Nov. 10 (Bloomberg) -- Robert L. Miller, once an attorney at the U.S. Securities and Exchange Commission, pleaded guilty to federal charges that he helped imprisoned New York law firm founder Marc Dreier defraud hedge funds.

Miller, the third person to plead guilty in the case, entered his plea yesterday in Manhattan federal court. His plea agreement says he’ll assist prosecutors in the probe of Dreier’s fraud, suggesting the U.S. investigation of Dreier’s scheme is continuing.

Miller admitted in court that he agreed in November 2008 to Dreier’s request that he impersonate a representative of a Canadian pension plan and later an Icelandic hedge fund as part of a scheme to sell a fictitious $44.7 million note. Miller said he was paid $100,000 by Dreier in return.

“I agreed with Marc Dreier to make misrepresentations to two hedge funds in order to induce them to buy the notes,” said Miller, who worked in the SEC’s enforcement division from 1983 to 1986.

Dreier is in the Metropolitan Correctional Center in Chicago, serving 20 years for defrauding hedge funds of more than $400 million. He admitted selling phony notes, including some purportedly issued by the firm of Sheldon Solow, a New York developer who was a client of Dreier LLP.

Dreier’s law firm, which had 250-attorneys, filed for bankruptcy and is being liquidated.

Leniency

Miller, who faces as long as 25 years in prison and is cooperating in exchange for leniency, said in his plea that Dreier asked him to impersonate a pension fund representative who was “unavailable.” Miller said he agreed to do so and, after being briefed by Dreier, told the hedge fund in a phone conversation that he was a representative of the Canadian pension fund.

He said Dreier next asked him to impersonate a representative of a hedge fund in Iceland that was purportedly holding the $44.7 million note. Dreier had an assistant at his firm look up the weather in Reykjavik, Iceland, and pass along that information to Miller to prepare for the call, Miller said.

On Nov. 2, Kosta Kovachev, a former broker, pleaded guilty to helping Dreier defraud hedge funds. Kovachev said he pretended to be Steven Cherniak, chief executive officer of Solow Realty, when Dreier had a phone conference with a hedge fund he duped. He hasn’t been sentenced.

The case is U.S. v. Miller, 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: November 10, 2009 00:01 EST