March 26 (Bloomberg) -- The receiver appointed to locate the assets of Marc Dreier, the New York law firm founder charged with selling phony promissory notes to hedge funds, said he recovered more than $100 million, including $39 million in art, a 121-foot yacht and three properties in the Hamptons.

Mark Pomerantz, the receiver, said in a report to the U.S. District Court in New York that the assets will be preserved for the benefit of Dreier’s clients, creditors and victims of alleged his alleged Ponzi scheme.

“As of September or October 2008, Dreier had largely run through the cash under his control and was relying on additional sales of fictitious notes to pay overdue bills, replenish stolen escrow funds, and maintain the extravagant lifestyle that his crimes had made possible,” Pomerantz wrote in the March 24 report.

Prosecutors claim Dreier, 58, sold more than $700 million in phony promissory notes to at least 13 hedge funds and three individual investors from 2004 to 2008. He allegedly used the money to pay interest and principal to some investors and to fund his law firm, as well as to support his lavish lifestyle. The scam cost victims more than $400 million, prosecutors claim.

Pomerantz, a New York lawyer, was appointed as receiver by U.S. District Judge Miriam Goldman Cedarbaum, who is overseeing a civil lawsuit filed against Dreier by the U.S. Securities and Exchange Commission. Dreier is charged criminally with conspiracy, securities fraud and wire fraud.

250-Lawyer Firm

Before his arrest in December, Dreier was the sole equity partner of the 250-lawyer firm Dreier LLP. The firm has filed for bankruptcy protection.

Dreier used “enormous amounts of stolen funds” to finance his collection of artwork, including paintings, photographs, prints and sculptures, according to Pomerantz, who estimated their value at about $39 million. Pomerantz said he has located all but “a handful” of Dreier’s 300 pieces of art.

Pomerantz said Dreier’s firm and related businesses, “despite appearances of profitability, including rapid growth and new construction, were in fact losing enormous amounts of money.”

By the time Dreier was arrested in Toronto in December and charged with impersonating a Canadian pension fund attorney, he was behind “on everything from payments to the crew of his yacht to mundane firm expenses like car service and off-site storage,” Pomerantz said. The receiver speculated that Dreier’s pressing need for cash may explain his “desperate attempts” to sell additional notes in Canada.

Real Estate

In addition to the artwork, Pomerantz says he’s identified homes in Manhattan, property in the Hamptons east of New York and parcels in Anguilla owned by Dreier or his family members. Dreier’s $18 million yacht, which he bought through the sale of fake notes, has returned from St. Maarten to Ft. Lauderdale, Florida. Pomerantz says he has “secured” five cars own by Dreier.

Dreier held stock certificates in an office safe and stakes in a company called People Capital and a startup bio-diesel firm in Argentina, Pomerantz said. Dreier also controlled an investment vehicle called Armada Partners.

The combined accounts receivable and work-in-progress fees for Dreier LLP were almost $100 million, of which “large amounts” may not be collectible, Pomerantz said.

The receiver provided additional detail on what he called Dreier’s “long-running and (until recently) successful Ponzi scheme dating back to at least 2004.” He said the scheme featured the sale of more than 85 fake notes, ranging from $200,000 to $60 million, that paid interest of as high as 11.5 percent.

Hedge Funds

“The victims of the phony sales were primarily hedge funds and other large investors, although some smaller, individual investors also bought notes,” Pomerantz said.

Pomerantz asked to be relieved of his receivership, saying the bankruptcy trustees for Dreier and his firm are now in a better position to complete his work.

The criminal case is U.S. v. Dreier, 09-cr-85, and the SEC case is Securities and Exchange Commission v. Dreier, 08-cv-10617, 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; David Glovin in U.S. District Court in New York at dglovin@bloomberg.net.

Last Updated: March 26, 2009 00:01 EDT