When the Ontario Teachers' Pension Plan thrust BCE Inc. into an auction in 2007, all manner of people came out of the woodwork in hopes of a quick payday. There were bankers and lawyers. There were consultants, hedge funds and accounting firms. And now, it appears, there were alleged con artists as well.
Marc Dreier, the New York lawyer who is charged with defrauding investors of $400-million (U.S.), allegedly concocted a scheme in which he attempted to sell corporate IOUs issued by both BCE and the Ontario Teachers' Pension Plan - and which were backed by each other, according to court filings and sources.
Court filings also allege Mr. Dreier had an accomplice in Canada who impersonated someone at Teachers to help persuade a New York hedge fund manager to buy the promissory notes.
The revelations are the latest twist in the Dreier saga and Teachers' failed takeover attempt of BCE, a long-running and often bitter melodrama that died abruptly late last year when KPMG LLP ruled that the phone company couldn't pass a solvency test.
Mr. Dreier, once a legal superstar whose firm represented a host of celebrity clients, was arrested in Toronto in December. He was picked up by police after visiting the Toronto offices of Teachers and allegedly impersonating one of its executives in an effort to sell $52-million worth of forged promissory notes to a hedge fund. Sources now say he said the notes were issued by BCE and guaranteed by Teachers.
These sources added that on another occasion, Mr. Dreier did the reverse: He allegedly impersonated someone from BCE, and attempted to sell fake promissory he said were issued by Teachers and backed by BCE.
Mr. Dreier was eventually handed over to U.S. authorities and faces several fraud charges in New York. A U.S. court filing this week listed Teachers and BCE among his "organizational victims," some of whom bought notes. The list includes a dozen hedge funds and an investment firm run by Thor Bjorgolfsson, Iceland's only billionaire. It was not clear how much each was owed.
People close to the Canadian entities say Mr. Dreier forged the names of Dean Metcalf, a former Teachers executive, and Martine Turcotte, BCE's chief legal officer, on the notes. They surmise he got the names from public filings.
Both BCE and Teachers say they did not lose any money to Mr. Dreier's alleged misdeeds.
"The investigation uncovered forged documents purportedly executed by BCE. They were clear forgeries, very clear forgeries," said Mark Langdon, a BCE spokesman. "They were such clear forgeries that there was no hope that payments could ever be made on them."
Teachers' chief executive officer Jim Leech said the pension plan is co-operating with authorities and that none of the fund's money was affected.
"We are identified as a victim because, as the indictment states, he impersonated a Teachers employee, forged Teachers employees' signatures and created fraudulent documents that he represented as issued by Teachers," Mr. Leech said.
Prosecutors allege Mr. Dreier began selling fake securities in 2004. At first, according to the filings, he allegedly sold promissory notes purportedly issued by New York-based Solow Realty & Development Co. He had represented its founder, Sheldon Solow, for years. To convince fund managers the notes were legitimate, prosecutors allege Mr. Dreier provided fake financial statements from the developer. He also allegedly set up phone calls and meetings with people who pretended to be Solow executives.
Mr. Dreier began selling the Teachers and BCE notes in 2008, prosecutors allege. He allegedly followed a similar pattern including arranging for someone in Canada to "impersonate a representative of [Teachers]on a telephone call with a fund representative located in New York."
Court filings allege Mr. Dreier used money from the phony sales to buy yachts and properties in New York and the British West Indies, as well as dozens of pieces of art, including works by Andy Warhol, Pablo Picasso and Henri Matisse. He also bought 9,294 shares of Nortel Networks, which is in bankruptcy protection.
Mr. Dreier had been held in prison since his arrest in Toronto and transfer to New York. This week a judge allowed him to be released on strict conditions. In addition to posting a $10-million bond, Mr. Dreier must not leave his Manhattan apartment. He must wear an electronic monitoring device, throw away all cellphones and computers, install an alarm on his balcony and pay for armed guards to make sure he stays put. The guards will cost $210,000 for three months, according to filings, and they are permitted to "use reasonable force [including lethal force]... to thwart any attempt to flee."
Paul Waldie