Los Angeles Affiliates Feel Fallout From Charges Against Marc Dreier

The fate of 74 lawyers in Los Angeles was unclear after New York lawyer Marc Dreier was charged in December with $100 million in securities fraud. Dreier, the founder and managing partner of New York firm Dreier LLP, was charged with one count of securities fraud and one count of wire fraud, both of which involve a maximum sentence of 20 years in prison.

Over the past two years, Dreier wooed prominent Los Angeles attorneys to form a California partnership known as Dreier Stein Kahan Browne Woods George LLP. None of the L.A. attorneys have been named in the investigation. The firm, an affiliate of Dreier LLP that operated under separate management, issued a statement on behalf of its other name partners: “We are continuing to operate our Los Angeles law firm for the benefit of all our clients, while immediately discontinuing our relationship with Marc Dreier.” And the Santa Monica firm answered its phones with a shorter greeting: “Stein Kahan Browne Woods George LLP.”

In the unique partnership model Dreier formed with these Los Angeles attorneys, he was reportedly the founder and sole equity partner, and the others were paid employees who negotiated their salaries every few years. Launched in 2007, the Los Angeles firm featured some of the most prominent lawyers in the city, including entertainment lawyer Larry Stein, corporate attorney Robert Kahan and business litigator Eric George, the son of California's chief justice.

One Los Angeles attorney, who declined to be named, says he had explored going to work at the L.A. firm, but walked away after getting a feeling that something “wasn't right” and that it wasn't a sound business model. “It wasn't so much the ownership structure, it was how much money he was throwing at these guys. It was too much,” the source says, speculating that partners were offered between $2 million and $2.5 million a year. Then there was a short exchange with Dreier himself that solidified this attorney's impression: “Dreier said something that immediately set off a warning bell in my mind: He said expenditures don't matter, it's the revenue side that matters.”

The recent events had the potential to create complications for anyone affiliated with Dreier, says Lawrence Mullman, managing director and co-leader of the partner practice group in the New York office of legal recruiter Major, Lindsey & Africa. “If you hold out to the world that you are a partner, you can create liability.”

Timothy Treanor, a partner in the New York office of Sidley Austin who specializes in white-collar criminal defense, securities enforcement matters and civil litigation, confirms that he represents “some of the lawyers” at Dreier Stein Kahan Browne Woods George. He declined to comment further.

“It's pretty safe to say that anybody who was involved in any way with this guy, either as a passive investor or any other way, was pretty shocked and outraged by the events that are unfolding,” says David White, managing principal of Entertainment Strategies Group, an entertainment consulting firm in Beverly Hills that Dreier invested in earlier in 2008.

Dreier had a total of 10 separate affiliates, including some California entities, under his umbrella. Dreier Sports Opportunities, a sports consulting firm based in Santa Monica, was launched earlier this year, headed by Don Gibson, former general counsel and senior vice president and acting president of Major League Baseball Properties Inc. In addition, a third Los Angeles firm, Mason Miller, an entertainment transactional boutique formed earlier this year and based in Century City, had ties to Dreier. In an earlier interview with The National Law Journal, name partner John Mason said he had planned to join Dreier Stein Kahan Browne Woods George last year when Stein, a longtime colleague, suggested he contact Dreier to start his own firm. As a transactional attorney, Mason's entertainment clients would pose conflicts with Stein's litigation work at Dreier's Los Angeles affiliate, Mason said. He said Dreier was a partner at his firm, which had four lawyers and operated independently on its own budget, cash flows and staff. Dreier supplied the administrative costs, equipment and files, Mason said.

“Marc's goal is that where an affiliate needs legal work, they should be able to, and ought to, send it to an affiliate that does that kind of work. For example, Dreier Sports does refer to Mason Miller sponsorships and endorsement agreements of the athletes they represent,” Mason said at the time. “When I have union questions for one of my clients, I just call David White,” he said, “and find out where I should go.”

White, former general counsel of the Screen Actors Guild, says he had met with Dreier, whom he considered a “passive investor” in his firm, about four times in the past 11 months. “When we make profits, he gets a percentage out,” White says. “But he's not involved in the operations at all.”

White's firm, which has 10 employees, consults producers and other entertainment professionals on union agreements. He said that Entertainment Strategies had hired an attorney to investigate to what extent the criminal charges against Dreier could affect the firm's financial situation.

[Note: Just as this issue was going to press, the New York Law Journal reported that Mark Pomerantz of Paul Weiss Rifkind Wharton & Garrison, who was appointed as receiver to preserve Dreier LLP's remaining assets, had filed for Chapter 11 bankruptcy protection for the firm and related entities, declaring that "no effective management" exists at Dreier LLP following the arrest of sole equity partner Marc Dreier. Pomerantz said in an affidavit filed with the Southern District Bankruptcy Court that the firm faces "an accelerating onslaught" of demands from creditors, clients and its attorneys. Dreier himself meanwhile has no intention of seeking personal bankruptcy protection, according to his attorney, Gerald Shargel.]

The fate of 74 lawyers in Los Angeles was unclear after New York lawyer Marc Dreier was charged in December with $100 million in securities fraud. Dreier, the founder and managing partner of New York firm Dreier LLP, was charged with one count of securities fraud and one count of wire fraud, both of which involve a maximum sentence of 20 years in prison.

Over the past two years, Dreier wooed prominent Los Angeles attorneys to form a California partnership known as Dreier Stein Kahan Browne Woods George LLP. None of the L.A. attorneys have been named in the investigation. The firm, an affiliate of Dreier LLP that operated under separate management, issued a statement on behalf of its other name partners: “We are continuing to operate our Los Angeles law firm for the benefit of all our clients, while immediately discontinuing our relationship with Marc Dreier.” And the Santa Monica firm answered its phones with a shorter greeting: “Stein Kahan Browne Woods George LLP.”

In the unique partnership model Dreier formed with these Los Angeles attorneys, he was reportedly the founder and sole equity partner, and the others were paid employees who negotiated their salaries every few years. Launched in 2007, the Los Angeles firm featured some of the most prominent lawyers in the city, including entertainment lawyer Larry Stein, corporate attorney Robert Kahan and business litigator Eric George, the son of California's chief justice.

One Los Angeles attorney, who declined to be named, says he had explored going to work at the L.A. firm, but walked away after getting a feeling that something “wasn't right” and that it wasn't a sound business model. “It wasn't so much the ownership structure, it was how much money he was throwing at these guys. It was too much,” the source says, speculating that partners were offered between $2 million and $2.5 million a year. Then there was a short exchange with Dreier himself that solidified this attorney's impression: “Dreier said something that immediately set off a warning bell in my mind: He said expenditures don't matter, it's the revenue side that matters.”

The recent events had the potential to create complications for anyone affiliated with Dreier, says Lawrence Mullman, managing director and co-leader of the partner practice group in the New York office of legal recruiter Major, Lindsey & Africa. “If you hold out to the world that you are a partner, you can create liability.”

Timothy Treanor, a partner in the New York office of Sidley Austin who specializes in white-collar criminal defense, securities enforcement matters and civil litigation, confirms that he represents “some of the lawyers” at Dreier Stein Kahan Browne Woods George. He declined to comment further.

“It's pretty safe to say that anybody who was involved in any way with this guy, either as a passive investor or any other way, was pretty shocked and outraged by the events that are unfolding,” says David White, managing principal of Entertainment Strategies Group, an entertainment consulting firm in Beverly Hills that Dreier invested in earlier in 2008.

Dreier had a total of 10 separate affiliates, including some California entities, under his umbrella. Dreier Sports Opportunities, a sports consulting firm based in Santa Monica, was launched earlier this year, headed by Don Gibson, former general counsel and senior vice president and acting president of Major League Baseball Properties Inc. In addition, a third Los Angeles firm, Mason Miller, an entertainment transactional boutique formed earlier this year and based in Century City, had ties to Dreier. In an earlier interview with The National Law Journal, name partner John Mason said he had planned to join Dreier Stein Kahan Browne Woods George last year when Stein, a longtime colleague, suggested he contact Dreier to start his own firm. As a transactional attorney, Mason's entertainment clients would pose conflicts with Stein's litigation work at Dreier's Los Angeles affiliate, Mason said. He said Dreier was a partner at his firm, which had four lawyers and operated independently on its own budget, cash flows and staff. Dreier supplied the administrative costs, equipment and files, Mason said.

“Marc's goal is that where an affiliate needs legal work, they should be able to, and ought to, send it to an affiliate that does that kind of work. For example, Dreier Sports does refer to Mason Miller sponsorships and endorsement agreements of the athletes they represent,” Mason said at the time. “When I have union questions for one of my clients, I just call David White,” he said, “and find out where I should go.”

White, former general counsel of the Screen Actors Guild, says he had met with Dreier, whom he considered a “passive investor” in his firm, about four times in the past 11 months. “When we make profits, he gets a percentage out,” White says. “But he's not involved in the operations at all.”

White's firm, which has 10 employees, consults producers and other entertainment professionals on union agreements. He said that Entertainment Strategies had hired an attorney to investigate to what extent the criminal charges against Dreier could affect the firm's financial situation.

[Note: Just as this issue was going to press, the New York Law Journal reported that Mark Pomerantz of Paul Weiss Rifkind Wharton & Garrison, who was appointed as receiver to preserve Dreier LLP's remaining assets, had filed for Chapter 11 bankruptcy protection for the firm and related entities, declaring that "no effective management" exists at Dreier LLP following the arrest of sole equity partner Marc Dreier. Pomerantz said in an affidavit filed with the Southern District Bankruptcy Court that the firm faces "an accelerating onslaught" of demands from creditors, clients and its attorneys. Dreier himself meanwhile has no intention of seeking personal bankruptcy protection, according to his attorney, Gerald Shargel.]