Legal News

New Defendant in Dreier Scandal May Have Had History With Marc Dreier

By Dan Slater

Another shoe has dropped in the case of fallen lawyer Marc Dreier, who’s alleged to have perpetrated a massive fraud against a group of hedge funds. In a criminal complaint, prosecutors are attempting to tie a former broker, Kosta Kovachev, to the fraud. Kovachev was charged with one count of conspiracy to commit wire fraud.

The complaint alleges, among other things, that Kovachev pretended to be the controller of a realty company to effect a meeting with a hedge fund. (We’ve confirmed that the company was New York-based Solow Realty, though the name is not in the complaint.) Dreier purported to sell promissory notes on behalf of the realty company, but the notes were fictitious, according to the complaint. Federal officials have said that Solow was uninvolved.

Peter Kalikow, March 31, 2005. (AP/Richard Drew)

Dreier and Kovachev have crossed paths before. This 2004 NYT article, which details a legal skirmish between New York real estate competitors Sheldon Solow (owner of Solow Realty) and Peter Kalikow, tells the following story.

Kalikow sued Solow, believing he was responsible for newspaper ads listing more than 400 creditors from Kalikow’s personal bankruptcy proceeding in 1991. The ads suggested that Kalikow had misled the bankruptcy court about the extent of his assets. But the bankruptcy had been settled years before, and there were no outstanding creditors.

Real estate mogul Sheldon Solow, Dec. 5, 2007. (AP/Evan Agostini)

A bankruptcy judge agreed that Kalikow had proved that Solow was the man behind the notices. The judge, according to the Times, said that even a man from Mars would conclude that the ads represented “an affront to the court” and a “somewhat sleazy course of conduct.” He ordered Solow to pay Kalikow’s expenses, and, according to the Times, “practically invited him to pursue claims against Mr. Solow’s law firm before ‘professional or legal tribunals that govern professional conduct.’ ”

At that time, Solow’s law firm was Dreier LLP, according to the Times. And here’s where Dreier and Kovachev come in: At the bottom of the ads was the name of a company, Evergence Capital Advisors, and a telephone number, the Times reported. An investigation revealed that Evergence was a dissolved Florida company that had been headed by Kosta Kovachev, but the phone number led to Dreier LLP. The ad reportedly generated 58 phone calls to Dreier’s firm, according to the Times.

During a subsequent deposition, Dreier acknowledged that Kovachev was his client and that he had a second client involved in the case, Sheldon Solow, according to the Times. A lawyer for Kalikow, Stanley S. Arkin, criticized what he called Solow’s “irrational animus for [Kalikow],” but he reserved his sharpest jab for Dreier. “He was facilitating an angry and vicious assault on his client’s perceived enemy,” Arkin told the Times.

A Solow spokesman declined to comment. Mr. Kovachev, who is expected to appear in court today, could not be reached for comment this morning.

Full post as published by Law Blog - WSJ.com on December 23, 2008 (boomark / email).