Feds Now Say Dreier Bilked Investors Of $380 Million

Prosecutors have expanded their investigation of prominent New York attorney Marc Dreier, uncovering hundreds of millions more of missing funds in what they characterize as an "extraordinary" fraud played out over two years.

A federal magistrate judge ordered Dreier to remain behind bars Thursday, denying bail because of the "enormous risk of flight." Dreier was arrested in New York Sunday evening and has been charged with fraud in an alleged brazen scheme to bilk sophisticated hedge funds.

Assistant U.S. Attorney Jonathan Streeter said in court Thursday the loss from the alleged fraud is $380 million, well more than the $113 million cited in criminal charges filed Monday because of new information pouring into the prosecutor's office.

The alleged fraud has been carried out since at least January 2006, Streeter said, and targeted some of the most sophisticated institutional investors. Dreier, a Harvard and Yale-educated litigator with a roster of celebrity clients at the 238-attorney firm he founded in 1996, is a "Houdini of impersonation and false pretenses," Streeter said at Thursday's bail hearing.

Dreier's lawyer, Gerald Shargel, had asked that Dreier be released on a $10 million bond signed by Dreier's 19-year-old son and 85-year-old mother and allowed to live under house arrest at his beach home in Quogue, N.Y., or at his Manhattan apartment.

Shargel also told Judge Douglas Eaton that Dreier was prepared to meet with the court-appointed receiver of the Dreier LLP law firm Thursday evening to help identify and locate assets and would provide a complete financial statement. None of Dreier's money is overseas, he said.

But Streeter successfully argued the government's case that Dreier could have squirreled away substantial assets overseas. Much of the $380 million is unaccounted for, he said. With his firm in tatters and his U.S. property to be seized--and with overwhelming evidence against him--Dreier had nothing to lose by skipping out of the country, he said.