Dreier: The Cupboard is Bare

Just heard from a pal at Lion Button Company, in the midst of a buyout where he was represented by Dreier LLP, that the firm’s escrow account was looted and is, for all intents and purposes, gone with the wind.

Speculation is that Marc Dreier, the sole equity owner of the firm, was up in Canada trying to scam $40 million to cover the gaping hole in the firm’s escrow account.  The problem isn’t the potential collapse of his firm because the founder and owner has gone bonkers, but that the firm is now at the epicenter of perhaps the greatest instance of lawyer dishonesty ever.

The ramifications of this raiding of the escrow account will send shockwaves throughout the legal world.  The Lawyers Fund for Client Protection only covers up to $300,000 in losses, so Lion Button, with $1.6 million missing, is screwed but good, and stands to collapse for loss of its working capital.  Worse still, the faith the businesses repose in lawyer escrow accounts, particularly with Biglaw and Big Deals, may be fatally undermined as a result of this fiasco.

Apparently, the efforts are now being made both internally and externally to shut down the escrow account, preserve what remains of the cash on hand and try to salvage what little is left following this disaster.  Frankly, I hope this information is totally wrong, as the ramifications of this are shocking. 

3 thoughts on “Dreier: The Cupboard is Bare

  1. Concerned

    Finally, a commentator who sees the big picture. It’s a shame some big money funds got swindled. And it’s a shame that firm employees are hurt. And it’s a shame that MD’s family is forever damaged. But the impact on the profession is huge. Watch for controls soon over escrow accounts which, until now, have received only spotty regulatory attention. Escrow accounts routinely hold multiples of insured limits and often, as with MD, have little or no accounting protections and controls beyond reliance on the honesty of the lawyers authorized to draw on those accounts. That’s going to change.

  2. SHG

    The ordinary checks, losing one’s ticket and prosecution, are of no avail when something as massive as this happens.  It is the unthinkable, the impossible.  I agree that when this situation is finally sorted out, it is going to have substantial implications for escrow accounts, and trusting the lawyer is no longer going to suffice, and in light of what happened here, it shouldn’t.  Expect major reform.

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