded guilty. 

The criminal Information filed by the United States Attorney for the Southern District of New York against Miller, other publicly filed documents, and statements made during Miller’s plea proceeding tell the story - and what a story it is!
 
From 2002 through 2008, Dreier sold hundreds of millions of dollars worth of fictitious promissory notes to various hedge funds and individuals. As part of that scheme, in November 2008, Dreier offered to sell a New York-based hedge fund a promissory note with a face value of $44.7 million. Dreier falsely claimed that the promissory note was held by a hedge fund located in Iceland, was guaranteed by a pension plan located in Canada, and was issued by a company in Canada. At about that same time, as part of his effort to sell the note, Dreier contacted Miller and asked him to impersonate a representative of the Canadian pension plan during a telephone call with the New York hedge fund.
 
The government further alleged that: Dreier offered to pay Miller $100,000, gave him an outline of the proposed transaction, a copy of the deal documents, the name of the person Miller was to impersonate, a fictitious email address where that person could be contacted, an annual report of the Canadian issuer, and detailed notes of what Miller was to say during the call.
 
According to the government:  The following day, at Dreier’s offices, Miller received a call from representatives of the hedge fund on a cell phone Dreier gave him with a Canadian area code and phone number. During that call, Miller impersonated a representative of the Canadian pension plan and discussed the guarantee that the pension plan had supposedly issued for the $44.7 million note. Shortly thereafter, Dreier wired $100,000 into Miller’s bank account.
 
Then, on November 26, 2008, a representative of the hedge fund told Dreier that the fund was unlikely to complete the deal over the next several days. On that same day, Dreier contacted a second New York hedge and offered to sell it the same fictitious $44.7 million note. When a representative of the second hedge fund asked to speak with someone from the Icelandic hedge fund supposedly selling the note, Dreier again contacted Miller and asked him to impersonate a representative of that Icelandic fund.
Dreier prepared Miller for the call, had one of his assistants look up the weather in Reykjavik, Iceland, and gave Miller a European cell phone on which to make the call.
 
On November 29, and December 1, 2008, at Dreier’s offices, Miller impersonated a representative of the Icelandic fund during two phone calls. Miller falsely answered questions about the structure of the fund, its reasons for selling the note, and the documents underlying the transaction. After those calls, a representative of the second hedge fund told Dreier that to complete the transaction, a representative of the Canadian pension plan would need to sign documents authorizing the sale during a face-to-face meeting. On December 2, 2008, Dreier traveled to Toronto, Canada, impersonated a representative of the Canadian pension plan in a meeting with a representative of the second hedge fund, and forged the signature of a representative of the pension plan.
 
Miller pleaded guilty to one count of conspiracy and one count of securities fraud. He faces a maximum sentence of five years in prison on the conspiracy charge and a maximum sentence of 20 years in prison on the securities fraud charge. The conspiracy charge carries a maximum fine of $250,000 or twice the gross gain or loss from the offense, while the securities fraud charge carries a maximum fine of $5 million or twice the gross gain or loss from the offense.
 
Oh, as for the $100,000 Miller received – he agreed to forfeit it as part of his plea.