Dec. 8 (Bloomberg) -- Marc Dreier, managing partner and founder of the 250-lawyer New York firm Dreier LLP, was charged by federal prosecutors with cheating hedge funds out of more than $100 million.

Dreier, who has represented publishing executive Judith Regan and U.S. radio broadcaster Clear Channel Communications Inc., was ordered detained by a magistrate judge in Manhattan federal court, where he faces securities and wire fraud charges. The judge will hold a bail hearing on Dec. 11.

“This is a very complex matter, and the facts are beyond the reach of a sound bite,” defense attorney Gerald Shargel said after the hearing. Dreier didn’t enter a formal plea to the charges today. “He’s had a tough several days,” Shargel said.

The charges against Dreier, 58, a graduate of Harvard Law School and Yale College, came on the same day he was sued by Wachovia Corp. for defaulting on $12.6 million in loans. The U.S. says he lied to three unnamed hedge funds when he claimed to represent a New York real estate developer purportedly seeking to sell notes to investors. Dreier told the funds they could buy the notes at a deep discount from the developer and the original note purchasers, prosecutors said in a complaint.

One fund wired about $100 million to Dreier’s account in October after receiving phony financial documents written by the attorney, prosecutors said. Another fund allegedly wired about $13.5 million. The funds were based in New York, Toronto, and Greenwich, prosecutors said.

Government’s Charge

“The developer did not issue any of the notes,” according to the complaint. Dreier “has never been responsible for managing or selling notes on the behalf of the developer.”

Dreier faces a maximum 10 years in prison on the most serious charge.

The U.S. Securities and Exchange Commission filed a parallel civil lawsuit against Dreier today, claiming he raised at least $113 million by marketing bogus promissory notes to hedge funds and other investment funds. About $100 million is missing, the SEC says. Money was returned to at least one buyer who discovered the scheme and demanded a refund.

The SEC said Dreier, whose law firm has offices in six U.S. cities including New York and Los Angeles, recruited accomplices to pose as representatives of legitimate businesses and created dummy e-mail addresses to help convince buyers the notes were real.

Dreier was arrested in Canada last week for impersonating lawyer Michael Padfield at the Ontario Teachers Pension Plan. On Dec. 5, he was released on $100,000 bail.

Calling the Police

The pension plan said in a statement that it alerted police on Dec. 2 after learning a person visiting its offices was involved in “fraudulent behavior.”

Dreier faces a maximum 10 years in prison for criminal impersonation in Canada. Neither Padfield nor Dreier’s Canadian lawyer, Edward Greenspan, responded to requests for comment. Dreier is scheduled to appear again in an Ontario court on Jan. 22.

In October, Dreier engaged in a similar ploy in New York, according to the U.S. criminal complaint. Federal prosecutors said Dreier told a receptionist at the unnamed developer’s offices that he and three other people were authorized by the chief executive officer to attend a meeting.

“The CEO had not scheduled such a meeting,” according to the complaint. “The CEO subsequently observed Dreier having an unauthorized meeting with three individuals in a conference room.”

Taped Calls

Prosecutors said in court papers they have taped phone calls made by a cooperator in which Dreier said he knew financial statements he provided to a hedge fund were false.

“It was ‘very serious what’s happened here,’” the complaint quotes Dreier as saying on the phone call.

Dreier was previously head of the litigation department in the New York office of Fulbright & Jaworski, according to the Web site of Dreier LLP. Before that, he’d been a litigation partner at Rosenman & Colin, according to the site. Dreier founded his law firm in 1996.

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

According to court papers filed by Dreier LLP, Regan, who agreed to pay his firm 25 percent of any verdict or settlement, resolved the lawsuit through another attorney for an undisclosed amount. Dreier LLP claimed the sum was $10.75 million plus a share in film and television profits. The case is pending.

Broker’s Suit

Dreier, who lives in New York, also was sued by another former client, commercial real estate broker Kenneth Laub, who said the lawyer had given him a bad stock tip and was legally obliged to make up the loss. The case was dismissed in 2003.

At a hearing today, U.S. District Judge Miriam Goldman Cedarbaum said she would grant a request by the SEC to appoint Mark Pomerantz, a partner with the New York law firm Paul, Weiss, Rifkind, Wharton & Garrison, as temporary receiver to take charge of Dreier’s assets, including Dreier LLP, of which he is the only equity partner.

“The lawyers in the firm have apparently manned the lifeboats,” Shargel said after the hearing. “Given the reaction of the partners, I don’t think there’s going to be any firm to run.”

Employees Frustrated

Outside Dreier’s headquarters at Park Avenue and 59th Street in Manhattan, people entering the building who confirmed they work for the law firm declined to comment. A security guard said the law firm’s employees were frustrated, and that workers were arriving “when they want to,” if at all. A reporter who tried to visit the office was told to leave the building.

A phone message left at Dreier’s Manhattan office wasn’t immediately returned.

Dreier represented Clear Channel this year in a closely watched case that began after Bain Capital LLC and Thomas H. Lee Partners LP sued Citigroup Inc. and five other banks in March for refusing to fund a proposed $19.5 billion buyout of Clear Channel, the largest U.S. radio broadcaster.

Dreier, who was Clear Channel’s lawyer in a New York State case, argued that the lawsuit belonged in Texas, where the company was based. The case was settled in May after private- equity firms and banks financing the deal reached a legal accord approved by a New York judge and agreed to a $17.9 billion buyout, less than the original $22.1 billion in promised funding.

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; Bob Van Voris in New York at rvanvoris@bloomberg.net.

Last Updated: December 8, 2008 21:50 EST