Dec. 11 (Bloomberg) -- Marc Dreier, the founder of the New York law firm Dreier LLP who is charged with cheating hedge funds out of more than $100 million, is “cooperating” with the temporary receiver who’s running the business, his lawyer said.

Dreier is in jail on criminal charges that he cheated the funds. A bail hearing is scheduled for today in federal court in Manhattan. Dreier’s lawyer, Gerald Shargel, said yesterday in an interview that his client has begun working with Mark Pomerantz, who’s been appointed temporary receiver of Dreier LLP.

“I will tell the court that Mr. Dreier is cooperating with Mr. Pomerantz to help identify and gain control of the assets,” Shargel said.

Prosecutors said Dreier, 58, a graduate of Harvard Law School and Yale College, convinced two unidentified hedge funds to give him more than $100 million by claiming, falsely, that he was selling at a discount notes issued by New York developer Sheldon Solow. Dreier hasn’t responded to the charges.

Pomerantz, a partner with the New York law firm Paul, Weiss, Rifkind, Wharton & Garrison, didn’t immediately return a call seeking comment.

In a related civil case brought by the U.S. Securities and Exchange Commission, lawyers at Dreier LLP say the firm is in disarray.

“The news of Mr. Dreier’s arrest has had a devastating effect” on the firm, partner Joel Chernov wrote in an affidavit that was included in the SEC’s court papers on Dec. 8. “The December health insurance premium has not been paid, the firm’s December rent payment is now overdue, and AT&T will terminate BlackBerry service.”

Dreier is the firm’s only equity partner. Chernov didn’t return a call seeking comment.

The criminal case is U.S. v. Dreier, 08-mag-2676, U.S. District Court, Southern District of New York (Manhattan).

To contact the reporter on this story: David Glovin in U.S. District Court in New York at dglovin@bloomberg.net;

Last Updated: December 11, 2008 00:02 EST