Dec. 13 (Bloomberg) -- Marc Dreier, the New York lawyer known for the aggressive way he represented clients and his lavish lifestyle, is facing charges that he defrauded hedge funds of more than $100 million.

Dreier, called “a Houdini of impersonation and false documents” by prosecutors at a hearing on Dec. 11, surrounded himself with celebrities, expensive art and other luxuries beyond the means of most lawyers.

“He was unpleasant. He’s a very pushy, arrogant, tough guy,” said Errol Margolin, a New York lawyer who litigated a complex property case against one of Dreier’s clients, developer Sheldon Solow, for nine years. “This was war with them.”

Prosecutors on Dec. 8 accused Dreier, 58, a graduate of Yale College and Harvard Law School, of tricking two unidentified hedge funds into giving him more than $100 million by falsely claiming he was selling notes issued by Solow Realty & Development Co.

Dreier operated his firm from an office on Park Avenue that was filled with expensive art by painters including Gerhard Richter, Jackson Pollock, Ellsworth Kelly and Mark Rothko, according to a lawyer who formerly worked at his firm.

Firm attorneys said in court papers that Dreier spent as much as $40 million on artwork to decorate Dreier LLP’s offices in New York and five other cities.

He lived just a block away in a luxury East Side apartment building complex that houses the Le Cirque restaurant. He entertained at an ocean-front house in the Hamptons and owned a boat that he sailed to the Caribbean, the lawyer said, asking not to be identified.

Private Jet

Dreier often used a chauffeured car and typically flew by private jet, Margolin and other lawyers who dealt with him said.

Dreier paid $5.43 million, with a $5 million mortgage, to buy a condominium at One Beacon Court, a luxury residential tower that is part of a Manhattan office and residential development whose tenants include singer and actress Beyonc Knowles and rapper Jay-Z.

Dreier also hosted an annual charity golf tournament with Michael Strahan, a former New York Giants defensive lineman.

Photos of the 2008 event, recently removed from the Dreier LLP Web site, show Dreier with singer Alicia Keys, film director Spike Lee and former basketball star Julius “Dr. J” Erving. Past tournaments featured performances by Diana Ross and Jon Bon Jovi, a Dreier client.

Dreier’s relationship with his high-profile clients sometimes turned antagonistic.

Stock-Tip Suit

He was sued by Kenneth D. Laub, a commercial real estate broker who claimed Dreier gave him a bad stock tip and was legally obliged to make up the loss.

The Solow relationship turned sour too.

“As soon as the company learned that fraudulent and forged instruments purporting to be obligations of Solow Realty were circulating, the company reported the facts to the U.S. Attorney’s Office, and we have been co-operating fully with the investigation,” said Michael Gross, a spokesman for Solow.

Dreier had represented Solow in efforts to get control of a $35 million East Hampton, New York, 10,000-square-foot beachfront house located between properties owned by designer Calvin Klein and developer Harry Macklowe, Margolin said.

“There were helicopters overhead, frog men coming out of the ocean, photographing,” Margolin said, referring to Dreier investigations near the start of the case. “It was all over- the-top sort of behavior.”

Solow and Dreier, showing equal zeal, pursued the matter in state court in Riverhead, New York, in federal district courts in Manhattan, Brooklyn and Florida, and in bankruptcy court in Florida.

‘Insatiable Appetite’

They tried to appeal unfavorable decisions to New York’s highest court and to the U.S. Supreme Court. In the end, Margolin’s client, Peter Morton, Hard Rock Hotel & Casino chairman and chief executive officer, won and Solow lost.

Solow’s company “has had so many bites at the apple, it has swallowed the core,” U.S. District Judge Loretta Preska wrote in 2002, dismissing one of several related suits and entering an order blocking new ones. Preska said Solow had “an insatiable appetite for litigating” over the property.

“The last time I saw Marc Dreier was when we tried the case in Suffolk County in July 2007,” Margolin said. “He never even said hello to me. It’s usually not that antagonistic.”

In 2005, a state judge dismissed a different case filed by Solow, who was again represented by Dreier, noting its “egregious frivolousness.”

Canadian Charge

Dreier was arrested in Canada this month and charged with impersonating a lawyer for the Ontario Teachers Pension Plan. He was released on bail and arrested by U.S. authorities on his return to New York.

Dreier on Dec. 11 was ordered held in custody pending his trial after prosecutors told a federal magistrate that victims of a fraud that started in 2006 have lost $380 million.

If convicted of the securities fraud and wire fraud charges against him, Dreier faces as many as 20 years in prison on each count.

The U.S. Securities and Exchange Commission filed a civil suit against Dreier claiming he stole $38 million from an escrow account set up to hold money for the unsecured creditors of 360networks (USA) Inc., which the firm represented in bankruptcy court.

Dreier is the managing partner of Dreier LLP, a 250-lawyer New York firm that, according to Dreier’s lawyer Gerald Shargel, probably won’t survive his client’s arrest. A call to Shargel for comment on Dreier’s tactics was not returned.

Regan Lawsuit

In March, Dreier sued client Judith Regan, a former publishing executive, claiming she owed the firm fees in connection with her $100 million defamation and breach of contract suit against her former employer, News Corp.’s HarperCollins Publishers LLC.

On Dec. 9, Regan claimed Dreier tried to extort a settlement from her and improperly disclosed her $10.75 million settlement with HarperCollins.

“If you don’t know anything about the cases that he was involved in, you’d believe his claim that his client was damaged and aggrieved and everyone else involved is evil,” Margolin said. “He personalizes his litigation. He makes it a battle for good and evil.”

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

To contact the reporters on this story: Bob Van Voris in New York at rvanvoris@bloomberg.net; Patricia Hurtado in New York State Supreme Court in Manhattan at pathurtado@bloomberg.net.

Last Updated: December 13, 2008 00:01 EST